News Corp is dumping Foxtel.
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 or at Banking Day.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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 29 in our series for 2024 and today’s date is Friday August 16
First, I’ll be talking to Nexia Australia’s corporate advisory partner Brent Goldman about the latest M&A trends, which overseas countries are the largest acquirers of Australian companies and M&A trends looking forward.
And I will talk to economist Saul Eslake about Australia’s inflation outlook, its economy and the RBA.
But first, let’s talk to Brent Goldman
So what’s happening in the news?
Bruce Daisley, formerly Twitter’s vice-president for Europe, Middle East and Africa says Elon Musk should face “personal sanctions” and even the threat of an “arrest warrant” if found to be stirring up public disorder in the UK on his social media platform. The UK government has called on social media platforms to act responsibly after violent unrest swept through the UK following the fatal stabbing of three young girls at a Taylor Swift-themed holiday dance class in Southport last month. The prime minister has blamed social media companies for allowing the spread of false claims that the attacker was an asylum seeker and police are increasingly going after those suspected of using online posts to incite violence. In one post, Musk wrote: “civil war is inevitable” in the UK, language that the justice minister, Heidi Alexander, described as “unacceptable”. Musk has Musk also shared a false post suggesting Labour leader Kier Starmer was planning to set up “detainment camps” in the Falkland Islands, a post he later deleted. Daisley, who worked at Twitter, now X, from 2012-2020, describes Musk as someone who “has taken on the aura of a teenager on the bus with no headphones, creating lots of noise”. He said “Were Musk to continue stirring up unrest, an arrest warrant for him might produce fireworks from his fingertips, but as an international jet-setter it would have the effect of focus.”
Reserve Bank deputy governor Andrew Hauser has warned against “overconfidence” on the outlook for interest rates, while outlining two-way risks for unemployment and household consumption that could affect the outlook for inflation. In a speech to the Economic Society of Australia in Brisbane on Monday, Mr Hauser said anyone claiming that interest rate prescriptions were “obvious” were “false prophets”. Mr Hauser – who joined the RBA in February after a distinguished career at the Bank of England – said that Australians are right to want to be confident that the central bank will bring inflation back to target and maintain full employment in accordance with its dual mandate. “That is the RBA’s mandate, and we should be held to account for it,” he said. “But the policy strategy required to deliver that outcome, and the economic judgments that inform it, simply cannot be stated with anything like the same degree of certainty,” he added. Those pretending otherwise are false prophets.” The RBA board, led by Michele Bullock, left interest rates on hold as expected after its August meeting last week. Mr Hauser said the RBA must “guard against overconfidence” in its outlook for economic demand. In its latest statement on monetary policy, the RBA considered alternative scenarios and the potential for “potentially sharp changes in behaviour.” “Assuming that unemployment rises only gradually, the central projection is for consumption growth to pick up in line with an expected recovery in household real incomes,” he said. “But consumption also depends on the extent to which households choose to spend or save these higher incomes – and we are much less confident in that judgment.”
Technology companies say job graduate readiness is at its lowest levels, with most believing 99% are not able to jump in and perform effectively after leaving university. Just 1% of graduates can hit the ground running across Australia, a figure that’s dropped 2% from last year, and this is leading some employers to look offshore, according to the Australian Information Industry Association’s State of the Nation 2024 report. AIIA chief executive Simon Bush says that most tech companies found graduates needed at least half a year to reach a level where they were productive. “Six to nine months of training is what’s required – at least that’s the feedback from our members to train university graduates and get them job ready,” he said. “Obviously, we’ve got a very small to medium enterprise-heavy economy, and SMEs cannot afford to bring someone in that’s unproductive for that period of time.” Vietnam has for some time been rising up to meet Australia’s tech worker shortages, with a report released in February this year finding hiring from the southeast Asian nation had grown 126% over the past 12 months. Vietnamese recruitment firms say that many workers have found Australian working conditions, even on remote contracts, are more generous than those from the US and Korea. Mr Bush said while AIIA’s new report showed that most overseas workers were being hired on remote contracts, occasionally those with highly sought-after skills were being sponsored and brought into the country. The AIIA wasn’t against the hiring of remote offshore workers but said the association had a preference for hiring in Australia.
