Australia’s rapid-fire interest-rate increases are sending tremors through the nation’s heavily indebted households and threatening a property downturn on a scale unseen since the eve of the 1991 recession.
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 30 in our series for 2022 and today’s date is Friday August 26.
First, I’ll be talking to Frank Meehan, the managing director of Fiscal Note, 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.
But now, let’s talk to Frank Meehan.
Australia’s rapid-fire interest-rate increases are sending tremors through the nation’s heavily indebted households and threatening a property downturn on a scale unseen since the eve of the 1991 recession. The market hardest hit is bellwether Sydney, where home values have dropped almost 5% in the past three months, compared with 2% in the A$9.9 trillion ($6.8 trillion) national market. Further falls are inevitable as the Reserve Bank, which meets again in just under two weeks, raises borrowing costs at the fastest pace in a generation. Home prices are weakening from Stockholm to San Francisco as central banks scramble to contain the hottest inflation in decades. Rate-hike risks are intensified in Australia by a record debt-to-income ratio of 187.2%. The RBA acknowledges it has only a narrow path to push rates high enough to snuff out excess inflation without driving the economy into recession. The Bank of Korea is grappling with a similar conundrum as it meets on Thursday, while the Federal Reserve has signaled flexibility on future rate moves.
News Corp co-chairman Lachlan Murdoch has filed defamation proceedings against Crikey over an article naming his family as “unindicted co-conspirators” of former US president Donald Trump following the deadly 2021 US Capitol riots. Lawyers for Murdoch, the chief executive of Fox Corporation, filed a statement of claim against the online news outlet in the Federal Court in Sydney late on Tuesday, after Crikey challenged the billionaire media mogul on Monday to sue it over the June 29 article. The lawsuit may prove the first major test of new defamation laws, in force across most of Australia, that include a public interest-style defence aimed at protecting investigative journalism and a requirement for a prospective plaintiff to show a publication has caused, or is likely to cause, serious harm to their reputation. The latter is aimed at weeding out trivial claims before a trial.
A new Productivity Commission report has endorsed skilled migration as a solution to Australia’s shortage of tech-savvy workers to resolve the country’s slow internet speeds and low uptake of innovative technologies which are contributing to lacklustre rates of productivity growth. The Productivity Commission’s second interim report in its five-yearly review into the nation’s productivity performance, titled Australia’s data and digital dividend, says digital technologies such as artificial intelligence and robotic automation could revolutionise how businesses operate, but a range of barriers such as a lack of skills for businesses and inadequate internet speeds were limiting uptake. The report says governments have a role to play in facilitating better use of technology, by bringing in skilled migrants with experience in cutting-edge digital technologies. Productivity Commission’s says more jobs would be created in digital technology over the next 10 years than could be filled by local applicants, even on the most optimistic estimates of Australians completing domestic courses through both the VET (Vocational Education and Training) system, through a range of the unaccredited vendor providers .and through the university system. Some of the strongest jobs growth would be in areas such as data analytics, cybersecurity and cloud-based services. Australia’s intake of foreign workers will be a major topic of debate at next week’s skills summit, with business groups calling for the annual migration intake to increase to at least 200,000 a year for the next two years, up from the present limit of 160,000. The Australian Council of Trade Unions supports expanding the program to 200,000 workers, conditional on the government making other changes to the skilled migration program, including lifting the salary floor for temporary skilled migrants to $90,900 and abolishing visa conditions that tie workers to a single employer.
Supermarket majors Coles and Woolworths have been flooded with a record number of demands from suppliers to push through higher shelf prices as food producers grapple with surging inflation. In some cases suppliers are up to their third round of requests so far this year, as they strain under rising costs. The supermarkets have warned that more demands for price increases are expected in coming months, putting pressure on supermarket shelf prices. The sheer volume of price rise requests – mostly in the past six months – has also seen talks between suppliers and supermarkets pushing out beyond the 30-day window set down by the industry code of conduct. Higher prices come against a backdrop of Covid-19-linked supply chain squeezes, worker shortages, higher energy costs and major flooding across NSW and Queensland, which has hurt the nation’s food producers. For their part, supermarkets are reluctant to push through rises as shoppers are highly sensitive to price changes.
The price of electric vehicles needs to roughly halve and fall into the $20,000s range before Australians will switch from traditional combustion engine cars, according to Ampol chief executive Matt Halliday. Government policies on vehicle emissions efficiency will do little to shift the dial on uptake rates, he added. Mr Halliday said he expected little change in demand for traditional fuels such as petrol and diesel out to 2030, given EVs would not reach price parity with traditional cars until later in the decade. After that point, the impact would become more marked, which Ampol is preparing for with the roll-out of its EV charging strategy and its preparations to offer electricity supply. The latter will begin with a limited trial for employees this December half.
