Soaring food and fuel prices are starting to rattle governments around the world, showing the widespread political consequences of Russian President Vladimir Putin’s invasion of Ukraine.
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 10 in our series for 2022 and today’s date is Friday April 8.
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.
But now, let’s talk to Ian Neil SC.
Soaring food and fuel prices are starting to rattle governments around the world, showing the widespread political consequences of Russian President Vladimir Putin’s invasion of Ukraine. Inflation has buffeted leaders since the worst of the Covid-19 pandemic showed signs of easing. Now it’s rampant, and the pressures are in many cases becoming intolerable. U.K. gasoline and diesel costs have risen at their quickest rate on record since March, and inflation is becoming a key issue ahead of the U.S. midterm elections in November. Cost of living is also shaping up as the key issue that might determine the result of the Australian election in May. More than the Budget “sweeteners”. While citizens in some countries may be fine with paying more if it helps pressure Russia to stop the war, plenty of others will simply blame whoever is in charge. That’s a risk for all world leaders, no matter what they think of Putin.
Over 1,000 major investors believe a worldwide recession is just around the corner, a definitive survey says. The Ukraine War has sent international markets roiling and investor morale spiralling, just as the global economy appeared ready to rebound from the stagnant years of the pandemic. Investor confidence in the Eurozone is now at the lowest it’s been since the early days of the pandemic in July 2020, according to a new survey by the Germany-based Sentix economic indicator. Even worse, it finds that a worldwide recession is just around the corner, and Europe will be hit first and hardest. But there’s an even worse finding tucked into the survey. Morale also fell in the U.S. and Asia, and while the economic outlook in these regions is higher than the global average, economic performance forecasts in every part of the world are all trending negative. The survey says that uncertainty as a result of the war will combine with global inflation to create a new type of economic crisis that is largely without precedent. In times of market uncertainty, an option for central banks is to loosen their monetary policy and create more demand. But because of pandemic-infused inflation, which in the U.S. has been branded a “top economic priority” by President Joe Biden, a more expansive monetary policy is simply not an option. The Fed has already begun hiking interest rates in an effort to reduce aggregate demand and bring prices down.
Twitter has announced it is appointing Elon Musk to its board the day after the world’s richest person was revealed to be the social media platform’s biggest shareholder with a 9.2% stake. Parag Agrawal, the Twitter chief executive, said on Tuesday that he was “excited” to announce that Musk was joining the company’s board of directors. Agrawal said in a tweet that the company had been talking to Musk in recent weeks and “it became clear to us that he would bring great value to our Board.” In a regulatory filing on Tuesday, Twitter said it had entered into an agreement with Musk to “serve as a class two director with a term expiring at the company’s 2024 annual meeting of stockholders”. On Monday it emerged that Musk had taken an almost $3bn stake in Twitter, a holding more than four times the 2.25% of the site’s co-founder, Jack Dorsey. Musk, who has 80 million Twitter followers, purchased 73.5 million shares, worth about $US2.89 billion. He has also raised the possibility with his massive and loyal Twitter following, that he could create a rival social media network. Musk has not spoken specifically about any Twitter rule changes he might push. He tweeted Tuesday that he wants to make “significant improvements to Twitter in coming months! ” While it was not immediately clear what role Mr Musk plans to play, analysts speculated he may try for an activist restructuring that could change the way Twitter polices its platform as well as who it banishes. Some inside Twitter worry Mr Musk may push Twitter in a libertarian direction, away from blocking or restricting accounts that cause social harm
The Reserve Bank of Australia has left the official cash rate on hold near zero, but the RBA has abandoned its language of patience and signalled it could begin raising its record low 0.1% rate in June if upcoming data show accelerating inflation and wages growth. “Over coming months, important additional evidence will be available to the board on both inflation and the evolution of labour costs,” RBA governor Philip Lowe said in a statement following the bank’s April board meeting that kept the rate at 0.1%. The step to normalise the RBA’s emergency level 0.1% cash rate implemented at the height of the COVID-19 crisis would be the first time interest rates have risen since November 2010. Gone from Dr Lowe’s statement was any reference to the board being “committed to maintaining highly supportive monetary conditions”, or that the board was willing to be “patient” before lifting the cash rate.