The Albanese government plans to reduce the number of online gambling ads but it has exempted Google’s lucrative search engine. Wagering firms will still be able to buy “sponsored” results on some search terms. The Government plans include a ban on gambling ads an hour either side of live sport, no more than two ads per hour on TV until 10pm, and a blanket ban on betting ads on social media and other digital platforms. However, it does not prevent gambling companies from advertising on sports jerseys or on signs in stadiums – both of which appear on TV broadcasts. As for Google, its search results fall into two categories: organic and paid. Organic results are based on how relevant a website is to what a user has searched for. Paid results are listed as sponsored at the top of some search terms. Banks, for example, pay to appear at the top under the search term “home loans”. Google’s search platform has a carve-out for wagering-related terms. Search is a huge money spinner for Google. According to digital advertising group IAB Australia, search engines made $6.6 billion in Australia in 2023. Google commands the lion’s share of the search market. Revelations there may be carve-outs have triggered fury among independent MPs, who have demanded a total ban. “Anything short of a blanket ban will just move ad revenue around, as we saw with tobacco,” teal independent Kate Chaney said. “A carve-out allowing sponsored content on search engines would be the thin edge of the wedge.” Fellow independent MP Zoe Daniel said gambling companies would take every “loophole” they are given. “In this case it may well be the most vulnerable who are likely to search gambling terms who are then targeted with ads,” she said. “Surely, this is unconscionable.”
Woolworths has moved into the vegan meat industry, signing an exclusive deal to stock discount options that undercut the struggling startups once dominant in the market. In May the supermarket behemoth started selling products from Melbourne manufacturer Flexitarian Foods that retail for about half the price of offerings from vastly smaller rivals. The move mirrors a trend in Europe, where supermarkets such as Germany’s Lidl are selling home-brand fake meat products after businesses hoping to become brand names in the sector, such as venture capital-backed Sunfed and ProForm Foods, collapsed. Plant-based food start-ups enjoyed a boom until 2020 as investors piled money into the sector hoping it would attract customers willing to swap out meat for ethical reasons, even if it cost a premium. But the sector has grown at a far slower rate than expected. Woolworths says demand for plant-based meat had grown 50% in “recent years” off a low base, then softened but bounced back in the last two months. It claims plant-based protein products which seek to recreate the traditional meat-eating experience are proving more popular than vegetable-based proteins like veggie patties. Premium plant-based meat maker Vow is making high-end creations like parfait. Though the company is not profitable, Vow’s co-founder and chief executive George Peppou says Vow has significant financial reserves. It hopes to hit the high end of supermarket pricing within two or three years, he said, but would not necessarily sell through that channel.
REA, which owns property listings platform realestate.com.au, extended its lead over Domain at its annual results on Friday and has been handsomely rewarded. The $460.5 million in net profit was below expectations, but shares rose almost 7% with guidance of ongoing strong listings numbers. REA, which is majority owned by Rupert Murdoch’s media company News Corp, has grown its market capitalisation to $26.7 billion, up more than 10% since January. It is worth more than Coles. Domain, meanwhile, has fallen 10.8% over the same time, taking its value down to $1.9 billion. The longer-term trend is just as poor. Over the past five years, Domain, which is majority owned by Nine Entertainment, has added 11.3% to its share price. Nine’s 60% stake in Domain is worth $1.16bn; Nine’s current market cap is $2.24bn. REA is up 109%. Decent proxies for changes in market share are app downloads and monthly active users. According to analysts at investment bank UBS, REA’s monthly app audience rose 9% in July year-on-year, versus Domain’s 7% decline. In February’s half-year results, Domain lost ground on the number of property listings available. Brokers say this has narrowed in the second half, but also say it should reinvest recent cost cuts to close what has become a record difference in valuation to REA. On Friday, Domain releases its full-year numbers. Every result is important. But the cliché “critical juncture” seems very appropriate. Domain’s potential is clear. Private equity firms KKR and TPG have been circling – Nine’s bankers gauged their interest in Domain last year. TPG has kicked the tyres and had a swing at buying Domain back in 2017. Nine’s board has periodically pondered the merits of taking full ownership. Former Nine Chairman Peter Costello was no fan of Domain’s performance – or chairman Nick Falloon – but nothing was done. Nine’s new chair, Catherine West. West has quickly cemented herself in the role, touring the country’s news floors and offices to meet key decision makers and Domain’s long-term leadership must be right up there on her list. More than half of Nine’s $2.2 billion valuation is down to its ownership of Domain.
Rupert Murdoch’s News Corp has put Australian media company Foxtel up for sale as the global publishing and broadcast giant confronts the reality that streaming is rapidly bringing the era of pay TV dominance to an end. On Friday, News Corp flagged “third-party interest” in the group, in which it owns 65%, and brokers point to Platinum Equity, a major LA-based investment firm, as a likely buyer. News Corp chief executive Robert Thomson told analysts that News Corp had a “significant overture that we are naturally assessing”, but declined to provide further details. The sale could value the business at $1 billion and comes in the same week that big broadcasters Warner Bros. Discovery and Paramount Global had more than $US15 billion ($22.8 billion) wiped off the value of their cable TV networks. Foxtel’s streaming platforms Kayo and Binge have much leaner profit margins. The challenge for News Corp has been to preserve Foxtel’s legacy base of 1.2 million subscribers who pay, on average, $90 a month, and are responsible for most of the profit. They are diminishing by about 10% a year. Including streaming and cable, Foxtel has grown its total paying subscription base to 4.7 million people. Any sale of Foxtel would have a flow-on effect on long-term content deals, multibillion-dollar sports rights packages, and more.
