Talking Business December 3 2021
The Omicron variant of COVID-19 adds new measures of uncertainty to the outlook for the global economy,
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, 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 44 in our series for 2021 and today’s date is Friday December 3.
First, I’ll be talking to Frontier Pet’s Founder, Diana Scott, to discuss how Frontier Pets is helping put an end to the 500 million Australian animals stuck in factory farming, and how they’ve created an additional source of income for Australian farmers. And I’ll be talking to economist Saul Eslake about how Australia will manage the recovery
But now, let’s talk to Diana Scott.
The Omicron variant of COVID-19 adds new measures of uncertainty to the outlook for the global economy, although it is too soon to adequately quantify that risk. Much will depend on its speed of transmission, virulence, associated rates of hospitalization and death, and also the effectiveness of vaccines and antiviral medications against it. It will be at least two more weeks before more will be known as scientists around the world build a better understanding of the new variant and as the severity of infections becomes clearer. The fate of global markets now depends at least in part on laboratories around the world probing the omicron Covid-19 strain, potentially leaving investors with weeks of uncertainty in the wait for answers. The variant detected in Africa is described as highly concerning, and has already led to international travel bans. Scientists are analyzing whether it can evade vaccines and how its symptoms differ from current strains. Vaccine maker BioNTech SE expects the first data within two weeks, initial findings that will help to determine if a passing scare or bigger hit to global economic reopening looms. Fearful investors fled stocks worldwide Friday and flocked to havens such as sovereign bonds as volatility spiked. The window for more clarity on omicron to emerge may be two to eight weeks, during which demand for riskier assets could take a hit, according to Citigroup Inc. strategists including Jamie Fahy and Yasmin Younes. “At a minimum, volatility will be higher the next two weeks,” Peter Berezin, chief global strategist at BCA Research Inc told Bloomberg.
Rising COVID-19 cases and the new omicron variant could imperil the economic recovery and exacerbate inflationary pressures, Federal Reserve chairman Jay Powell told US legislators on Tuesday In testimony delivered at a joint congressional hearing with Treasury Secretary Janet Yellen, Mr Powell said that while US consumer demand remains buoyant and workers are returning to the workforce, the possibility of coronavirus pandemic-related setbacks is clouding the economic outlook.
With Japan, Israel, Morocco, and South Korea shutting down foreign travel, and Australia and several European nations closing their borders to travellers from South Africa the travel industry has again been thrown into turmoil due to a new variant of the Covid-19 virus. Cruise company P&O Cruises Australia has further extended its ban for at least another month, revealing that it has no plans to sale from Sydney and Brisbane until March 3. Earlier this month, P&O Cruises Australia also cancelled next year’s scheduled seasons for Adelaide, Fremantle and Cairns. P&O Cruises Australia President Sture Myrmell said recent speculation about the lifting of the ban on cruise ships has been encouraging but uncertainty continues around the resumption of cruising in Australia. Meanwhile, local travel agents are frustrated by the micron variant, saying it could not come at a worse time as travel business, particularly lucrative leisure travel, was just starting to recover. Helloworld chief executive Andrew Burnes, who runs thousands of retail outlets throughout Australia and New Zealand said some of his clients had cancelled their looming international trips over the past few days due to Omicron.
Scott Morrison and state premiers are holding the line against domestic border closures and new COVID-19 lockdowns, agreeing until more is known about the risk of the new omicron variant Australia must keep pushing towards a Christmas reopening. At a national cabinet meeting held late on Tuesday, Commonwealth Chief Medical Officer Paul Kelly said it would be two weeks before a fuller picture of the threat from the newly declared variant of concern was clear. He told premiers and chief ministers that no evidence yet existed to suggest COVID-19 vaccines were not working against omicron, first identified in Africa last week. Professor Kelly said there was no evidence to suggest the variant would lead to more serious illness than the deadly delta strain. While Queensland Premier Annastacia Palaszczuk said earlier that moves by countries such as Israel and Japan to close international borders suggested omicron was more serious than previous strains, it was pointed out in the snap talks that those countries were aligning themselves with Australia’s existing border stance. Victorian Premier Daniel Andrews, who held talks with Qantas chief executive Alan Joyce on Tuesday, said the federal government was wise to delay arrivals of foreign students and skilled workers by two weeks, but he would keep his state borders open because “the consequences of (closing) would be very significant”.
