This is episode number forty-one in our series for 2020 and today’s date is Friday, November 13.
First I talk to entrepreneur Ringo Chan who is on his way to revolutionising the bedding industry with his eco-friendly, ergonomic, and philanthropic company, Ecosa.
And then I’ll be talking to IFM Investors economist Alex Joiner about the RBA’s decision to cut interest rates to drag Australia out of the coronavirus recession.
But now, let’s talk to Ringo Chan.
U.S. stocks soared as promising coronavirus vaccine news and Joe Biden’s White House victory sent investors into a frenzy. The Dow Jones industrial average spiked nearly 1,600 points, or 5.6 percent, at the opening bell Monday after drug giant Pfizer and German biotechnology firm BioNTech announced that their vaccine candidate was more than 90% effective, compared with a placebo.
It is the strongest sign yet that the unprecedented effort, breaking every scientific speed record, to develop a vaccine was within sight. President-elect Joe Biden applauded Pfizer’s breakthrough in a statement Monday but warned that the end of the battle against Covid-19 is still months away. “Today’s news does not change this urgent reality,” Biden said. “Americans will have to rely on masking, distancing, contact tracing, hand washing, and other measures to keep themselves safe well into next year.”
McDonald’s will test a meat-free burger in several markets next year as it adds plant-based menu offerings, which it has coined “McPlant.” International President Ian Borden said that McPlant was created “by McDonald’s and for McDonald’s.” Borden said that the McPlant line could also include chicken substitutes.
McDonald’s began testing a meatless burger, dubbed the P.L.T., in several dozen Ontario restaurants in September last year. By April, the chain had ended the pilot and has since said that it has no plans to bring back its P.L.T. burger at this time. Former McDonald’s CEO Don Thompson, who was an early investor in Beyond, sits on the plant-based meat maker’s board. Investors have speculated that the connection between the two companies could mean a long-term partnership and make Beyond a supplier for the largest U.S. restaurant chain by sales.
Other international McDonald’s markets have found more success with meatless burgers. Restaurants in Germany, for example, have added veggie burgers made by Nestle to their menus. Rival Burger King, which is owned by Restaurant Brands International, released a plant-based Whopper in the U.S., with a patty made by privately held Impossible Foods last year.
The Westpac-Melbourne Institute Index of Consumer Sentiment lifted by 2.5% to 107.7 in November from 105.0 in October. This is another strong result. It follows the 11.9% increase in October with the Index now 35.3% above its level in August.
The Index is also now 13% above the average over the six months prior to the economy-wide shut-down in March and has reached its highest level since November 2013 – a seven-year high! The most important developments since last month have been the significant unwinding of restrictions across Victoria and the reopening of the Victoria-NSW border.
The survey was conducted over the period of November 2–8 before the second round of easing restrictions had been announced for Melbourne although, with Victoria’s stunning recent success in containing the virus, expectations for this second round were buoyant. It also preceded the recent encouraging developments around Pfizer’s Coronavirus vaccine.
NAB’s monthly business survey showed business conditions improved by a further 1.7pts in October to reach the highest level in 2020 so far. Business confidence saw a larger bounce of 8.5pts, to hit a 17-month high. Both were driven by significant improvements in Victoria as restrictions eased, with conditions up by 12pts and confidence up by 23pts in the state.
There were several positives in this month’s data, with profitability, trading, and forward orders all above pre-pandemic levels. Conditions in recreation and personal services, the sectors hit hardest by restrictions, continued to improve and will likely rise further in November as Melbourne reopens.
There are reasons to be cautious though. Conditions deteriorated in Queensland, South Australia, and Western Australia. The latter two states also saw confidence weaken, as did Tasmania. While capacity utilisation rose 0.9ppt to 77.9%, this is still well below the 81.3% recorded in February, and improvements in New South Wales appear to have stalled.
The national employment index recorded only a marginal improvement of 0.6pts and remains well below zero at −5.5, with all states in negative territory. According to NAB, this “continues to suggest job shedding, with more firms reporting lower employment relative to the previous month”. This may be partially reflecting the effect of some businesses, particularly outside Victoria, coming off JobKeeper. Finally, business conditions are now weakest in the construction industry, one of the largest industry employers. This is despite the housing construction incentives and infrastructure funding commitments from the federal and state/territory governments.
