Australia’s latest monthly CPI indicator came in lower at 3.5% in the 12 months to July.
But energy subsidies are weighing on the index.
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 31 in our series for 2024 and today’s date is Friday August 30.
First, 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.
But first, let’s talk to Dana Udall
So what’s happening in the news?
Inflation in Australia has fallen to its lowest level since March, pulled down by a 5% cut to electricity prices as billions of dollars in government rebates kicked in. Consumer prices fell to 3.5% in the year to July, the Australian Bureau of Statistics said on Wednesday. That compared with the 3.8% pace recorded for the month of June, and the 3.4% rate expected for July by economists. Slower increases in petrol costs, rising by only 4.0% compared to 6.6% in the year to June, helped bring travel costs and inflation down towards the Reserve Bank’s target of 3% overall.
Almost 1.6 million Australian households are now facing insurance stress, with a rising number of families experiencing “extreme” cost pressures as insurers raise premiums in response to inflation and catastrophic weather trends. New analysis from the Actuaries Institute shows insurance premiums have soared in recent years, with more than 15% of households now under insurance stress. Stressed households are defined as those who face paying one month’s income to obtain their most basic insurance. The Actuaries Institute says an extra 376,000 households have fallen into the distressed category over the past year as insurance premiums surged. It found affordability had worsened for all insured customers in Australia, with a 9% lift in the median premium. All major insurers reporting over the past month have revealed spiralling premiums in response to inflation and cost pressures. Suncorp reported a 13.9% jimp in its premiums to $14.1bn, as it unveiled its full year earnings last week. Rival insurer QBE said its Australia/Pacific customers had seen a 9.9% lift in premiums. Meanwhile, Insurance Australia Group, which runs brands including NRMA, RACV and CGU, told investors last week it had pushed through a 12.8% lift to Australian premiums last year. IAG also reported it was seeing an increase in distressed customers. Report author Sharanjit Paddam said many insured customers had seen their premiums rise, and those with already expensive cover faced even steeper price rises. “Increases in premiums are outpacing wages growth,” he said. “Unfortunately, we expect this will continue because of the overall increasing risk of natural disasters associated with climate change, which will continue to put upward pressure on premiums.”
Airlines and airports will be made to pay for unreasonable flight delays and cancellations under sweeping changes outlined in the federal government’s long awaited aviation white paper. The largely ineffective Airline Customer Advocate will be replaced by an aviation industry “ombuds” (ombudsman) scheme which will enforce a charter of customer rights. These include the right to refunds across all fare types in the event of an unreasonable flight delay or cancellation, the right to prompt payment of refunds, and a minimum standard of customer service. The paper, considered a policy blueprint for aviation reforms, acknowledged airlines and airports needed to lift their game to support customers, handle complaints and provide refunds. It was noted the airline-funded Customer Advocate had largely failed to fix such problems, with fewer than 40% of complaints resolved in the last year. A customer rights charter would set out what length of time was “an unreasonable delay” and what amounted to appropriate treatment of customers in circumstances such as when flights were disrupted. This included entitlements to refunds rather than travel vouchers, no matter what the fare type, for excessively delayed or cancelled flights, and appropriate time frames and methods for providing refunds. Airlines would also be expected to be transparent about the cause of flight delays and cancellations as part of regular reporting to the government. Carriers are currently not required to pay refunds for delayed flights, with some providing food vouchers to affected customers or overnight accommodation if required. An ombudsman would oversee airlines’ and airports’ compliance with the customer rights charter, and deliver an external dispute resolution service. Supported by legislation, the ombudsman scheme would have the power to direct airlines and airports to provide remedies to consumers including refunds, and refer instances of misconduct for investigation and enforcement. The changes followed an extended period of disrupted travel for customers.
More Australian mortgage holders will enter arrears over the coming months as a cocktail of higher for longer interest rates and an expected pick-up in the country’s unemployment rate push many over the edge, according to S&P Global. The expected pick-up in arrears for the rest of 2024 comes after Australian RMBS mortgage arrears fell during the second quarter to 0.95% amid many households cutting expenses to the bones to prioritise essentials such as home loan repayments. S&P Global noted that households’ prudence in reducing discretionary spending to stay on top of non-discretionary expenditures, including mortgage repayments, had helped to keep mortgage arrears low. Other key factors contributing to this resilience are low unemployment, rising property prices, and refinancing opportunities, while the use of offset and redraw facilities was easing cash flow pressures and limiting mortgage arrears. The report by S&P Global warned, however, that arrears were yet to peak, with the lagging impacts of rising unemployment yet to emerge. “The persistence of higher interest rates will see more borrowers enter arrears as unemployment rises. This will lead to an increase in arrears in months ahead, because they are a lagging indicator and one of the last places where financial stress manifests,” it said. Hopes for relief from the RBA were blown this month after the central bank’s governor, Michele Bullock, said there wouldn’t be any cuts to the cash rate in the next six months as inflation continued to prove sticky. Inflation climbed to 3.8% in the year to June, up from 3.6% the quarter prior. This means struggling homeowners will be under pressure for longer, and could be squeezed even further if the RBA hikes in a bid to kick inflation lower. Rising arrears in NSW and Victoria partly reflect greater levels of leverage required to access property markets relative to income, and higher property taxes adding to cash flow pressures, S&P Global said. Western Australia had the highest arrears rate in the country of 1.2%.
