China’s economic slowdown deepened in July as strict Covid Zero measures and a slumping real-estate market threaten the chances of a recovery to a “reasonable” range.
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 29 in our series for 2022 and today’s date is Friday August 19.
First, 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.
But now, let’s talk to Ian Schubach.
In worrying news for Australia, China’s economic slowdown deepened in July due to a worsening property slump and continued coronavirus lockdowns, with an unexpected cut in interest rates unlikely to turn things around while those twin drags remain. Retail sales, industrial output and investment all slowed and missed economists estimates in July. The surveyed jobless rate for those aged 16-24 climbed to 19.9%, a record high and headache for the Communist Party as it gears up for a major congress in coming months that’s expected to give President Xi Jinping a precedent-defying third term in power. The data suggest a crisis of confidence among Chinese businesses and households, adding another threat to the world economy as global demand for everything from Apple iPhones to luxury goods take a knock. At the same time, a worsening property slump is being felt at home and abroad as commodity prices such as iron ore and copper plummet. China’s bonds surged and the offshore yuan weakened as investors absorbed the disappointing data prints and surprise rate cut. China’s leadership has ruled out large-scale stimulus and vowed to continue with its stringent Covid Zero policy, requiring authorities to shut down businesses and lock down the population when major outbreaks occur — as is the case now in the resort island of Hainan. That’s dimming the growth outlook for the rest of the year, which economists are downgrading further below 4%.
Oil giant Saudi Aramco made an astonishing $700 million in profit every single day, the biggest quarterly profit of any publicly listed company in history. The Saudi Arabian petroleum and gas company reported an eye-watering $68 billion (US$48.4 billion) of profit in the second quarter of 2022. Its earnings were boosted by surging demand as Covid-19 restrictions were dropped around the world — and pushed even higher by Russia’s invasion of Ukraine. Net income leapt 90% year-on-year for the world’s biggest oil producer, which clocked its second straight quarterly record after announcing $55.46 billion (US$39.5 billion) for Q1. Aramco’s massive Q2 windfall was the biggest quarterly adjusted profit of any listed company worldwide, according to Bloomberg. The state-owned Saudi firm heads a list of oil majors raking in massive sums after ExxonMobil, Chevron, Shell, TotalEnergies and Eni also revealed multi-billion-dollar profits in Q2.
The world’s biggest fund manager, BlackRock, has selected Australia for the rollout of its largest investment in grid-scale batteries that will be crucial to driving the shift from coal to clean energy. BlackRock, which manages $US10 trillion ($14 trillion), announced it intends to commit $1 billion for nine battery-storage projects spanning the nation’s east-coast electricity grid after agreeing to acquire Melbourne-based battery developer Akaysha Energy which has nine projects proposed across the National Electricity Market. The commitment marks the American behemoth’s first investment in deploying battery storage projects in the Asia-Pacific region, and its most significant investment in batteries globally. BlackRock Asia-Pacific’s co-head of climate infrastructure, Charlie Reid, said BlackRock had selected Australia because it was experiencing many challenges of the transition from fossil fuels to renewable energy much sooner than other countries.
A weekly gauge of consumer confidence put together by ANZ and market research company Roy Morgan increased 4.9% last week, but remains in negative territory. The sentiment index registered 84.2 points for the week, well below its long-term average of 112.2 points based on data stretching back three decades.
Australian workers have suffered another large real pay cut, with the latest official data showing wages growth fell further behind the surging cost of living in the year to June. The latest Australian Bureau of Statistics Wage Price Index shows baseline pay packets rose 2.6% over the year to June after a 0.7% rise in the quarter. This means “real wages” slumped 3.5% over the year to June amid inflation of 6.1%.
Nine has denied that its chairman Peter Costello acted as an undisclosed Crown lobbyist, working personally for James Packer as he attempted to get “closer” to the Victorian gaming minister, the billionaire businessman. James Packer claimed that he paid Costello $300,000 in 2011 to try and lobby his friend and former staffer Michael O’Brien, the then Victorian gaming minister. This has been alleged in private correspondence with the former federal treasurer. According to the emails, Mr Packer claimed he’d hired Costello to be a casino lobbyist in 2011, helping him get “close to” the Victorian gaming minister. Nine said Mr Costello was an “adviser” to Mr Packer during that time, and refuted claims he was working as an unregistered lobbyist. In the emails, Mr Packer accuses Mr Costello of hypocrisy and deceiving the Nine Entertainment board, which he chairs, about his time as a “secret Crown lobbyist” in 2011. “Your job was to get me closer to (then gaming minister) Michael O’Brien,” Mr Packer wrote to Mr Costello in July, adding he paid the Future Fund chairman $300,000 “to lobby for me, for Crown”. Mr Costello was not the registered lobbyist for Crown or Mr Packer’s private vehicle, Consolidated Press Holdings. The gaming group was represented by Strategic Advice Australia, a firm owned and operated by former Labor national secretary Karl Bitar. Mr Costello, who joined the Nine board in 2013, was briefly listed as the owner of a registered lobbying firm, ECG Advisory Solutions, that year. Mr O’Brien, who worked for Mr Costello for several years from 1999 when the latter was federal treasurer, said he had “met and was lobbied by a number of Crown executives”.