Australia’s corporate regulator needs a US-style “law enforcement” approach, the architect of the latest inquiry into the country’s business investigation agency has warned, saying its current model is unworkable. Liberal Senator Andrew Bragg, in his first interview since publishing his 206-page-review of the Australian Securities and Investments Commission, says the regulator needed a new direction if it were to achieve better enforcement outcomes. His view has been backed by a coterie of former regulators and corporate figures, who said ASIC’s mandate was too broad and the agency inadequately funded, and urging consideration of a break-up. Bragg, who chaired the latest inquiry into ASIC, called for the agency to be split between a company regulator and a financial conduct authority. Bragg said ASIC should be split into two agencies, one which handled business administrations, liquidations and registration and another to deal with the country’s financial sector. This could see Australia adopt a British-style model, spearheaded by their Financial Conduct Authority. Britain split its “super regulator” in April 2013 into the FCA and the Prudential Regulation Authority in the wake of the Global Financial Crisis. ASIC, the corporate regulator, is charged with upholding Australia’s corporate laws and taking enforcement action against law breakers and business figures. It can take civil or criminal action. The commission, formed in 1998 in the wake of the Wallis inquiry, has faced criticism over its enforcement record and failure to tackle major breaches. Senator Bragg says it is time to consider a split of ASIC, saying the regulator had shown a failure of leadership and that there had been some poor appointments, and calling for a new approach to governing the agency. By contrast, the Securities and Exchange Commission, America’s corporate law enforcement agency, operates as a market-focused entity. It is credited with an aggressive enforcement culture and fast results, and is able to hand whistleblowers a fee for “high-quality” information. Bragg said ASIC or any enforcement agencies should achieve more Sam Bankman-Fried style outcomes, with a quick turnaround between charges and jail. “They need to drive a culture of fear of law enforcement,” he said.
And the profit reporting season continues. Commonwealth Bank, Australia’s biggest bank reported a $9.8 billion cash profit for the year to June 30, down 2% on the previous year. Seven West Media reported a profit of $45.3 million, down 68.9%. AGL Energy reported a statutory profit of $711 million for the full year, from a loss of $1.3 billion a year ago, Imaging technology company Pro Medicus posted a net profit of $82.8 million for the 12 months to June 30, 36.5% higher than the year earlier. Glass bottles and cans maker Orora’s net profit inched ahead by 0.2% to $185.2 million for 2023-24. Evolution Mining posted net profit (statutory and underlying) of $422 million and $482 million, up 158% and 135%. Online vehicle marketplace business Car Group posted a net profit of $250 million, down from the $646 million a year earlier. Beach Energy posted a net loss for the year ended June 30 of $475.3 million, down from net profit in the 2023 financial year of $400.8 million. JB Hi Fi’s profit fell 16.4% to $438.8 million. Rail haulage group Aurizon reported a 25% rise in annual net profit to $406 million. CSL reported a 20% increase in full-year net profit to $US2.64 billion ($4 billion), boosted by “exceptional growth” in its immunoglobulins business. Wealth giant Challenger posted a 24% decline in full year net profit to $130 million. Online recruitment platform Seek reported a 13% drop in earnings to $483 million in fiscal 2024 from a year ago as job ads fell across the Asia Pacific region. Building products group James Hardie posted a 1% lift in first quarter adjusted earnings to $236 million, and kept guidance for fiscal 2025. Online retailer Temple & Webster reported record revenue of $498 million for the 2024 financial year, up 26% on the prior year. The country’s biggest owner of suburban malls, Region Group, has posted a statutory net profit of $17.3 million. Fund manager Netwealth’s statutory net profit leapt 24% to $83.4 million in fiscal 2024. NBN Co reported a loss of $1.176bn, which was worse that the $1.119bn the previous financial year. Bunnings landlord BWP Trust has turned in a $180.2m profit for the 2024 financial year, up from last year’s profit of $36.7m. Car equipment company Amotiv posted a $100 million statutory net profit in fiscal 2024 – a 6.5% gain from a year ago.
And that’s it for this week.
And next week, I’ll be talking to the director of WorkforClimate Lucy Piper on the issue of how many of Australia’s leading companies (Telstra, Rio Tinto, Qantas, Woolworths & more) are obstructing and delaying Australia’s transition to net zero by lobbying against climate action.
And I will talk to Indeed economist Callam Pickering about the latest unemployment figures.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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Wishing you all a safe and healthy week, And looking forward to bringing you Talking Business next week.
