Plummeting iron ore prices could cost the federal government $3 billion in revenue, which is likely to push Australia’s budget further into deficit this financial year.
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 30 in our series for 2024 and today’s date is Friday August 23.
First I’ll be talking to the director of WorkforClimate Lucy Piper on the issue of how many of Australia’s leading companies like Rio Tinto, BHP, Qantas, Coles and Woolworths & more obstructing and delaying Australia’s transition to net zero by lobbying against climate action. Despite their ostensible commitments to Net Zero, they are in reality greenwashing, even gas lighting.
And I will talk to Indeed economist Callam Pickering about the latest unemployment figures and whether these point to rate hikes instead of rate cuts.
But first, let’s talk to Lucy Piper.
So what’s happening the news?
Plummeting iron ore prices could cost the federal government $3 billion in revenue, which is likely to push the budget further into deficit this financial year. China’s property market is in a precarious state, which has seen demand for iron ore — the key component for making steel – drop significantly. Iron ore prices at the start of the year were around $143 per tonne and have been gradually declining all year. But that decline has accelerated in recent weeks, with prices now sitting around $82 per tonne, which is below the price the Treasury had anticipated at this point. It had forecast the iron ore price gradually declining to settle at $60 per tonne by the first quarter of 2025. Treasury analysis finds that if prices fall to that level in the current quarter (which ends in September) instead, it would mean a loss of $3 billion dollars in tax receipts over the next four years. The government was already expecting to post a deficit of $28 billion for the 2024-25 financial year, after delivering surpluses for the last two years. The Treasury often makes conservative forecasts on iron ore prices, which has meant the federal government has regularly received more revenue than it planned for. But now, with iron ore prices falling faster than expected, Labor faces the prospect of less revenue and a bigger deficit as it heads into an election year in 2025. In a statement, Treasurer Jim Chalmers described it as “another reminder that we are not immune from volatility and uncertainty in the global market”. The federal government will be hoping the jobs market remains strong, with continued low unemployment meaning more revenue for the government via income taxes.
Federal police have been called in to investigate whether Regional Express’s former chairman illegally recorded the company’s final board meeting amid increasingly bitter recriminations over the airline’s collapse late last month. The Australian Federal Police confirmed it had received a report of a potential crime last week and the company’s chairman, John Sharp, had spoken to investigators examining misdemeanours at Regional Express, known as Rex. The report to the AFP alleged that Lim Kim Hai, who was deposed as Rex’s chairman earlier this year and controlled more than 50% of the register until administrators at EY were called in on July 31, illegally recorded the final board meeting. But those claims come amid a serious falling out between Mr Lim and other directors including Mr Sharp. Mr Lim was removed as executive chairman with little explanation in June, and later pushed to turf the company’s entire board. Rex was rescued out of the collapsed airline Ansett – and its regional subsidiaries, Hazelton and Kendell Airlines – in 2002. While many other airlines have failed around it, most recently low-cost carrier Bonza, Rex had succeeded in staying afloat, even flourishing. In 2021, it secured the backing of PAG Asia Capital, which gave it a $150 million line of credit that allowed it to expand into capital city markets. Since its collapse, those services have ended. The federal government is guaranteeing flight bookings made during the administration process. EY is hopeful of selling the airline. It has brought on corporate advisors Houlihan Lokey for the process. Part of the animosity in the boardroom has been attributed to dealings with Virgin Australia and its private equity owner Bain Capital. Virgin made two attempts to strike a deal with Rex, including just months ago, to take on the capital city business and the nine Boeing 737’s flown by the airline. Those agreements never proceeded. When Rex fell into administration, Virgin agreed to take over three of Rex’s 737 leases. The others have been handed back to their owners. Rex’s regional business is the largest owner of Saab turboprop aircraft in the world, although it needs significant new funding to overhaul the ageing fleet. EY has told creditors that Rex owes around $500 million, including $120 million to PAG and $170 million to Westpac, although that is fully guaranteed by government contracts related to the ambulance service PelAir, a subsidiary of the airline.