Jim Chalmers has attacked Peter Dutton as the “most divisive leader of a major party in Australia’s modern history” who is deliberately undermining cohesion and preying on social fractures for political advantage, positioning himself ahead of the election as a Treasurer who can take on the alternative prime minister. Dr Chalmers, considered a future Labor leader and potential successor to Anthony Albanese used a major pre-election speech on Monday night to warn economic dislocation is triggering waves of global violence fanned by fragmentation and destructive leadership. The 46-year-old also said Labor’s stage-three taax cuts overhaul was his “proudest” moment and outlined his blueprint for a “fourth economy” led by artificial intelligence, a bigger care economy, 90% of electricity globally generated by renewables by 2050 and a bigger, more influential Indo-Pacific region. Invoking patriotism and national security in reflections on former Labor prime ministers John Curtin and Ben Chifley, Dr Chalmers conceded “there’s a lot at stake” and “we don’t take any outcome for granted”. With polling indicating plunging support for the Prime Minister and Labor tracking towards minority government, Dr Chalmers defended his economic management during a cost-of-living crisis and high inflationary environment. He said the Coalition was wrong to criticise government spending in the budget and flagged that Labor was not preparing a “spendathon” to woo votes ahead of a tight election. In a politically charged speech at the Labor-aligned John Curtin Research Centre in Melbourne, Dr Chalmers launched an extraordinary assault on the Opposition Leader’s readiness to lead the country while acknowledging the government faced a tough re-election fight. The attack followed a heated two weeks in parliament headlined by Mr Dutton heaping pressure on Anthony Albanese over claims the government did not impose adequate security checks in fast-tracking thousands of tourist visas for Palestinians. “If anything, Dutton wants higher inflation, higher interest rates, higher unemployment, lower wages and less help. We are now well into the third year of a three-year parliamentary term and he’s still ticked precisely none of the necessary boxes.” The Rankin MP, who mentioned Mr Albanese’s flagship Future Made in Australia policy once in the speech, warned that manufacturing had crashed from 15% of output in the 1980s to 5% in the 2020s. Referencing a quote by former Labor prime minister Paul Keating about “Australia’s first three economies”, Dr Chalmers mapped out his vision for a fourth economy driven by energy, technology, demography, industry and geography.
Months after a sometimes fiery inquiry into supermarket giants Coles and Woolworths wrapped up, the Senate’s economics committee has called a new probe into big-box retail chains selling household items outside the reach of the food and grocery sector’s code of conduct. In May, the supermarket inquiry recommended a separate probe into big-box retailers, warning of “creeping acquisitions” by major players. It said the competition watchdog, the Australian Competition and Consumer Commission, was only becoming aware of the issue of buy ups when they were notified of larger merger plans.Voter frustration at the high cost of living is driving populist politics around the world, even prompting Democratic presidential nominee Kamala Harris to promise a ban on corporate price gouging on groceries if she wins the White House in November. Critics of big business in Australia – including the Nationals and Greens – want better prices for consumers and suppliers, goals that could be contradictory and would reduce profit margins. Former Labor minister Craig Emerson opted not to add the Wesfarmers-owned Bunnings, Chemist Warehouse or online giant Amazon to the grocery code in recommendations of his review commissioned by the Albanese government. Bunnings managing director Mike Schneider was criticised in the Senate supermarkets inquiry report for not appearing to give evidence in person and now faces another request to appear in Canberra. In April, he said Bunnings should not be covered by the grocery code. Bunnings profits surged 40% during the COVID-19 pandemic as many Australians turned to home improvement to pass the time. Wesfarmers will announce its latest full-year results on Thursday and Bunnings’ profit margins will be closely scrutinised. The new inquiry could become another flashpoint on cost of living ahead of next year’s federal election. Liberal MPs have privately expressed apprehension about the inquiry and the Nationals’ influence over Opposition Leader Peter Dutton’s proposed break-up powers for supermarket giants.
