An analysis of Scott Morrison’s vote-buying budget.
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
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 9 in our series for 2022 and today’s date is Friday April 1.
First, , I’ll be talking to Andy Thiss, head of Anaplan ANZ. Anaplan is a planning software company used by leading ANZ enterprises across CPG, retail, finance and healthcare to help these companies better plan for the future. And I’ll be talking to RMIT economist Sinclair Davidson about the Morrison Government’s budget.
But now, let’s talk to Andy Thiss.
Australia announced a series of spending measures – from fuel-tax cuts to cash handouts – designed to cushion the impact of rising living costs which Treasurer Josh Frydenberg describes as “temporary”, targeted” and “proportionate” and catapult Prime Minister Scott Morrison back into contention for a May election. At the same time, Tuesday’s budget showed the deficit narrowing to $78 billion in fiscal 2023, or 3.4% of GDP, and $43.1 billion, or 1.6% of GDP, by 2026. Gross debt will rise to $1.117 trillion in 2024-25, or 44.9% of GDP. Net debt will peak in June 2026 at $864.7 billion, 33.1% of GDP. The government is forecasting we might be getting somewhere close to a balanced budget in 10 years’ time. But this will only be after continuing along for most of this decade with spending running at more than 26% of GDP (a once-off step-up from levels closer to 24% before the pandemic), while tax is stubbornly supposed to stay at 23.9% of GDP. In other words, this budget complacently is talking about being comfortable with underlying deficits for the next decade. Australia faces at least another decade and a half of deficits which it will have to finance by increasing amounts of debt with interest rates on the rise. The budget predicts the jobless rate will fall in the third quarter to 3.75%, driving wages growth above 3% for the first time in a decade. The budget anticipates inflation will peak well below most other advanced economies. It forecasts the consumer price index to hit 4.25% through the year to the June quarter of 2022 before moderating to 3% next financial year. The economy is forecast to expand by a robust 4.5% this financial year, up from the 3.75% tipped in December, to be followed up by a healthy 3.5% in 2022-23. All up, the Morrison government has made an audacious bid for re-election with an $8.6 billion cost of living package that slashes petrol tax by 22 cents per litre for six months. The government has halved the 44.2¢ per litre fuel excise for six months, at a net cost to the budget of $2.9 billion. The upfront cost of the cut is $5.6 billion, but this is reduced by $2.7 billion in diesel excise rebates the government does not have to refund to miners, fishers and farmers. The cut, to be legislated this week, comes into effect from 12.01am Wednesday and ends automatically at 11.59pm on September 28. It hands $250 cheques to six million pensioners and welfare recipients. In a naked appeal to voters grappling with a rising cost of living, the government has spent big on these one-off assistance measures which, Mr Frydenberg said were “temporary, targeted and responsible” and which, he said, had been assured by Treasury would not be inflationary. The budget also embellished by $420 per person the Low-and-Middle-Income Tax Offset (LMITO) and an end of year rebate of up to $1080 for those earning up to $126,000 a year. The bonus means at the end of this financial year, single taxpayers will be eligible for bonuses of $1500 and couples $3000. This measure will cost the budget $4.1 billion. Another $1.5 billion will be spent on the $250 “cost of living” payments to age pensioners and welfare recipients. The Budget provides $18 billion for new road and rail projects around the country, $15 billion for an east coast submarine base, an upgrade to the Henderson naval shipyard in WA and other defence projects around the country. ,$480 million over six years for a million households in regional, rural and remote areas for access to higher speed broadband. For small businesses, it provides $120 tax deduction for every $100 they spend on training employees, and the same deduction for spending on digital technologies such as cloud computing, cyber security or e-invoicing. The government also set aside significant funds to target women, with whom it has struggled since Morrison was accused of mishandling harassment and sexism allegations in the parliament.
Rising bond yields mean the multibillion-dollar interest bill on Australia’s $1 trillion debt will jump by nearly 50% to $26.3 billion over the budget four-year forward estimates. But the hit could be greater than forecast after the 10-year bond yield surged to 2.9%.rising above pre-pandemic levels the day before the budget, well above the 2.3% assumed by Treasury out to 2025-26. That puts the 10-year yield about 12 months ahead of even the budget’s high-end forecast, in which gross debt lifts above 45% of GDP over the medium term; about 12% higher than expected.
