The RBA’s ‘whatever it takes’ attitude will cause a recession: ACTU
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, 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 28 in our series for 2022 and today’s date is Friday August 12.
First, I’ll be talking to Chris Adams, the CEO and founder of the Ellis Adams Group and his international luxury hospitality consulting firm EAG which is currently opening 100 hotels during Q3 and Q4 of this year, partnering with Marriott International to transform locations for The Ritz-Carlton, St. Regis, Westin and Renaissance among others all over the world.
And I’ll be talking to KPMG economist Sarah Hunter about Australia’s inflation rate.
But now, let’s talk to Chris Adams.
The Australian Council of Trade Unions has accused the Reserve Bank of deliberately laying the groundwork for a recession due to its “whatever it takes” attitude to bringing inflation back to target. The allegation forms part of a broader call by the union movement to ditch a three-decade old monetary policy framework whereby a politically independent central bank has primary responsibility for ensuring low and stable inflation. Instead, the ACTU wants the government, as part of the upcoming jobs and skill summit, to consider greater Commonwealth involvement in managing inflation by increasing its role in the economy, including through regulating housing credit, cancelling the stage three tax cuts, and raising high-income and company taxes when the economy is too strong. The ACTU released a policy paper on Tuesday, in which it argued for full and secure employment to be the September jobs summit’s top macroeconomic goal. The report calls for the Reserve Bank of Australia (RBA) to pursue full employment in balance with its inflation target, while acting in co-ordination with the federal government to achieve its goals.
Sixty people earned more than $1 million yet paid no tax in 2019-20, Australia’s highest earners live in Perth, and the country’s lowest incomes have been recorded in regional New South Wales. Eight of the nation’s highest-earning postcodes were in Sydney, while five of the lowest-earning postcodes were in regional NSW, The Australian Taxation Office’s (ATO) latest taxation statistics are based on the tax returns of almost 15 million Australians for 2019-20. Analysis of the data by the Australia Institute reveals there were 60 Australians who earned more than $1 million in that financial year who did not pay a cent of income tax, compared to 66 the year before. On average these 60 individuals earned $3.5 million each. Managing your tax affairs is an allowable tax deduction. Some of those who earned more than a million dollars but paid no tax claimed this deduction.
Labor’s pledge to fully fund an increase in pay for aged care workers could cost the already stretched Commonwealth budget an extra $3 billion a year, with the government endorsing a pay rise for the sector’s “significantly” undervalued workforce. The Fair Work Commission is weighing up a union case for a pay rise of up to 25% for a sector where workers can earn as little as $22 an hour. Low pay in the sector operates as a barrier to staff recruitment.
Australia will see 11% of jobs lost to automation by 2040, according to the latest jobs forecast for the APAC region by global research and advisory firm Forrester. On a broader Asia Pacific perspective, Forrester forecasts that working populations in the five largest economies in the region – — India, China, South Korea, Australia, and Japan — are more at risk due to physical robot automation than Europe and North America. And, by 2040, Forrester forecasts that 63 million jobs are expected to be lost to automation, with more than 247 million jobs expected to be in jeopardy across industries that are more susceptible to automation, such as construction and agriculture.
One in five mortgage holders, or an equivalent of 551,000 home owners, would struggle to meet their repayments if their home loan rates were to rise by 3 percentage points, a new poll shows. The market forecasts the cash rate will be 3.3% by March next year. Comparison site Finder, which conducted the survey, also found that around 145,000 home owners who were struggling significantly would consider selling if their mortgages rose to that extent.
Australian consumer confidence has fallen to levels seen during COVID-19 and the Global Financial Crisis, but is well above recessionary levels. Confidence fell 3% to 81.2 in August, according to the latest Westpac Melbourne Institute of Consumer Sentiment Index. Since the peak in November 2021, the Index has fallen every month for a cumulative decrease of 22.9%.