Prime Minister Scott Morrison has threatened to intervene and break the industrial gridlock on the nation’s ports unless the Maritime Union of Australia and Patrick Terminals negotiate a resolution to their months’ long dispute. Declaring the efficient operation of ports critical to the economic recovery, Mr Morrison has also flagged longer-term, substantive legislative change to break the power of the MUA. He said Treasurer Josh Frydenberg had charged the Productivity Commission to look at the “broader issues” hampering the productivity of Australia’s ports. The inquiry would include an examination of recent criticisms by the Australian Competition and Consumer Commission of the poor performance of Australia’s ports, exacerbated by the MUA’s enterprise bargaining deals. The ACCC said they “contributed to the sub-optimal performance of the nation’s major ports and added to the pandemic-induced supply constraints” by “hampering productivity and increasing disruptions”. The Productivity Commission would report by the middle of next year, just after the federal election, setting the scene for a pre-election fight and, should the Coalition win a fourth successive term, an early pursuit of a reform agenda
The Australian economy has contracted by 1.9% during the September quarter, with lockdowns in place in New South Wales and Victoria for most of the period. Economists had been expecting a contraction of 2.7%. On an annualised basis however, the economy grew by 3.9%. Economists had been forecasting growth of 3%.
Westpac faces a $113 million fine after the corporate watchdog took the unprecedented step of launching six lawsuits against the bank simultaneously, including one for charging fees from 11,000 dead clients. The Australian Securities and Investments Commission (ASIC) said the six separate investigations into the bank – some of which were raised at the 2018 banking royal commission – had uncovered major problems with the lender’s processes, systems and governance. Due to the “exceptional circumstances,” the watchdog has expedited the matters to have them heard by a court as soon as practical. Westpac has admitted to all the allegations against it, and the bank will pay about $80 million in compensation and it and ASIC will jointly submit that the court imposes a fine of $113 million. The lawsuits are another blow for Westpac as it tries to recover from a tumultuous two-year period since the lender was thrown into turmoil by a money laundering compliance scandal in late 2019. In one of the lawsuits launched on Tuesday, ASIC said that over a 10-year period, Westpac charged $10 million in fees for financial advice to 11,000 clients who had died. In another, the bank sold duplicate insurance policies to more than 7,000 customers for the same property – meaning some customers needlessly paid for two or more insurance policies. A separate action said Westpac-owned BT Funds Management charged insurance premiums that included commissions, despite commissions being banned under laws introduced by the Gillard government. BT was paying $12 million in compensation to more than 8,000 people affected, ASIC said. A fourth lawsuit took aim at $7 million in financial advice fees charged to at least 25,000 people, saying the fees were either not disclosed or inadequately disclosed. There is also a lawsuit alleging the bank allowed 21,000 deregistered company bank accounts to remain open, which meant it charged fees on accounts and allowed money to be withdrawn that should have been given to ASIC or the federal government. And in the final case, ASIC said Westpac had on-sold debt with incorrect interest rates, which meant more than 16,000 customers were overcharged. ASIC said more than $17 million had been refunded over this matter.
Australians spent more than an estimated $8 billion across the four days from Black Friday to Cyber Monday according to NAB analysis of merchant transactions. In a clear boost for Australian businesses, the promotional holiday beat pre-pandemic records from 2019 with sales up by 8%. The strongest performers in the period for in-person purchases were technology retailers with sales up by 168% on 2019. Shoe store sales were up by 92% for the same period while jewellery stores were up by 49% and clothing sales were up 54%. The strongest performer in the period for online retailers was jewellery and watch stores with sales up by 312% on 2019.
Australia Post will deliver parcels to customers in Sydney and Melbourne ahead of Christmas with the first of 20 electric trucks in its national fleet, as part of a plan to edge towards carbon-neutral deliveries. Australia Post is already the largest electric vehicle operator in Australia, with a fleet of 3000 – more than 2100 e-trikes (the three-wheel delivery vehicles that can run on the footpath, with another 2000 on the way) and 1400 electric bicycles. But the purchase of what were the world’s first all-electric trucks in 2017, made by Mitsubishi Fuso Truck and Bus Corporation, which produce zero emissions and little noise, expands Australia Post’s fleet into “heavy assets” and beyond last-mile deliveries.