$25 billion worth of residential property is at risk due to increasing storm surges and coastal erosion, new research shows. Coastal property is more at risk than ever, after significant development in popular beach towns over the past 30 years and a rise in beachside property values, CoreLogic’s Coastal Risk Scores for Financial Risk Assessment report found. Increasing coastal risk is pushing up insurance premiums and could affect property values, the group said, highlighting the recent floods in NSW and Queensland as an example of the devastation that extreme weather events can wreak on people and property. The top 10 suburbs with the most value at risk are spread across the east coast, often in popular residential neighbourhoods or holiday towns with low elevation, high property values and a fast-receding coastline. Paradise Point on the Gold Coast has $1.467 billion of property at risk due to its canals, the most of any suburb in Australia. About 20% of the suburb is at high risk, the report said. Cronulla in Sydney’s south ranked second with $486.4 million of property at risk, followed by Port Melbourne with $483.8 million. Other at-risk suburbs include Manly and Collaroy on Sydney’s sought-after northern beaches, Melbourne bayside suburbs Brighton and Aspendale, Runaway Bay on the Gold Coast and Caloundra and Golden Beach on the Sunshine Coast. The report also looked at coastal retreat rates, warning of gradual coastal erosion as well as the immediate risk of storm surges. In East Mackay in Queensland, the coastline is retreating at an average rate of 7.72 metres a year, the report found. Victoria’s Queenscliff and Portland are retreating at more than 5 metres each per year, while on the NSW south coast North Batemans Bay is retreating at more than 3 metres a year.
Inflation expectations continued to surge, according to the latest ANZ-Roy Morgan survey. Inflation expectations rose 0.4 percentage points to 6.4% last week, the highest weekly reading since June 2012. Its four-week moving average rose 0.3ppt to 5.8%. Consumer confidence was virtually unchanged with a decline of just 0.1%. Among the major states, confidence dropped in Victoria, Queensland and South Australia, while it increased in NSW and Western Australia.
Households in NSW, Victoria, the ACT and Tasmania could be forced to cut their gas use during next year’s winter due to an ongoing supply squeeze as production dries up from offshore fields and amid a year-long delay bringing on volumes from Australia’s first LNG import plant. The shock warning means consumers and businesses face a fresh energy security crisis at a time of record petrol prices and broader inflation across the economy and ahead of a May federal election. The Australian Energy Market Operator, which runs the national electricity and gas system, has forecast a risk of gas shortfalls under extreme weather conditions from winter 2023 in NSW, Victoria, Tasmania and the ACT, when average consumer demand is three times more than summer.
Corporate governance experts are predicting further casualties from The Star Entertainment’s senior ranks and board after chief executive Matt Bekier resigned on Monday following damaging revelations about the group’s failure to stop money laundering and organised crime risks in its casinos in an ongoing inquiry into Sydney’s Star casino. Mr Bekier will step down from the board immediately but his final departure date is yet to be determined. Star Entertainment Group chairman John O’Neill said Mr Bekier told the board he was resigning because he was “accountable for the effectiveness and adequacy of the company’s processes, policies, people and culture”. Last week the public inquiry heard that it was widely known by those at senior levels of the casino that cash transactions were occurring in a junket room, which was prohibited because of the risk of money laundering. Star employees have already admitted misleading the National Australia Bank (NAB) when it inquired on behalf of China UnionPay for reassurances that cards were not being used for gambling. The inquiry last week heard that a high roller spent $11 million on a China UnionPay debit card in one day at the Star. Property developer Phillip Dong Fang Lee told the inquiry he would spend millions in a day at the casino. The inquiry had previously heard that cards issued by the China UnionPay bank were only allowed to be used for non-gambling expenses, under an agreement with the bank. The inquiry by the Independent Liquor and Gaming Authority is looking into The Star Entertainment Group’s suitability of to run its casino at Pyrmont.
