Talking Business 2 April 2021
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 2021 and today’s date is Friday April 2.
First, I’ll be talking to Bill McLellan from WhyCubed which is in the business of building teams. And I’ll be talking to economist Saul Eslake getting his insights on the direction of the Australian economy and how the states are performing.
But now, let’s talk to Bill Maclellan.
The skyscraper-sized container ship that has been stuck in the Suez Canal for almost a week was finally freed on Monday, with the vessel starting to move north following a dramatic rescue mission to reopen one of the world’s main trade arteries. Hundreds of vessels carrying everything from oil to livestock were forced to wait in line after the Ever Given became stuck in the canal. The accident was a stark reminder of the fragility of global trade infrastructure and threatened to further strain supply lines already stretched by the pandemic. Tugboats involved in the rescue sounded their horns as the bow of the Ever Given was released from the eastern canal bank shortly after 2pm London time. Leth Agencies, a transit agent in the Suez Canal, said the vessel was moving north to the Great Bitter Lake portion of the canal. By Monday evening, large ships including cargo containers and livestock transporters could be seen on satellite-tracking moving south through the lower section of the canal, while vessels were also beginning to enter from the Mediterranean side. Boskalis, the Dutch company fronting the rescue of the ship through salvage subsidiary Smit, had earlier warned there was only a 70% chance of freeing the vessel this week after the stern of the ship was moved overnight, cautioning that it was still badly stuck. But efforts to free the bow from heavy clay soil on Monday afternoon using heavy-duty tugboats and dredging operations were successful, potentially allowing the speedy reopening of the waterway to international shipping traffic. Osama Rabie head of the Suez Canal Authority on Monday said navigation had started in the canal from 6pm local time and that by 8am on Tuesday 113 vessels should have sailed through the channel. If they continued at this rate, he said, the backlog of 422 ships waiting at both ends of the waterway could all pass through within three to three and half days.
Hundreds of thousands of Australians started the week with an uncertain future amid a surge of job losses expected following the expiry of the JobKeeper wage subsidy on Sunday. Treasury has estimated up to 150,000 jobs may be lost this week, while labour market economist Professor Jeff Borland warns the number could be as high as 250,000. According to the Australian Tax Office, more than one million employees were still relying on the wage subsidy at the end of January. Those who lose their jobs can likely shift to JobSeeker, however that will be reduced from its peak of $1115.70 to $620.80 a fortnight from Wednesday. There are concerns the cuts to support will further the gap between rich and poor, with new analysis by SGS Economics finding lower socio-economic regions of Sydney and Melbourne suffered greater job losses than wealthier areas during the pandemic.
A record $296 billion in forecast resources and energy exports this year is turbocharging Australia’s economic rebound from the COVID-19 downturn and will help offset the withdrawal of the federal government’s JobKeeper wage subsidy. China’s strong demand for iron ore is underpinning the new commodity super cycle, despite ongoing diplomatic and trade disputes between Beijing and Canberra. While the international push to tackle climate change will challenge thermal coal, demand will rise for commodities – including copper – used in green infrastructure in the transition to a low-carbon world, as well as lithium and nickel. The record-high resources and energy exports forecast for the year ending June 30, eclipses a previous high of $291 billion posted last year, according to the quarterly report by the Department of Industry, Science, Energy and Resources. Surging mining exports are also helping the federal government’s budget recover faster than expected, though it remains deep in deficit. The export analysis shows how the broader mining and energy export trade has shrugged off the tensions with China that have hurt shipments of coal, barley, wine, seafood and wool. China said on Friday it was extending for five years tariffs on Australia’s $1 billion of wine exports to Asia’s largest economy, exacerbating diplomatic tensions between the two trading partners. Nevertheless, China’s stimulus spending on buildings, roads and bridges is fuelling strong demand for exports of iron ore, which only topped the $100 billion mark – a first for any commodity – in 2019-20.
China’s Ministry of Commerce has slapped a countervailing duty rate of 175.6% to Treasury Wine Estate’s Australian country of origin wine in containers of two litres or less.
Australian winemakers are pushing to have their case over China’s punishing tariffs to the World Trade Organisation and are looking to the Morrison government to back their claim. The nation’s peak industry body for grape growers and winemakers will meet after Easter to discuss the industry response to the punishing tariffs on Australian wine imposed by China for the next five years and are looking for the WTO make a ruling on the matter.