Disgraced construction union leaders could be banned from their jobs for life after Labor and the Coalition struck a deal giving an independent administrator control of the CFMEU for at least three years. The compromise law was thrashed out on Monday in response to a litany of issues exposed in the media. But the bill, which passed parliament on Monday night, could be challenged by the union in the courts and will test the expected administrator Mark Irving KC’s ability to turn around a union with deep-seated loyalties and a militant culture. Workplace Relations Minister Murray Watt said the law would turn around Australia’s $269 billion construction sector. After weeks of public sparring, Labor agreed to Coalition demands to require six monthly reports to parliament from the administrator, a three-year minimum administration and the lifetime bans for dodgy unionists. The Coalition failed to extract a legal guarantee barring union political donations, settling instead for an assurance from Irving that they would not occur. Only the Greens opposed the bill. All state and territory divisions of the union will be forced into administration as early as next week, Watt confirmed. Opposition Leader Peter Dutton’s move to table a bill to bring back the union watchdog scrapped by Labor, the Australian Building and Construction Commission, and another allowing lifetime bans for corrupt union officials was knocked back by Watt, who said it would be “a witch hunt against all unions”. Senator Jacqui Lambie used parliamentary privilege to accuse major contractors of working with the CFMEU to engage in price fixing on government projects and allege that construction workers were being forced to join the union to work on them.
Self-funded retirees will be asked to pay more out of their own savings for their aged care under a deal to be struck between Labor and the Coalition that will chart a new course for the care of older Australians. Legislation giving effect to the changes has been largely agreed between the parties and, barring last-minute politics, could be put to parliament as early as Thursday. The new laws would see wealthier older Australians privately funding more of their daily living expenses while in aged care. Those not drawing a government pension would pay more for nursing home rooms, meals and everyday living costs such as cleaning, while those receiving in-home care packages would contribute more of their own money for services such as home maintenance and gardening. The new aged care bill is the Albanese government’s response to a number of elements of the aged care royal commission, and to its own taskforce that examined the financial sustainability of a beleaguered sector in which currently half of all nursing homes are operating at a loss. It is expected to come into force from July next year but, under grandfathering arrangements, existing nursing home residents are understood to be exempt from the changes. For home care, the greater co-contributions are not expected to come into effect for a further two years to allow for a transition.
Collapsed bookseller Booktopia has been rescued by the owner of online camera store digiDirect. McGrathNicol administrator Keith Crawford said he was incredibly pleased to close the sale and that the transition of Booktopia to another Australian e-commerce retailer was a great outcome for the business. “The transaction will result in the retention of all remaining employees, the recruitment of some 100 additional employees and continuity of supply for Booktopia’s trade creditors,” he said. However, the sale price, which was not disclosed, does not cover what creditors are owed. A second creditors’ meeting will be arranged, with details to follow.
Banks are spending hundreds of millions each year to keep cash in the branches and they want you to know it. CBA, the biggest bank in the market, has made the unprecedented move of using its annual results presentation to detail how much it costs to keep cash in the branches. The new CBA report says monthly cash ATM withdrawals have plunged 50% since 2018. At $350m per annum, the bank describes the provision of cash services as a “challenging commercial model”. The enormous bill for cash will serve as ammunition for the banks when they face a House of Representatives committee later this month which is set to examine the vexed issue of cash services. Consumer activist group Cash Welcome is calling for new regulations that would mandate big banks to provide cash and big retailers to accept it. Separately, there has been an independent members’ bill put before parliament calling for fines against businesses that do not accept cash on amounts below $10,000. At the heart of the matter are older Australians – many in regional areas – who want cash for everyday use with nearly 20% of over 65s classified as ‘high cash users”. Bank CEOs such as CBA’s Matt Comyn and ANZ’s Shayne Elliott are navigating a fine line between managing the shrinking – and increasingly expensive – business of providing cash with fears that regulators could intervene and dictate terms by mandating cash services. Banks have publicly admitted to not holding any cash in some branches – a change which prompted a social media uproar in recent times after ANZ customers realised selected branches did not carry cash any longer.