KPMG has “exited” 11 people from the firm for misconduct including bullying, sexual harassment and policy breaches during the past year. The number of complaints more than doubled to 88 after a concerted internal campaign to encourage staff to speak up about unethical behaviour at the firm. The firm expects the number of complaints to continue to rise amid the push to instil a culture where partners and staff members are unafraid to report wrongdoing. More than one-third of the 88 complaints, or about 32, related to policy breaches, while another 27%, or about 24, were bullying allegations. Nine complaints were about sexual harassment with seven substantiated, leading to one individual leaving the firm. This is up from three reports of sexual harassment in 2021. Overall, the firm finalised 69 misconduct investigations last financial year, with 38, or 55%, substantiated partially or in full.
The average weekly fuel cost for Australian motorists has hit $100, after rising an extra $5 a week over the course of the past three months, according to new figures. The Australian Automobile Association’s latest Transport Affordability Index, released on Sunday, shows average weekly fuel costs across the nation rose to $100.39 in the June quarter. Typical weekly household transport costs, which take into consideration average weekly spending on fuel, car loan repayments, tolls, insurance and servicing, as well as public transport, also grew by $11.74 in capital cities in the first quarter to $412.21 and $342.98 in the regions. The fuel costs factor in the temporary halving of the fuel excise rate, inflation running at 6.1% annually and global price shocks stemming from the war in Ukraine. Michael Bradley, managing director of the peak motoring body, said it was the first time the national weekly fuel cost average had passed $100 since the index’s inception in 2016.
Australian employers are throwing in the towel on hybrid work, with more than 40% of companies no longer expecting staff to ever make an appearance in the office. More than four in every 10 companies no longer expect their staff to show up to the office. A survey of nearly 1200 companies, conducted by the Australian HR Institute in July, found just 4% required employees to work in the office full-time. Of those surveyed, 7% of organisations allowed employees to work from home continuously, while 34% had no set number of days required in the office but did encourage it. The average proportion of employees working continuously from home has increased from 5% before the pandemic to 18% Almost 30% of companies are requiring a minimum of three days a week in the office and 16% request two days. More than half of the organisations revealed they were offering incentives to lure staff back to the office, such as social events and free coffee or meals. Those surveyed reported that before the pandemic, on average 23% of employees worked from home at least one day a week. Now it’s 58%.. More than half of the human resources professionals surveyed expected that working from home or remote working arrangements would remain the same over the next two years, while 25% predicted that the rate of working from home and remote working would increase.
BHP has issued an apology to staff subjected to sexual harassment , after revealing it had received substantiated reports of more than 100 cases in the past year. Of 103 substantiated cases in the 2021 financial year, BHP said 37 had involved non-consensual kissing or touching of a sexual nature. Another 66 had involved other forms of harassment including sexual comments, unwelcome gestures or sending inappropriate text messages or images. Australia’s largest miner said 101 of the individuals involved in the 103 substantiated cases had been sacked, had resigned or been removed from site if they were a contractor. “We are deeply sorry and apologise unreservedly to those who have experienced, or continue to experience, any form of sexual harassment anywhere at BHP,” the company said on Tuesday BHP said it had been conducting assessments to identify risks and prevent sexual harassment, including through leadership and training, enhanced security at accommodation sites, confidential reporting processes and disciplinary actions. Similar issues had been reported at resources giant Rio Tinto