Commonwealth Bank has been hit by lower margins, rising expenses, and higher provisioning contributing to a 16% fall in quarterly cash profit to $1.8 billion as the tough economic conditions continue to squeeze the sector.
Insolvency experts expect to be hit by a wave of company collapses from January 1 after temporary relief measures to help businesses through the COVID-19 economic crisis expire. Practitioners in the area have spent the quieter-than-normal period working on existing insolvency matters, catching up on training, and helping out in other service lines.
The economic downturn caused by the coronavirus pandemic led the federal government to make two major changes to the way insolvencies are dealt with in Australia, alongside providing subsidy programs such as JobKeeper. The first insolvency-related measure was to introduce temporary relief rules for struggling companies and individuals.
The temporary insolvency rules, which now run until December 31, increased the thresholds at which creditors could issue a demand on a company to initiate bankruptcy proceedings, and the time that a company had to respond to any demand. The second change, which kicks in from 2021, will allow small businesses with liabilities of up to $1 million to continue trading for up to 20 business days while they develop a debt restructuring plan.
Unemployed Australians will have the temporary coronavirus supplement extended into next year at a reduced rate under a federal government decision to increase the $16.8 billion payment. The supplement will continue until March in a boost for JobSeeker recipients and others on income support, ending weeks of doubt over whether the payments would end as scheduled at Christmas. Prime Minister Scott Morrison and cabinet ministers made the decision on Monday night with the rate likely to fall from $250 to $150 per fortnight.
The largest Australian-owned brewer, South Australia’s Coopers Brewery, has posted a 3.9% lift in beer sales for the year at a time when the broader beer market is flat. Coopers reported full-year profit before tax 2020 of $34.3m, in line with the profit posted in 2018, but a strong recovery from the $23.1m recorded in the 2019 financial year. Like other Australian brewers, Cooper’s faced issues including the protracted shutdown and slow opening up of bars, clubs, and other licensed venues at a time when beer consumption before the COVID-19 pandemic had hit lows not seen since World War II.
Canadian fertiliser giant Nutrien says it has the balance sheet needed for Australian farmers to grow and keep up with technology as well as the global footprint to overcome any supply bottlenecks out of China. Nutrien is investing $50 million in a new digital platform for farmers and increasing capacity at its processing facilities in Western Australia and Victoria in a year when Australia’s reliance on China for essential farm chemicals has become a hot topic.
Australian farmers looking to take advantage of drought-breaking rains were exposed to shortages of the weedkiller glyphosate earlier this year when COVID-19 disrupted shipment’s from China, prompting warnings from local crop protection supplier Nufarm about China’s supply stranglehold. Some farmers are now keen to avoid using Chinese-made products in response to what they see as Beijing’s politically-motivated trade sanctions on commodities like barley and beef. Like Nufarm, Nutrien relies on China for the supply of active ingredients used in its manufacturing in Australia but globally it is a major customer for multinationals like Bayer, FMC, and Syngenta.
A new analysis is urging the Morrison government to be cautious about what taxpayers’ money it puts into big transport projects, warning they may turn out to be a “herd of white elephants”. Governments are now fast-tracking new road, bridge, and other transport network projects in their quest for an infrastructure-led recovery from the COVID-19 recession.
But the Grattan Institute think tank says it makes little sense to be spending big on transport projects that were conceived before the coronavirus pandemic. The analysis showed that of all projects valued at $20 billion or more and built in the past 20 years that the actual costs exceeded the promised costs by 21%. The pandemic should prompt governments to rethink major projects that have been promised or are under construction, particularly those announced without a business case, the analysis says.
Global biotech company CSL will begin manufacturing millions of vials of one of the most promising coronavirus vaccines in Melbourne, in the hope trials will prove it is effective and can be rapidly distributed. CSL chief scientific officer Andrew Nash said one-millilitre vials of the University of Oxford-AstraZeneca COVID-19 vaccine will be thawed on Monday, having been frozen in liquid nitrogen to preserve their integrity.
The thawed vaccine, which came from a cell bank, will be added to a bioreactor – a large vessel where biological reactions take place – where it will go through a fermentation process, grow and multiply. This facility at Broadmeadows is the only one of its kind in Australia, Dr. Nash said.
The vaccine will spend six days multiplying in the bioreactor, then be filtered and purified, leaving just the antigen – or vaccine product – ready to be put into dosage vials. There will be eight or nine processes like this, each producing 3 million to 4 million doses. The biotech company has separate contracts with AstraZeneca and the Australian government to manufacture about 30 million doses of this vaccine candidate. CSL said the total processing time for the vaccine is approximately 50 days.