Shell is considering developing its own offshore wind project in Gippsland, intensifying a race between global powerhouses to develop the renewable energy source in Victoria. Offshore wind has been earmarked as critical if Australia is to decarbonise and meet its net zero emissions targets, and Victoria has a particularly ambitious target of generating about 20% of its energy needs from offshore wind within a decade. Keen to capitalise, a pipeline of industry heavyweights have announced their own plans to develop offshore wind projects in Gippsland, which is on course to be home to Australia’s first offshore wind project. Swelling the number of projects in the pipeline, Shell is understood to be considering two sites in Gippsland for their own offshore wind project – intensifying competition for federal licences.
Solar power has outpaced coal as the number one fuel source in the Australian power grid in August for the first time, as the energy transition accelerates. While solar generation typically emerges as the dominant source of electricity needs in spring, Energy Edge managing director Josh Stabler said the pattern had never been observed this early in the year. The emergence of solar as the dominant source was first observed in August on Friday, when it overtook coal for 35 minutes as the biggest fuel source. On Sunday the period lasted for three hours and 20 minutes. At its peak, solar was producing 11,487 megawatts of power, while coal was producing 9784MW, according to Energy Edge.
The corporate regulator is widening its focus on digital misconduct by prioritising scams and crypto assets, as it threatens “strong and targeted” enforcement action to protect consumers. The Australian Securities and Investments Commission released a new corporate plan for the next four years on Monday, highlighting a strategic agenda and areas of concern. Tackling technology risks was one the regulator’s four key external priorities. The new ASIC plan noted Australians lost more than $242m to investment scams in the first half of 2022, cautioning a “diverse range of technologies” were enabling scams. Last year, bank transfers were the most common payment method for scams, with $129m in losses reported while 4730 reports of crypto investment scams were accompanied by $99m in reported losses. ASIC’s actions in the crypto industry will include supervising and assessing product disclosure statements of major crypto offerings within the Australian jurisdiction and implementing a regulatory model for exchange-traded products that have underlying crypto investments.
PwC has fired nine people from the firm for workplace misconduct including bullying, sexual harassment and data breaches during the past year. The firm investigated 31 allegations in the 2022 financial year, up from 13 the previous year, and substantiated 21 of the complaints. The consultant employs almost 9300 staff, meaning the rate of investigations is about 0.33 per 100 staff. The firm substantiated 11 cases relating to bullying, harassment and misconduct, six cases of sexual harassment and four data breaches. This comes a week after KPMG “exited” 11 people from the firm for misconduct including bullying, sexual harassment and policy breaches during the past year.
The Transport Workers Union (TWU) has called on Qantas CEO, Alan Joyce to resign, after this airline’s apology fell on deaf ears. On Sunday, the embattled airline announced they would be offering frequent flyers a $50 travel credit for a return flight of their choosing. Mr Joyce also issued an apology to customers, acknowledging that “the return to flying hasn’t gone smoothly”. He also announced that the airline had recruited 1500 staff since April and has adjusted rosters and schedules to overcome a 50% jump in employees taking sick leave. However, the Union National Secretary, Michael Kaine lashed the decision, labelling the move as “Alan Joyce at his absolute worst”. Instead he called on the CEO to resign. According to federal government data, the airline lost $1.2 billion in the first half of the 2022 financial year, with multiple Covid lockdowns in Sydney and Melbourne to blame. Staffing shortages due to Covid-19 and flu cases has also created challenges for the airline, leading to a request from the airline to ask senior executives and managers to step down from their usual roles to assist ground staff.