The battle for Treasurer Josh Frydenberg’s seat of Kooyong is shaping up to be one of the most expensive races in the May election, which is expected to be called in the coming days. Mr Frydenberg spent $62,192 on Facebook and Instagram ads between March 2 and March 31, which was more than any other Australian politician. The Treasurer is playing catch-up, after being handily outspent by his independent opponent Dr Monique Ryan over the past 90 days. Mr Frydenberg spent $71,267 on Meta – the parent company of Facebook – advertising over the past 90 days, but almost 90% of this expenditure occurred in March. Dr Ryan spent $34,534 over the past 30 days and $93,974 over the past 90 days, with the independent’s ad spend spread much more evenly over time than the Treasurer’s. The only other political figure to spend more than Dr Ryan over the past 90 days was mining billionaire and United Australia Party (UAP) founder Clive Palmer.
Crown Resorts is facing a fine of up to $100m from the Victorian gaming regulator over the use of Union Pay cards to illegally transfer funds from China. The blockbuster fine is on top of separate action from the financial crimes regulator Austrac, which alleged Crown broke money laundering laws more than 500 times – attracting a penalty of up to $22.2m per breach. The move threatens to derail US private equity giant Blackstone’s $8.9bn takeover of Crown, which contains an exit clause if any fine or liability tops $750m. If the Blackstone deal fails, it will not only stop Crown’s major shareholder James Packer from receiving a $3.3bn payday from his 37% stake, but likely trigger a share price fall for Crown and a refinancing of the company’s debt and $89m break fee. The Victorian Gambling and Casino Control Commission launched disciplinary proceedings after the state’s royal commission into the group found that it devised a “China Union Pay process” to allow patrons to illegally transfer cash from mainland China, evading authorities in Beijing. Rival Star Entertainment has been accused of similar conduct, with the NSW Bell inquiry hearing that the company disguised almost $1bn in gambling transactions as hotel charges.
Australian business leaders are calling on whoever wins government to urgently resurrect the dying collective bargaining system to allow for the productivity that underpins higher wages, and are willing to negotiate safeguards with unions if necessary. Business Council board directors, including Qantas CEO Alan Joyce, Wesfarmers CEO Rob Scott and Commonwealth Bank CEO Matt Comyn, lashed a technical, complex and resource-intensive system that they say hinders employers negotiating major workplace change and led many to revert to awards and minimum wage decisions. Enterprise agreements, once the source of broad-based wage growth in the economy, have been in decline for the past decade. Current agreements now cover less than 15% of employees, the lowest since the system was introduced in the 1990s. The BCA has blamed the decline of the EBA [enterprise bargaining agreement] system on a Fair Work Commission ruling in 2016 that held the better off overall test (BOOT), which requires EBAs leave staff better than the award minimum, applies to each employee, including prospective workers. Retailers and fast-food franchisors considered the decision meant they could not easily negotiate trade-offs in penalty rates for higher base rates as it risked leaving some part-timers worse off.
South Africa’s Woolworths Holdings has held discussions with investment banks as it considers selling David Jones, the up-market Australian department store it purchased eight years ago. A sale would finally end an investment odyssey that has cost Woolworths billions of dollars in writedowns, seen the company churn through five CEOs, and created an ongoing headache for management in South Africa. Woolworths, listed on the Johannesburg Stock Exchange and not linked to the Australian supermarket chain, has already spoken to a number of banks as it looks for a buyer for David Jones to rid itself of the disappointing investment. It paid $2.1bn for the Australian retailer in 2014.