Australian motoring executives have launched a secret campaign to delay our moving to electric vehicles and unpick a key section of our climate change plan. It was created by the Federal Chamber of Automotive Industries, the peak body representing 39 auto brands. Basically, it would see the industry’s voluntary emissions scheme become the national standard — new passenger cars sold in 2030 would still pump out an average of at least 98 grams of CO2 a kilometre. This would ensure Australia’s car industry maintained some of the weakest carbon emission rules in the world. Plus it would set us back significantly in our fight to slash emissions: the transport sector is our third-largest source of greenhouse gases. The campaign started last week to shape public discussion and position the auto industry as a “trusted voice” in the “moderate middle” of the climate debate. But behind the scenes, they are lobbying policymakers to adopt rules that would preserve petrol and hybrid cars that are the main business of the biggest manufacturers such as Toyota for decades to come. The strategy mirrors aspects of the approach used overseas by car manufacturers such as Toyota, which combines public statements about environmental stewardship with behind-the-scenes pressure on policymakers to weaken regulation of car emissions. Toyota formed “Team Japan” in that nation along with Subaru, Mazda, Kawasaki and Yamaha to defend the place of petrol and hybrid cars in the face of competition from electric vehicles. Toyota last year refused to commit to a Glasgow Declaration pledge to phase out fossil fuel cars by 2040, saying “an environment suitable for promoting full zero emission transport has not yet been established” in many parts of the world. Asked about the strategy, FCAI chief executive Tony Weber said the industry group wanted to see significant emissions cuts in the sector but there were constraints around the number and cost of low emissions cars available. Meanwhile a new report has found if an emissions cap on car-makers that was proposed by former prime minister Malcolm Turnbull had been implemented, it would have saved consumers $5.9 billion in fuel costs
Workplace Relations Minister Tony Burke has signalled Labor will legislate to stop employers slashing wages by getting pay deals axed, slamming the tactic as a “rort” that is against the national interest. In a significant speech on Monday, Mr Burke said he is disgusted employers are even attempting the “heavy-handed” approach and that “on face value, I cannot see how this tactic can possibly be justified”. Mr Burke said the ability of employers to cut pay and conditions by applying to unilaterally terminate enterprise agreements will be on the agenda at next month’s Jobs Summit when the government seeks a consensus between unions and business on how to fix the “broken” bargaining system. The minister’s comments, the strongest by the government on the issue, signal Labor will seek to scrap the unilateral termination provisions as part of a package of industrial relations changes to be introduced into federal parliament by the end of the year. In his address to the Australian Industry Group conference in Canberra, Mr Burke criticised the bid by the country’s largest tugboat operator, Svitzer, to terminate its enterprise agreement with maritime unions. Svitzer’s application sparked strikes across the nation’s ports by unions, which are highlighting the dispute to lobby Labor to ditch the termination provisions.
Qantas has asked its senior executives and managers to join a new contingency program that would see them leave their jobs and work as ground handlers up to five days per week for three months. In a note to staff, the airline’s chief operating officer Colin Hughes said Qantas would recruit at least 100 managers, adding there was “no expectation that you will opt into this role on top of your full-time position”. While Qantas executives and managers have previously worked at airports during peak periods, the extensive new program demonstrates the breadth of the worker shortage issues confronting the airline over the longer term. As part of the program, staff will sort and scan bags and drive tugs – the vehicles used on the airport tarmac – moving luggage onto aircraft and between terminals. Qantas axed some 1700 ground-handling jobs in the depths of the Covid-19 pandemic, a decision the Federal Court found was in breach of the Fair Work Act. The airline is appealing the matter in the High Court. But ongoing Covid-19 infections and a tight labour market have prevented the airline from fully staffing operations since the resumption of domestic and international travel.
Australia and New Zealand Banking Group and the government’s Clean Energy Financing Commission have teamed up to offer $200 million of discounted financing to business customers to invest in activities designed to cut their carbon emissions. In the latest sign that banks recognise commercial opportunities in businesses pushing towards net zero emissions as part of broader environmental, social, and governance reporting, the CEFC and ANZ will provide cheap loans for a wide range of activities, with the two organisations splitting the cost. The program is an extension of the CEFC’s co-financing work across sectors, which it said had so far allowed financial institutions to provide more than 5500 asset loans to business borrowers Australia-wide. Under the new plan with ANZ, the CEFC and the bank will contribute equally towards a 0.5% discount on loans of up to $5 million, if businesses demonstrate the funding is for environmentally progressive investment. The CEFC said in a statement the investments could fall under a broad umbrella of initiatives aimed at reducing emissions, ranging from using more renewable energy to buying energy-efficient, precision agricultural equipment, recycling technologies and purchasing electric vehicles.
BHP is settling in for a quiet pursuit of Australian copper major OZ Minerals after its initial $25 a share bid for the company was rejected out of hand by the South Australian miner. BHP’s $8.4bn offer for OZ Minerals is a fresh salvo in chief executive Mike Henry’s bid to switch the mining giant’s focus to “future facing commodities” after BHP failed to capture Canadian nickel play Noront Resources this year after a heated bidding war with iron ore billionaire Andrew Forrest. On Monday BHP flexed its balance sheet in a move to expand its copper and nickel portfolio, lobbing a $25 a share bid cash bid for OZ Minerals. The move, delivered to the OZ Minerals board after the close of the market on Friday, was rejected by its target, with the SA-headquartered copper miner describing the offer as “unsolicited, conditional and non-binding”, despite BHP initially hoping to stitch up a friendly takeover through a scheme of arrangement. BHP said on Monday it still hopes a friendly tie-up can be arranged, with its bid conditional on OZ Minerals allowing due diligence – and a unanimous recommendation from the board.