Take-up of buy now pay later products is moving beyond the young consumers who were early adopters to include older groups, according to new research. RFI Global has released a report, The Global State of BNPL, which shows the BNPL customer demographic is expanding and consumers are prepared to use BNPL for a wider range of purchases. Close to a third of BNPL users in Australia and the UK said they would use it to pay for everyday expenses and a significant number in both countries said they would use it to pay for higher value purchases, including electronics, furniture and travel. Currently, online clothing purchases are the main purchase using BNPL in Australia, the UK and the US. RFI said that based on consumer responses, growth areas would be in travel, home improvements and medical expenses. RFI found that 40% of Australian consumers had used a BNPL service at least once, and 30% in the US and the UK have used it. In Hong Kong and Singapore usage levels are 37% and 24% respectively. “No interest” is the leading reason for using BNPL. Another important factor encouraging take-up is convenience. Older consumers are more likely to say the reason they use it is because the no-interest offer gives them a lower cost replacement for their credit cards. RFI found there are still barriers to consumer acceptance. Close to half of the consumers surveyed in Australia see it as a form of debt and want to avoid debt. Another concern is a lack of trust in BNPL providers. RFI said the trusts issue presents an opportunity for banks, which enjoy a higher level of trust with consumers, to offer their own BNPL products or partner with BNPL companies. RFI said that for BNPL to have greater penetration in the in-store market, providers will have to do more work to provide a quick and easy checkout experience, such as offering virtual cards in mobile wallets. On the merchant side, BNPL providers could win greater acceptance by cutting fees, which are seen by many merchants as high.
Australia ranks number one in Asia Pacific for most ransomware attacks, and seventh globally according to new research which reveals that 37% of all attacks on Australian organisations targeted the commercial and professional services sector.The research released from Unit 42 by global cybersecurity leader. Palo Alto Networks also found that ransomware payments hit new records in 2021 as cybercriminals increasingly turned to Dark Web “leak sites” where they pressured victims to pay up by threatening to release sensitive data.In Australia the research also found that 2021 saw a 642% increase in dark web leaks on the prior year and 38% of all attacks targeted organisations in NSW; ACT the least targeted geography.The average ransom demand in cases worked by the Palo Alto Networks Unit 42 security consultants rose 144% in 2021 to US$2.2 million, while the average payment climbed 78% to US$541,010, according to the 2022 Unit 42 Ransomware Threat Report.
Insurance coverage for businesses hit by a cybersecurity breach is becoming more expensive and harder to find, senior industry figures have warned. Businesses take out cyber coverage to cover the costs of a hack or cyber attack, including identifying the cause and recovering from the intrusion. Insurers writing cover for cyber attacks face an expanding market that is expected to double or triple from current levels of $US5bn in premiums each year, coupled with the rapidly escalating costs of each attack. Marsh, a key insurance broker for some of Australia’s largest businesses, warns that the Russia-Ukraine conflict could spill over into cyber attacks in other countries. This in turn could see insurers push further to wind back coverage in the event of an attack, with Marsh warning it could constitute “an act of war”, triggering an exclusion that would bar a cyber insurance customer from making a claim. Marsh head of cyber Kelly Butler said many businesses would see policy updates in the coming weeks that excluded cyber attacks from state actors.
The ASX is expected to delay the starting date of its $250 million CHESS clearing and settlement replacement for a fourth time, after an urgent meeting in New York with its business partner and key technology supplier, Digital Asset Holdings. ASX chairman Damian Roche, departing chief executive Dominic Stevens and the executive in charge of CHESS replacement, Tim Hogben, flew to New York at short notice last week for the meeting with DAH. The three men returned to Australia late last week and are now believed to be preparing to announce a delay in the April 2023 “go-live” start date. It was not clear at the weekend whether the project would be delayed for six months or 12 months. Another delay in the project’s starting date would be a significant blow to the world’s most high-profile, most costly and longest-running blockchain project.
Blackstone has received confirmation from the Foreign Investment Review Board (FIRB) that the Commonwealth government has no objection to its proposed acquisition of Crown. The implementation of the scheme remains subject to a number of other conditions, including approval from gaming regulatory authorities, Crown shareholder approval and court approval.
And that’s it for this week.
And next week I’ll be talking to leading Australian employment and industrial law barrister Ian Neil SC examining the seismic changes that have shaped the employment landscape and relationship between employers and employees during the COVID-19 pandemic, when and how can employers require employees to return to work and employment law issues arising with more people working from home including occupational health and safety, both physical and mental. And I’ll be talking to Rabobank economist Michael Every about the impact of the Russian invasion of Ukraine on the global economy.
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Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.