The NSW gambling regulator has warned that Blackstone faces an “exhaustive” probity process in its $8 billion takeover bid for Crown Resorts, and flagged that any relationship the US private equity group’s casinos have with junket operators in other jurisdictions will be closely scrutinised. While Blackstone has passed probity in the US state of Nevada to operate casinos in Las Vegas and also been licensed in parts of Europe, the head of the NSW Independent Liquor and Gaming Authority, Philip Crawford, said the state will run its own probity processes and take its time to closely check Blackstone’s credentials.
Sanjeev Gupta says he’s personally overseeing cost-cutting and cash preservation at all of his steel and aluminium plants under a blitz known as “Project Athena”, and he doesn’t intend selling any of his better businesses to help refinance his ailing empire. Mr Gupta is calling the shots from a residence in Dubai and said the “noise around this issue” of GFG Alliance potentially being dragged down too by the collapse of his main financier Greensill Capital had hurt the GSG business. But he is confident that GFG will be able to refinance its debts, which he conceded amounted to “many billions”, although he declined to be specific. Analysts believe the Greensill exposure is around $6 billion. Mr Gupta’s comments were contained in a podcast to the 35,000 GFG employees around the world, which is also available publicly.
The COVID-19 pandemic has produced a hothouse environment for online shopping that has seen e-commerce sales outside food generate more than five years of growth in just 11 months. This has propelled Australia to a level of online retail market share previously not expected until 2025. A report from PwC has detailed what its retail, consumer and digital consulting partner Vanessa Brennan describes as “the greatest digital onboarding of all time” and a consumer-led revolution that retailers must follow. PwC projections show that Australian non-food online retailing has more than five years of growth in 11 months. Non-food retail sales hit $2.1bn in January 2021, which would have taken until April 2025 in line with the pre-COVID-19 growth trajectory. On previous growth rates it would have taken until December 2024 for online food sales to reach the pre-COVID-19 level, representing just under five years of growth in 11 months.
The buy now, pay later sector may be booming but PayPal and credit cards are still the most popular ways for consumers – especially older, wealthier Australians – to pay for online purchases. PayPal, which has been around for more than 20 years, remains by far the most frequently used online shopping payment method, accounting for 41% of transactions in 2021 compared with 40% last year, according to a BigCommerce report. Credit cards accounted for 28% of transactions, up from 27% in 2020, debit card use was unchanged at 19%, while buy now, pay later products such as Afterpay, Zip, Humm, Klarna and Openpay accounted for 13% of online spending in 2021, down from 14%
The gender pay gap increased in companies that stopped auditing how much they pay their males and females, a new analysis from the Workplace Gender Equality Agency has found. The new data, from the government agency and the Bankwest Curtin Economics Centre, also shows the gender pay gap could take 26 years to close, if current trends continue. Workplaces with more than 100 employees are required to report their pay data to the agency annually, giving a snapshot of the gender pay gap across the nation, across sectors, and in management and non-management roles. While the pay gap for total remuneration has shrunk from 24.7% in 2014 to 20.1% in 2020, some sectors, like mining, utilities and finance, have made more progress than others. Female-dominated industries like community and personal services actually saw the gap widen. The data didn’t include the impact of COVID-19, which data has shown has had an uneven and gendered impact on the workforce. The agency measured what happened in companies that undertook their own internal pay gap audits, showing companies that consistently audited pay between 2015 and 2020 saw their pay gap drop across management and non-management roles. But companies that stopped auditing pay after 2017 immediately saw the pay gap in management roles increase – by 5.1 percentage points by 2020. The pay gap for non-management roles also increased in those companies, but not to the same extent.
A pay rise that means a woman earns more than her male partner increases her chance of domestic violence by 35%, ground-breaking Australian research has revealed, suggesting men struggle to deal with not being the family breadwinner. Based on surveys done by the Australian Bureau of Statistics over more than a decade, the same research shows as soon as women earn more than half a couple’s income they face a 20% increase in the chance of suffering from emotional abuse. Researchers Robert Breunig, director of the Tax and Transfer Policy Institute at the Australian National University, and institute fellow Yinjunjie Zhang found across age, income or country of birth, whenever women earned more than their male partner there was a substantial increase in the chance of domestic violence.