Petrol and diesel supplier Ampol has made its entry into electricity supply, opening its first AmpCharge electric vehicle charging site in the inner-city Sydney suburb of Alexandria, with a pilot offer to household customers in the wings. Chief executive Matt Halliday said Ampol had made clear it was looking to test an offer in retail electricity and had now secured its energy retailing license. The Alexandria AmpCharge site, at the Ampol Woolworths MetroGo site, is the first of 120 electric vehicle fast-charging sites to be delivered at Ampol forecourts across Australia by December 2023. It is part of an initial rollout of five pilot sites at Ampol service stations, with fast-charging infrastructure also to be installed at sites in the Brisbane suburb of Carseldine, Northmead in Greater Western Sydney, Altona North south-west of Melbourne and in the Perth suburb of Belmont over the coming month. Halliday said the first AmpCharge site also represents the first stage of Ampol’s shift to position itself as a provider of electricity for customers, to be supplied at home or in places such as shopping centres as well as on traditional service station sites. The plan to move into electricity supply was flagged by the former Caltex Australia last May as part of the company’s decarbonisation strategy, which also includes opportunities in hydrogen, gas, biofuels and emissions reductions. Ampol has committed to spending $100 million on future energy sources for customers as it shifts its portfolio to suit growing demand for lower-emission products. Each site will be capable of delivering charge to an electric vehicle at up to 150kw and have the capacity to charge at least two vehicles concurrently. They will be powered by solar panels and solar battery storage systems, with excess energy from the EV chargers offset by large-scale renewable energy certificates. The move comes amid lagging uptake of electric vehicles in Australia compared to other advanced economies, with only 2% of new car sales last year being electric. A lack of incentives to purchase EVs and the absence of vehicle emissions standards have contributed to a poor choice of models on the market in Australia, and high costs.
Subscription video on-demand platform Stan has secured a major new content pipeline from Sony Pictures International, locking down a set of new scripted dramas and a back catalogue of TV shows and movies. The new deal will give Stan exclusive first run of new Sony TV shows including Bob Odenkirk starring in an adaptation of the novel Straight Man, Anthony Mackie in Twisted Metal, based on the video game of the same name, Tiana Okoye in Panhandle, and Sophie Charlotte in Passport to Freedom.
And the profit reporting season continues. National Australia Bank, the country’s biggest business lender, recorded an unaudited net profit of $1.85 billion for the three months through June. No comparable figure was disclosed, but it compares with a profit of $1.65 billion reported by the bank a year ago. Commonwealth Bank has reported an 11% jump in full-year cash profit to $9.595 billion on the back of strong home lending and lower bad debts even as interest rates begin to rise. Suncorp revealed full-year cash profits had fallen 36.7% to $673 million. Net profit after tax fell 34.1% to $681 million on a statutory basis, battered by flooding and falling investment markets. Volt Bank’s bottom line loss soared to A$84.3 million in the 12 months to the end of March, according to annual financial statements lodged last week with regulators. The operating performance was markedly worse than the 2021 net loss of $38 million. Volt surrendered its banking licence last month after it failed to complete a $200 million capital raising earlier this year. GrainCorp has boosted FY22 profit guidance by 11-12% on “outstanding execution” across its business areas and expectations for the east coast Australian crop in 2022/23. Aurizon has reported group underlying EBITDA of $1.46 billion for the year ended June 30, down 1% on the prior year. Revenue for the year increased 2% to $3.07 billion. The company’s statutory net profit after tax fell 15% to $513 million, down from $607 million in FY21. On an underlying basis, NPAT dropped 2% to $525 million. News Corp reported a 31% jump in earnings before interest, depreciation and amortisation to $US1.67 billion for the full-year, up from $US1.3 billion in the previous year. REA Group’s revenue grew by 26% to $1170 million, EBITDA including associates increased by 19% to $674 million, and net profit grew to $371.7 million. Megaport revenue rose 40% to $109.7 million in financial 2022 from $78.3 million a year earlier. Dexus Convenience Retail REIT recorded a statutory net profit of $82.6 million, 11.9% up from last year.
And that’s it for this week. And next week, I’ll be talking to Red Leaf CEO Ian Schubach about how to build the post-pandemic workplace. And I’ll be talking to Rabobank economist Michael Every about the economic slowdown in China and its implications for Australia.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. 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.