And the profit reporting season continues. Adbri has reported revenue of $812.4 million for the half year ended June 30, up 8% on the prior corresponding period. Southern Cross Media has posted an FY 2022 net profit down 40.6% to $28,554 on sales down 1.8% to $519.7 million. Audinate has reported record revenue of $US33.4 million for the 2022 financial year, up 33.4% on FY21. It also delivered record EBITDA of $4.3 million, up 41% on the prior year. Reliance Worldwide has posted a $US137.4 million net profit after tax for the year ended June 30, down 3% on the prior corresponding period. Chorus has reported revenue of $NZ965 million for the 2022 financial year, up from restated $955 million in FY21. Ampol has reported a statutory net profit after tax of $695.9 million for the six months ending June 30, an increase of 114% on the prior corresponding period. Cooper Energy has reported record revenue of $205.4 million for the 2022 financial year, up 56% on the previous corresponding period. Payments business EML Payments has narrowed its FY 2022 net loss to $4.8 million versus $23.3 million in the prior year period. Event Hospitality & Entertainment earned a 2022 statutory profit of $53.3 million from a loss in 2021. Adairs delivered underlying EBIT of $76.4 million, down 30% on FY21. Statutory net profit after tax was $44.9 million. Nib Holdings has reported underlying revenue of $2.8 billion for the 2022 financial year, up 7.2% on the previous year. Furniture retailer Nick Scali has posted revenue of $441 million for the year ended June 30, up 18.2% on the previous year. oOh!media has reported adjusted net profit after tax was $20.4 million compared to $2.2 million for the previous period. EBITDA increased 17% to $131.8 million. The Star Entertainment Group reported a 2022 statutory loss of $198.6 million after EBITDA fell 44% to $239.1 million. New Hope has reported underlying EBITDA of $645 million for the quarter following further strengthening of coal prices. MACA’s annual profit has trebled to $43 million. The action flick silver screen revival has seen cinema and hotel operator Event Hospitality & Entertainment record a 43% rise in revenues to $987.8 million. Overall, Event’s earnings rose from $111.1m to $138.3 million for the 12 months to June 30, and net debts fell to $210.4 million – below pre-pandemic levels. A2B’s 2022 revenue increased 10.4% to $125.1 million and its net loss widened to $27.8 million from $18.1 million without the benefit of JobKeeper and after restructuring costs. Online retailer Kogan.com has posted a $35.5 million loss in FY22, down 1102% from a profit of $3.5 million in FY21, Charter Hall Retail REIT reported a $663.6 million statutory profit. Owner of large liquor chains Dan Murphy’s and BWS Endeavour Group has booked an 11.2% increase in FY22 net profit to $495 million. Scentre Group’s operating profit jumped 17.5% to $540.5 million or 10.4¢ a share. Alumina has reported a statutory net profit after tax of $US167.9 million for the half-year to 30 June, compared to $US73.6 million in 2021. Boral has reported a statutory net profit after tax of $961 million for the year ended June 30, 2022, Infection prevention technology company Nanosonics has booked a 57% decline in FY22 net profit after tax to $3.7million. Residential aged care provider Estia Health has reported a net loss after tax of $52.4 million for the year ended June 30, compared with a net profit after tax of $5.6 million for the prior year. HUB24’s statutory net profit was up 50% to $14.7 million after $17.9 million was spent on transactions and project costs. Breville’s net profit after tax rose 16.2% to $105.7 million. Electronic design software company Altium reported a 57% increase in profit. Ansell reported a 36% drop in net profit after tax to $US158.7 million for 2021-22. Pilbara Minerals soared to a maiden full-year profit of $561.8 million on the back of already strong global demand for lithium raw materials and spodumene concentrate. Iluka Resources has reported net profit after tax of $369 million for the half year to June 30, up 186% on the prior corresponding period. Seven Group Holdings posted a 14.4% increase in net profit after tax to $577.3 million for the full 2022 year, but its statutory NPAT fell 4.3% to $607.4 million. Tabcorp Holdings reported a 4.3% loss on revenues to $2.4 billion in FY22, due to COVID-19. Net profit jumped to $6.7 billion for the full year, up from $269 million in 2021, but that was largely due to the demerger gain of $6.5 billion. Elmo Software recorded underlying EBITDA of $7.1 million, up $6.5 million on the pcp. Coles supermarket earnings before interest and tax was up 0.8% to $1.72 billion, liquor EBIT fell 1.2% to $163 million, and express EBIT sunk 37.3% to $42 million reflecting travel restrictions throughout the economy. Logistics software company WiseTech Global’s profit surged 80% to $194.6 million. Insurance broker AUB Group grew revenues 5.9% and delivered a 14.5% increase in net profits after tax, which reached $80.8 million in the 2022 financial year. Worley posted an 18 per cent increase in underlying earnings to $547 million in FY22. G8 Education has reported a statutory net profit after tax of $8.5 million for the half-year ended June 30, down from the $23.5 million profit recorded in the prior corresponding period (pcp). Kelsian’s net profit rose 40.1% to $52.9 million for 2022, and revenue 12.9 per cent to $1.32 billion. EBITDA improved 15% to $185.1 million. APA Group reported a 3.9% increase in FY22 underlying EBITDA to $1.7 billion. Sonic Healthcare’s 2022 net profit rose 11.1 per cent to $1.46 billion and revenue increased 6.7 per cent to $9.34 billion in a record year of earnings on coronavirus testing and overseas growth.
And that’s it for this week. And next week I’ll be talking to videographer Adam Grusauskas from K5Creative.. And I’ll be talking to AMP Capital chief economist Shane Oliver about the profit reporting season.
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.