The Morrison government has given itself the option of a May 7 election at the earliest, should it choose to hand down another federal budget before going to the polls. Alternatively, should it choose not to have another budget, mid-March would be the most likely date for the election at which the Coalition is seeking a fourth successive term. The timetable for next year’s parliamentary sittings, released on Monday, has brought the budget forward from its usual spot of the second Tuesday in May to March 29. If Prime Minister Scott Morrison were to call the election at the end of that week, the earliest it could be held would be Saturday, May 7, which would be almost three years since the previous election on May 18, 2019. Waiting for a budget before calling an election would require the government to endure three weeks of Parliament, including the budget week. The government typically struggles when Parliament meets and Mr Morrison is keeping open the option of calling an election in early February for mid-March.
Jack Dorsey has resigned from Twitter on Twitter. In a resignation letter, he said after 16 years he decided it was “time to leave”. Mr Dorsey said the changes take effect immediately though he will remain on the board to help with the transition until “May-ish”. “I want you all to know this was my decision and I own it,” Mr Dorsey wrote, adding: “I’m really sad … yet really happy.” Mr Dorsey will be succeeded as chief executive by Parag Agrawal. Bret Taylor was named the new chairman of the company’s board, succeeding Patrick Pichette. Dr Agrawal joined Twitter in 2011 and has served as chief technology officer (CTO) since October 2017. He holds a Ph.D. in Computer Science from Stanford University. The surprise move ends Dorsey’s much criticized tenure as chief executive officer of both Twitter and Square, his digital payments company, which led to Twitter stakeholders Elliott Management and billionaire investor Paul Singer calling on him to step down from one of those roles. Investors and some staff have questioned Dorsey’s management style and have worried that he is stretched too thin by his roles at both companies. In 2019 he announced plans to relocate to Africa for six months, a move that worried both staff and investors. He scrapped the plan after the coronavirus pandemic struck. His stakes in Twitter and Square have helped Dorsey amass a personal fortune of over $12bn, according to Forbes. In April Dorsey announced he was giving $1bn to relief programs related to the coronavirus, “girls’ health and education”, and the study of universal basic income (UBI) – financial payments to people.
A Grattan Institute report has argued for a bond-funded $20 billion Social Housing Future Fund allowing the creation of an extra 3000 social housing units a year to tackle the existing shortfall and growing demand for secure housing for lower-income Australians. The institute said the federal government already managed six funds worth a collective $247.8 billion, including the $199.1 billion Future Fund, and a social housing fund that started next year could build 24,000 additional dwellings by 2030 and 54,000 by 2040. The lack of investment is a growing problem. The country’s 430,000 social housing dwellings – accommodation for the lowest-income Australians who pay rents capped at 25% of household income – has dropped to just 4% of total stock from 6% in 1991, the report shows. Social housing is a crucial part of the infrastructure puzzle to allow lower-income people to play a productive part in the economy – and also to give them a chance to prepare their own financial future.
Zero alcohol craft brewer Heaps Normal has raised $8.5 million in capital from a range of investors including Adore Beauty founder Kate Moss and the co-founder of eco toilet paper outfit Who Gives A Crap, Simon Griffiths Heaps Normal chief executive Andy Miller said the craft beer group began selling its first products in July 2020 and is expecting volume growth to be 8.5 times higher in 2021-22 as the zero alcohol category expands quickly, driven by a sharper focus on health and wellbeing. Mr Miller said being a pure-play zero alcohol company that does not make any alcoholic beers gives the company extra credibility. He said the pandemic had been the catalyst for many people to pay closer attention to their health and wellbeing, and this had helped accelerate growth in the broader zero alcohol category.
And that’s it for this week. And next week, I’ll be talking to Grant Emmanuel, global marketing director for the Chamberlain Group, Australia’s leading manufacturer in garage door openers and accessories, embracing change and adopting a nimble approach to the ever-evolving economic landscape. Emanuel has navigated a new world of online-led strategy, virtual office banter and a more adaptive approach to accommodating the needs of individual markets with different economic, social and health circumstances. And I’ll be talking to IFM Investors economist Alex Joiner about the outlook for 2022.
In the meantime you can catch me on Facebook, Twitter and LinkedIn. 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