And the profit reporting season is ending this week. BHP has posted an underlying net profit of $US13.7 billion for the 2024 financial year, The newly-listed Guzman y Gomez’s net profit after tax on a statutory basis for 2023-24 came in at a loss of $13.7 million, but that was 15.1% ahead of forecasts, while on a pro forma basis, net profit was $5.7 million, 71% ahead of forecasts. Johns Lyng Group’s net profit increased to $63.3 million from $62.8 million in the prior year. Jewellery retailer Lovisa’s net profit jumped 20.9% to $82.4 million. Supermarket giant Coles’ net profit rose 8.3% to $1.1 billion in fiscal 2024, from a year ago. Before significant items, Woolworths’ net profit fell 0.6% to $1.7 billion in the 52 weeks to June 30. Woodside’s underlying net profit net profit fell 14% to $US1.632 billion in the six months ended June 30. Hotel booking software company SiteMinder has narrowed its statutory loss from $49.3 million in FY23 to an after-tax loss of $25.1 million for the full year ended June 30. Novated leasing and salary packaging business McMillan Shakespeare Group reported 39.7% increase in full-year net profit from continuing operations to $90.06 million. NIB Holdings reported a 67.4% increase in full year net profit to $181.6 million. Aussie Broadband reported profits up 21% to $26.4 million. Pilbara Minerals profits fell 89% to $257 million, from $2.39 billion. Bendigo & Adelaide Bank cash profits have dived 2.6% to $562 million. Payments terminal player Tyro has quadrupled after-tax profits to $25.7 million. Viva Energy’s profits rose 10.3% to $192 million. Online beauty retailer Adore Beauty swung to a net profit of $2.2 million from a loss $559,000 loss a year ago. Wealth giant Perpetual will write down more than half a billion dollars in fair value losses in the 2024 financial year. Queensland coal export terminal Dalrymple Bay Infrastructure’s interim net profits rose 8.3% to $36.8 million. Kogan’s net profit after tax was $83,000 compared with a loss of $25.9 million a year ago. Infomedia’s profits jumped 32% to $12.7 million. Bus and ferry operator Kelsian Group forecast its profits to jump 176.2% to $58.0 million. Endeavour Group, owner of Dan Murphy’s and BWS chains, posted a net profit which fell 3.2% to $512 million. Investment firm Regal Partners generated a first-half net profit of $50.2 million, up 349%. Wealth platform Praemium announced a statutory NPAT of $8.8 million, up 42% on 2023. Chorus reported a net loss after tax of $9m. Zip Co’s revenue increased 285 in the year ended June 30 to $868 million and its transaction volume rose 14% to $10.1 billion. Propel Funeral Partners reported an operating net profit of $23.4 million, up 12.2% for the 2024 financial year. Integral Diagnostics swung to a statutory loss of $60.7 million for the 2024 financial year, having posted a $25 million profit in the prior year. Global engineering group Worley’s Underlying earnings rose 24% to $751 million. SG Fleet reported a 6.7% rise in profit after tax to $89.7 million. Nanosonics reported a gross profit $132.4 million, up 1% on FY23. Bed linen, pillows and cushions retailer Adairs reported a 17.8% drop in net profit to $31.1 million for 2023-24. APA Group’s net profit before one-off items fell 58.5% in the year ended June 30 to $119 million. Nine Entertainment posted a profit of $216.4 million. Mining company Fortescue Metals’ net profit jumped 18% to $US5.7 billion ($8.4 billion) in fiscal 2024 from a year ago. City Chic reported an underlying EBITDA loss of $8.4 million, which was a 47.3% improvement on the prior year. Flight Centre’s underlying profit soared by 131% to $320 million. Tabcorp posted a net loss of $1.4 billion. Smartgroup Corporation posted an operating EBITDA of $56.2m, up 20% on the previous corresponding period. Kelsian Group posted a statutory net profit after tax up 176.2% to $58.0 million. Karoon Energy posted a statutory net profit after tax of $US61.8 million, down 50% on the previous corresponding period. data centre operator NextDC boosted its underlying earnings to $204.3 million.
And that’s it for this week.
And next week, I’ll be talking to Evan Thornley, the co-founder and executive chair of LongView, the fund that allows property investors to invest in a slice of the more lucrative/better-performing family home market – without either the hassle of being a landlord or owning the entire property outright.
And I’ll be talking to economist Nicholas Gruen about how central banks around the world, including our Reserve Bank of Australia, can make better economic forecasts.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
If you like Talking Business, please leave us a review with Apple podcasts. Thank you in advance.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube.
If you want to contact me, email me at leon@leongettler.com. I answer all emails.
Also in my copious spare time, I have a copywriting business. If anyone needs newsletters, blogs, articles or advertorial, email me.
Wishing you all a safe and healthy week, And looking forward to bringing you Talking Business next week.