And the profit reporting season continues. Suncorp’s full year net profit jumped 12% to $1.2 billion. Westpac has posted a $1.8 billion unaudited net profit for the three months to June 30, up 6% on its average quarterly return in the first half. Ampol has recorded net profit of $235.2 million for the half year. BlueScope says its FY24 sales revenue dropped 6% to $17 billion on lower steel prices. Underlying net profit decreased 22% to $860.7 million. Property giant Lendlease reported a 10% decrease in revenue in fiscal 2024 to $9.4 billion, from a year ago. After tax losses deepened to $1.5 billion, from $232 million. In the first six months of 2024, oOh!media reported profit of $18.2 million, down 11%. Property giant GPT Group has recorded a net loss of $249.4 million, according to its half-year results. Financial software provider Iress earnings rose 52% compared to the previous half, to $67 million. Investigations software provider Nuix reported a statutory profit of $5 million for FY24 compared with a loss of $5.6 million for the year prior. Bathroom and plumbing products company Reece Group has lifted net profit after tax by 8% to $419.2 million for the 12 months ended June 30 GWA Group Limited has reported a 3.4% rise in normalized net profit. Retailer Baby Bunting posted a tiny $1.7 million statutory profit in fiscal 2024, 83% lower than a year ago. Construction group Monadelphous delivered a 16% increase in annual net profit to $62.2 million. Metal recycler Sims swung to a net loss of $58 million in fiscal 2024 from a profit of $181 million a year ago. Hub24 earnings for FY24 came in at $118.0 million, up 15% on FY23, and profit rose 24% to $47.2 million. Plumbing supplies group Reliance Worldwide Corporation suffered a 21% slide in annual net profit after tax for 2023-24 to US$110.1 million. Deterra Royalties posted a net profit of $154.9 million, up 1.6% on the previous year. Dexus reported a net loss of $1.58 billion, compared to a statutory net loss after tax of $752.7 million in FY23. Medical glove and surgical protective suits maker Ansell’s net profit slipped 49% to $US76.5 million for the 12 months ended June 30. Judo Bank has ruled off a slight fall in annual profit after tax to $70m but lifted its underlying profit before tax by 2%, to $107.5m. Shopping centre giant Vicinity’s annual net profit soared 67% to $547.1m. Mining services group Perenti’s statutory net profit of $107.2m was up $4.6m on FY23. Car parts merchant ARB reported a 17.1% jump in profit of $142.7 million. Helia Group reported a Statutory net profit after tax (NPAT) of $97.0 million and Underlying NPAT of$106.5 million. Ingenia Communities Group reported a profit of $14 million, up 78.2$ of 2023. Santos has posted an 18% drop in first-half underlying profit to $US654 million. Dominos Pizza posted a full-year net profit which was up 136.5% to $96 million. Insurance giant IAG’s net profit gained 9% in fiscal 2024 to $900 million. Fletcher Building swung to a loss of $227 million in fiscal 2024, from a profit of $235 million a year ago. AUB Group forecast underlying net profit in the range of $190 million to $200 million for the 2025 financial year, which represents growth of 16.9% over FY24. Pallett maker Brambles’ operating profit gained 19% to $US779.9 million. Breville reported a 7.5% increase in full-year net profit to $118.5 million. Alternative asset manager HMC Capital, lifted pre-tax operating earnings by 57% o $129 million for FY24. WiseTech’s statutory profit rose 24% to $262.8 million. Struggling pathology company Healius reported a loss of $645.8 million in FY24, compared to a loss of $367.8 million in FY23. Cleanaway Waste Management’s full year net profit jumped to $158.2 million from $23.5 million. Superloop has narrowed its annual net loss to $14.7 million. Sky New Zealand net profit fell 3.7% to $49 million in fiscal 2024. Red Bubble store owner Articore Group reported a net loss of $8.8 million, a $45.3 million improvement on 2023’s figures. Data#3 reported a 17% increase in full-year net profit to $43.3 million. Network service provider Service Stream’s profit was $50.1 million, up 36.4% on FY23. Mining-tech company Imdex’s Net profit fell 2% to $55.6 million. Pexa, which built the platform used to settle most Australian property transactions, reported a rise of 16% rise in operating earnings before interest and tax, depreciation and amortisation. to $115 million. The Lotto Corporation, which owns gaming brands like The Lott, Keno and Powerball, posted a net profit of $414 million for the year to June 30. Hansen Technologies’ statutory net profit halved to $21.1 million from $42.8 million a year prior. Peter Warren Automotive reported a 30.6% slump in full year underlying net profit to $56.8 million. Property fund manager Charter Hall has posted a near 19% drop in its operating earnings of $358.7 million for its 2024 financial year, Contractor Ventia Services has delivered a 15% increase in interim net profit to $101.4 million. Cedar Woods Properties reported net profit of $40.5 million for the 2024 financial year. Cleanaway Waste Management’s underlying net profit grew by 14.8% for the period to $170.6 million. Corporate Travel reported a 22% increase in underlying net profit to $113.3 million in the 2024 financial year.
And that’s it for this week. And next week, I’ll be talking to Dana Udall, the Chief Clinical Officer for the Headspace App which is the leading provider of meditation and mindfulness well-being solutions with over 100 million users, 30 million of those from Headspace for Work partnerships with over 4,000 global enterprises. The Headspace App continues to rank in the top 10 most downloaded health and fitness apps in both Apple and Android stores and has been downloaded over 70 million times with millions of monthly active users. Some notable Aussie brands who are cultivating healthier employee initiatives via Headspace for Work include Movember, caresales.com, A2 Milk, Atlassian, University of Melbourne and Booking.com (just to name a few). We will discuss trends happening within the mental wellbeing space.
And I will talk to EY economist Cherelle Murphy about Australia’s inflation and what it means for the Reserve Bank of Australia and the prospect of rate cuts.
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