The vaccine is still subject to approval by the Therapeutic Goods Administration for use in Australia. The results of stage three clinical trials on the vaccine are expected by the end of this year. If they are positive and the vaccine passes all regulatory requirements, the first doses could be released in the first half of next year. There are more than 150 candidate COVID-19 vaccines, most of which are in pre-clinical stages, meaning they are still being tested on animals or in labs. About 40 have reached human trials. CSL is manufacturing two separate vaccines, the Oxford-AstraZeneca vaccine and the University of Queensland vaccine. These will be done at separate times.
The number of branches and ATMs operated by the big four has fallen sharply over the past five years and is likely to accelerate as customers do more banking online, branch foot traffic falls and banks clamp down on costs. While branch numbers have been in steady decline since the early 2000s, the number of ATMs has begun to drop off more sharply as the cost of maintaining expensive networks of the high-tech machines rises and the use of cash plummets.
Points of presence data submitted to a parliamentary inquiry showed a 33% fall in the number of branches and ATMs operated by the big four banks per 100,000 people, between 2015 and 2020. Westpac was the bank to reduce its footprint the most decisively, slashing its ATMs in regional areas by 45% and in metro areas by 56%, for an average of 53% across Australia, according to the data.
Crown Resorts is facing another chapter in a legal battle with the Australian Taxation Office over $100m in GST from dealings with junkets. Late last week the ATO lodged an appeal against a decision of the Federal Court that sided with Crown on whether commissions and rebates paid to junkets should fall under normal GST rules or special rules for gambling revenue.
Junkets refer to gambling promoters who organise tours for international high rollers to Crown casinos in Australia. The legal stoush started in 2018 when Crown Resorts contested the GST rulings made by the ATO for its Melbourne and Perth casinos over several years. In September Justice Jennifer Davies ruled in favour of Crown, but the ATO now says her judgment should be put aside. The ATO said Justice Davies erred in her judgment that the relationships between junkets and casinos were “one integrated and indivisible transaction” and that the “commissions and rebates” should be considered a separate contract unrelated to gambling.
BHP has defeated an attempt to launch a £5 billion ($9 billion) class action lawsuit in England related to the 2015 Samarco dam disaster in Brazil, after the judge ruled that running parallel lawsuits in two countries would become a “white elephant” of cost and complexity. The lawyers representing more than 200,000 Brazilian claimants said they would immediately appeal the “fundamentally flawed judgment”, and were “overwhelmingly confident” they could get it overturned.
The lawsuit was brought in England because the victims of the Fundao tailings dam collapse say they’re getting only slow and inadequate redress via the Brazilian courts and from the Renova Foundation, which BHP and its 50-50 Samarco joint venture partner Vale set up to repair damage and disburse compensation. Justice Turner, of the Liverpool High Court, concluded it would be “alarming” to have an English case proceeding in parallel with the Brazilian court processes, especially as they sometimes involved the same claimants and might deliver irreconcilable verdicts.
Skedulo, a leading deskless productivity software provider, published a research report which shows the COVID-19 effects on desk-based workers — those in traditional office settings — and their deskless counterparts — mobile and remote employees — finding that both are working for many hours and worry about the risks related to either being on the frontline or returning to the office.
With every job suffering from the pandemic in some way, the researchers analyzed the challenges that both deskless and desk-based workers face, also how they perceive their jobs going under the present circumstances. One of the key findings of the study found that nearly 33% of deskless workers have either been infected with COVID-19 or know someone who has, which is higher than the national average.
However, executives of both segments of the workforce are working as much as they can to avoid potential exposure, as many companies have instituted work from home policies or enacted new regulations such as wearing a mask or social distancing. Other than the health-related concerns, workers say that their jobs have become more difficult (58%) — with deskless (31%) and desk-based (38%) saying working more hours is the main reason why.
And that’s it for this week. And next week, I’ll be talking to Bruce Tulgan, over in the US. The founder and CEO of Rainmaker Thinking, coach, and management thinker Tulgan will tell us how companies can rebrand themselves with smart recruiting. And I’ll be talking to RMIT economist Jonathan Boymal about signs that the Australian property market might be picking up post-COVID.
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.