Australians spent a record $62.3 billion online last year but Australia Post’s CEO expects that to double over the next five years. Australia Post’s annual online spending report, prepared by Commbank iQ, also reveals 1.4 million “super shoppers” who purchase goods online more than once a week, buy across 41 retailers a year, and make up as much as half of the volume of online shopping. More than 80% of Australians shopped online last year, driving the online share of the retail market to a record 19.3%, with 5.4 million households buying online each month. Online shopping had been predicted to reach 12% by 2021, revealing the extent of the acceleration caused by the lockdown. Two in five (40%) of the super shoppers are located in NSW, while another 29% are based in Victoria. The top three postcodes for super shoppers were Frenchs Forest and Menai in NSW and Diamond Creek in Victoria. The top postcodes for online shopping by volume were Point Cook in Victoria, Liverpool in NSW and Hoppers Crossing in Victoria. Shoppers are also buying across a broader cross-section of retailers and in new categories. In 2019, the average shopper bought across nine individual retailers, but in 2021 that increased to 15, while the number of product categories has increased from six to eight over the same period. The top-selling retailers were department and variety stores, fashion and home and garden stores, while the fastest growing products include athleisure, women’s fashion, footwear, baby and pet products, tools and garden products, and sporting and outdoor goods.
Motorists will soon be able to use Bitcoin and other cryptocurrencies to pay for their fuel and in-store purchases, with petrol giant OTR finalising plans to become Australia’s largest crypto-accepting bricks-and-mortar retailer. In a further sign of digital currencies entering the mainstream, more than 170 OTR outlets across South Australia, Victoria and WA will begin accepting crypto payments from July. OTR’s parent company Peregrine Corporation, owned by the Adelaide-based Shahin family, will also accept crypto at its C Coffee, Subway, Oporto and Wokinabox outlets, and at its Smokemart and Giftbox stores.
Australia stands to gain from a surge in energy prices on prospects that the war in Europe will exacerbate global oil and gas shortages as nations shun supplies from Russia, according to the government forecaster. The disruption to Russian energy exports amid sprawling sanctions on Moscow will keep prices high, said the Australian Department of Industry, Science, Energy and Resources, which boosted its outlook for resources and energy exports this fiscal year and next. Some consumers have switched from Russia as a source of natural gas and LNG, it said, which points to increased thermal coal consumption amid the dearth of energy supplies. Exports are expected to hit a record A$425 billion ($319 billion) in the year to June 30, 2022 — revised up by 12% from the December estimate – before dropping to A$381 billion in the following 12 months on account of falling prices amid waning demand growth and elevated global output. The government expects growing demand for metals — including copper, aluminum, lithium and nickel — as global electric vehicle sales surge and new energy technologies emerge. Supply should slowly catch up with demand, leading to a slide in prices as stockpiles build. Meanwhile, energy export volumes are forecast to show only minor growth during the outlook period as record high prices will impact adversely on near-term demand. The report noted that a risk to the outlook are higher global interest rates that may threaten global economic activity — a prospect that would damp the resource and energy export forecasts.
By the end of this month News Corp and Telstra will decide if they can float Foxtel, which also owns streaming services Kayo Sports and Binge, on the share market. The likelihood of a Foxtel float is the talk of corporate media circles. It is seen as a referendum on not just the growth prospects of streaming services in Australia but News Corp’s strategy. Most bankers, analysts and executives not tied to the potential deal don’t think it can be done, arguing that it is too difficult to sell a content aggregation business when key contracts with HBO and ESPN/Disney may not be renewed in the coming years. Others working on the deal are, unsurprisingly, more confident. News has wanted to list Foxtel since 2016. But it’s a transaction that became more possible last year as the company dramatically cut costs as it tried to pivot to streaming from its declining cable TV roots. Since then News Corp, which owns 65% , and Telstra, which owns 35%, have been weighing up the risks and the implications of a deal that could help pay down the significant amount of debt owed to banks and shareholders (almost $2 billion as of December 31). Foxtel had bankers from Citi and Bank of America running meetings with fund managers late last year after its September strategy day. A prospectus is not finalised but will need to be in the next few weeks if the plan is to float before June 30. That final decision of whether to press go is likely to coincide with the completion of the long-awaited US$43 billion merger of Discovery and Warner Media, slated for April 11 (April 12 in Australia). This won’t have any immediate impact on Foxtel, but could dramatically change what Australia’s streaming landscape looks like in the next three years.
And that’s it for this week. And next week, I’ll be talking to Tom Treanor, the chief marketing officer for Treasure Data, the California-based enterprise customer data platform (CDP) that powers the entire business to shape customer-centricity in the age of the digital customer. And I’ll be talking to KPMG economist Sarah Hunter about the state of the economy the budget and impending interest rate rises.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.