Australia’s oldest energy utility will divide itself in two in a radical restructuring that will see AGL’s huge coal power plants hived off into a separate company while the core markets business will emerge as a zero-carbon electricity retailer. The separation, demanded by the rapidly evolving electricity market, involves “New AGL”, which will comprise the retailing interests, and “PrimeCo”, which will be the country’s largest electricity generator, dominated by coal power. The concept of a demerger of coal power assets has been one that has found popularity in Europe where energy utilities such as E.ON successfully spun off its fossil fuel assets into a separate company.
National Australia Bank will train bankers to support the low carbon transition plans of its 100 heaviest emitting customers by helping them to reduce their climate risk in line with net zero by 2050 Paris agreement pledges. Over the next two years corporate and institutional bankers will complete a course developed by Melbourne Business School in partnership with the Climate Reality Project, which was founded by former US vice-president and climate campaigner Al Gore. Bankers will be trained in identifying climate-related financial risks and transition planning so they can better work with customers. The initiative comes as demand for green finance and other initiatives to ease the transition to net zero emissions is increasing rapidly from a low base, and still only a fraction of total global finance.
Insurer Suncorp thinks the damage bill for devastating floods in recent weeks could hit up to $250 million, higher than estimates from rival IAG. The prediction by Brisbane-based Suncorp, whose brands include Vero and GIO, of the flooding and storms costing between $230 million and $250 million came after it began assessing preliminary damage on the 7600 claims lodged so far.
The former Holden car factory site in northern Adelaide will host a grid-scale storage battery with capacity of up to 150 megawatts, to be constructed by renewable energy group CEP.Energy from early next year. The Holden factory manufactured its last car in 2017 and the site was bought by Melbourne-based property development company Pelligra Group, which is progressively developing a business park and industrial hub known as Lionsgate Business Park at the 122-hectare site. CEP has signed a 45-year lease agreement with the Pelligra Group and intends to begin construction early next year on the project, which is set to cost more than $200 million. CEP has been on the front foot, announcing last month it would build the world’s biggest battery, up to 1200MW, on industrial land at Kurri Kurri in the NSW Hunter Valley. At the Holden site, CEP has an agreement with Pelligra Group to lease the rooftop of the existing buildings, where it also plans to develop the largest rooftop solar farm in Australia.
A federal Labor government will create a $15 billion loan scheme to facilitate the manufacture of products domestically, Anthony Albanese has promised as he launched the ALP national conference on Tuesday. The National Reconstruction Fund will be seeded by contributions from government, industry and super funds and would operate in a similar fashion to the $10 billion Clean Energy Finance Corporation, which Labor established when last in government to encourage the development of low emissions energy sources. The fund will also have a strong regional focus, with an emphasis on areas such as resources and agriculture. For example, it could include producing more batteries using lithium rather than exporting lithium and then importing batteries. The Opposition Leader also mentioned areas such as food and beverage processing and transport, including increasing opportunities for contributing to the supply chains in the manufacture of cars, trains and ships. Medical science, low emission technologies, engineering and data science would be other areas eligible for loans. He said the COVID pandemic has exposed serious deficiencies in Australia’s economy, in particular our ability to manufacture products and be globally competitive when it comes to innovation and technology,
News Corp will pay $349 million to buy the publisher of “The Lord of the Rings” trilogy and other J.R.R. Tolkien books. The purchase means that the Houghton Mifflin Harcourt Books and Media segment of Houghton Mifflin Harcourt will be a part of News Corp. The segment will be operated by News Corp subsidiary HarperCollins Publishers, which already owns the rights to J.R.R. Tolkien’s works in the British Commonwealth. Besides the Tolkien titles, the purchase also means it will have control over George Orwell titles “1984” and “Animal Farm” and “All the King’s Men” by Robert Penn Warren. The deal gives News Corp control of 7,000 titles in total. The Houghton Mifflin Harcourt Books and Media segment also owns rights to children’s titles such as “Mike Mulligan and His Steam Shovel,” “Curious George,” “The Polar Express,” “The Little Prince” and “Stellaluna.”
And that’s it for this week. And next week, I’ll be talking to Adam Rein, President & COO of CapShift, a US impact investing firm that empowers philanthropic and financial institutions, along with their clients, to mobilize capital for social and environmental change. And I’ll be talking to RMIT economist Jonathan Boymal about Australia’s booming housing market,
In the meantime you can catch me on Facebook, Twitter and 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.