And the profit reporting season continues. BHP booked a $US30.9bn net profit for the financial year, up 173% from last year. Santos has reported free cash flow of $US1.7 billion for the period and an underlying profit of $US1.3 billion, up 300% on the prior corresponding period. Corporate Travel swung to a $3.1 million net profit in the year ended June 30 from the year-earlier loss of $55.35 million Dexus full year 2022 net profit rose 42% to $1.62 billion and adjusted funds from operations were 53.2¢, up 2.7%.. Fund manager Magellan has reported a 23% fall in revenue to $553.53 million while adjusted net profit after tax fell by 3% to $399.73 million. Blood products giant CSL had a 5% fall in profit to $US2.3 billion ($3.3 billion). Pact’s net profit fell 25% to $70 million in the year to June 30. E-commerce player Redbubble has reported a net profit loss of $24.6 million in the year to 30 June, down 56% from a profit of $31.2 million in FY21. Software platform Whispir has doubled its net loss to $19.4 million on sales up 48% to $70.6 million for FY 2022. Shopping mall landlord Vicinity Centres has swung to a $1.2 billion profit, increasing 571% from a loss of $258 million in FY21. Domain has reported a net profit after tax of $55.3 million for the 2022 financial year, up 46% on the prior year. Downer delivered a 17% drop in net profit to $152 million. Acquisitive software business ReadyTech has posted a net profit of $8.8 million on sales up 56.5% to $78.3 million. Brambles delivered $US571.7 million in after-tax profit on a statutory basis, up 7% on the previous year, while underlying profit increased 6% to $US930 million. Bapcor has reported a record statutory profit after tax of $125.8 million for the year ended June 30, up 5.9% on the previous year. Seven West Media reported an underlying net profit after tax (excluding significant items) of $200.8 million for the year ended June 25, an increase of 60% on the previous year.SCA Property Group reported funds from operations of 17.4¢, or growth of 17.9%, and adjusted funds from operations of 15.3¢, or growth of 21.3%. Super Retail Group, which owns Rebel, Supercheap Auto, BCF and Macpac brands, said it net profit fell 19.9% to $241.2 million in the 53 weeks ended July 2 compared with the consensus forecast of $224.4 million. Sims has reported sales revenue of $9.26 billion for the 2022 financial year, up 56.6% on the prior corresponding period (pcp), while statutory EBIT increased 146.4% to $773.6 million. Temple & Webster’s FY 2022 profit lost 14.2% to $12 million while sales climbed 30.6% to $426.3 million on an EBITDA margin of 3.8%. Buy now, pay later business Sezzle’s net loss widened to $US43.1 million ($61.2 million) for the full year. Growthpoint Properties Australia has announced a 17% decline in statutory profits after tax of $459.2 million. Challenger Financial reported a 57% drop in net profits after tax to 253.7 million in the 2022 financial year. James Hardie cut its full-year profit forecasts for the 12 months ending March 31 to between $US730 million ($1.04 billion) to $US780 million, from a previous band of $US740 million to $US820 million. Real estate investment trust Goodman Group grew operating profits by 25.3% to $1.5 billion in the 2022 financial year, while revenues jumped by more than a third to $5.2 billion.SG Fleet net profit rose 39% to $60.7 million. Abacus Property Group grew funds from operations by 18% to $160.9 million in the 2022 financial year. SEEK reported a 130% surge in full-year net profit from continuing operations to $240.8 million BlueScope’s overall net profit more than doubled to $2.81 billion in the year ended June 30. Underlying earnings before interest and tax totalled $3.79 billion, a full-year record. It was the highest profit since BlueScope was split off from BHP in 2002 and had its own ASX listing. Temple & Webster net profit fell 14.2% to $11.97 million, hurt by its initial investment of $1.7 million in to its new home improvement site, The Build.Carsales has reported net profit after tax of $161 million for the year ended June 30, up 23% on the prior corresponding year. JB Hi-Fi has reported total sales of $9.23 billion for the 12 months ending June 30, up 3.5% on the prior year. Online sales increased 52.8% to $1.63 billion. Charter Hall Social Infrastructure REIT (CQE) has reported a statutory profit of $358.5 million for the year ended June 30, up $184.4 million on the prior corresponding period (pcp). Beach Energy’s total revenues increased 13% to $1.8 billion in FY2022, while its underlying earnings lifted 17% to $1.1 billion. GPT Group has reported a net profit after tax of $529.7 million for the six months ended June 30, down from $760.5 million in the prior corresponding period. Listed investment company Bailador Technology have reported net profit which rose 23% to $34 million while gains on financial assets rose 36% to $70.7 million. GUD Holdings reported a statutory net profit after tax of $27.3 million, down 55..2% on the prior year, Bendigo and Adelaide Bank has recorded a 9.4% increase in full-year cash profit to $500.4 million. Argo reported record full-year profit of $312.9 million, up 79.9% year on year.
And that’s it for this week. And next week, I’ll be talking to Frank Meehan, the managing director of FiscalNote, the leading technology provider of global policy and market intelligence, next-generation carbon and ESG management software solutions. And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment and wages figures.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.