Australia is going after X. Communications minster, Rowland warns that when new laws are introduced X faces fines for 5% of annual turnover if they don’t stop mis and dis- information
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 3 in our series for 2024 and today’s date is Friday February 16.
First, I’ll be talking to I’ll be talking to Nina Webster, the managing director of Dimerix, a clinical-stage biopharmaceutical company, with a portfolio of drug candidates for inflammatory diseases, including kidney and respiratory diseases.
And I’ll be talking to CommSec chief economist Craig James about what’s in the market for the week ahead
But first, let’s talk to Nina Webster.
So what’s happening in the news?
At least 150 Australian Taxation Office officials have been investigated over a far-reaching, GST Fraud scheme with 12 terminated or facing criminal prosecution. The extraordinary figure was revealed in an auditor-general’s report that found the ATO’s management and oversight of fraud control arrangements for GST is lacking, while its internal risk framework is not fit for purpose. Outside the ATO, at least 100 arrests have taken place and so far at least 16 people have received a criminal conviction. Authorities estimate there have been more than 57,000 perpetrators of a TikTok GST fraud scheme, promoted on the popular social media app as a way to get a “loan” from the government. Individuals register a fake business, get an ABN, register for GST and then immediately file a Business Activity Statement claiming credit for previous, but not legitimate, GST payments. Despite more than $81 billion in GST collections every year, this week’s auditor-general’s report warned oversight and reporting of GST fraud within the ATO is only partly effective, as internal roles and responsibilities are not clear. An ATO spokeswoman said the majority of the 150 officials were former contractors or former employees and were not working with the ATO at the time of suspected fraud. Some were found to be victims of identity theft. Action has been taken against 12 people who were substantiated as having committed the fraud while working at the ATO. More than 4700 tip-offs related to GST fraud have been received by the ATO since 2019-20. Penalties of more than $120 million were issued before June 30 last year, with interest of about $220 million and continuing to accrue. As of August 31, the ATO said it had recovered $123 million, including $67.6 million recovered via bank garnishee notices. The fraud was uncovered by Westpac and other banks, some of which passed on a series of alerts to the ATO from 2020. But after being frustrated by the apparent lack of action by the ATO, some bank staff shared their concerns informally with the Reserve Bank, which then alerted Treasury and the tax office in February last year. Accountants in western Sydney, where the fraud went viral in mid-2021, have found new examples in recent tax returns, suggesting that the fraud activity is continuing. The ATO agreed to five recommendations from the auditor-general, and has established a Fraud and Criminal Behaviours Unit to focus on further protecting against fraud. In a statement, the ATO said it takes all fraud attempts seriously, and will work with the taskforce and other agencies to go after individuals suspected of doing the wrong thing.
Sydney’s eye-watering house prices are driving an exodus of young families and a failure to reverse the trend could see Australia’s harbor city become known as the place “with no grandchildren,” the New South Wales state productivity commissioner warned. Between 2016 and 2021, Sydney lost twice as many people in the 30- to 40-year age group as it gained, highlighting the need for increased housing density, Peter Achterstraat said in a video on Tuesday accompanying a new Productivity Commission report. “Many young families are leaving Sydney because they can’t afford to buy a home. Or they can only afford one in the outer suburbs with a long commute,” Achterstraat said as he launched the report titled ‘What we gain by building more homes in the right places.’ Australia is one of the least-affordable countries in the world for housing as a combination of strong population growth, limited construction and a trend toward smaller households produces a massive shortfall of dwellings. The problem is exacerbated in Sydney where there’s strong opposition to high apartment blocks among local residents. That’s at a time when a rebound in immigration means more than 1 million net arrivals in Australia over the next five years will need somewhere to live. Migrants tend to congregate in major cities like Sydney. Compared to global counterparts such as London, New York or Paris, Sydney has lower density inner-city suburbs, which means there is ample room to grow upwards, the report showed. Achterstraat said he hoped to help shift Sydneysiders’ mentality from “Not in My Backyard” to “Appropriate Density in My Backyard.” The report found that Sydney would have generated 45,000 additional dwellings without any extra land if buildings constructed between 2017 and 2022 had been an average of 10-stories high instead of seven. This would have seen prices and rents 5.5% lower, leading to an annual saving of A$1,800 ($1,200) for renters, Achterstraat said. “We know from overseas that density done well provides benefits for households, communities, and the economy,” Achterstraat said. “I’m confident we can make density work for us.” Achterstraat also said it was time for a fresh discussion on heritage restrictions on housing close to the central business district. He pointed to the proliferation of Heritage Conservation Areas (HCAs) that limit new housing, affecting more than half of residential land in prime Sydney suburbs. This reduces the amount available for new housing near the city. “We can preserve the gems of Sydney’s heritage without inadvertently freezing young people out,” Achterstraat said.
Communications Minister Michelle Rowland says X, the platform formerly known as Twitter, could face huge fines when new laws are introduced this year, for failing to prevent mis- and disinformation. Citing a litany of recent issues, including the spread of Taylor Swift deepfake pornography, reinstating 6000 banned accounts and being sued in the Federal Court over failing to comply with “basic safety expectations” relating to child sexual exploitation material, Ms Rowland said it was clear X would face “big trouble” if the platform continued as it had. Last year, the Albanese government released draft laws that would grant new powers to the Australian Communications and Media Authority to combat mis- and disinformation online. Key to the laws is the creation of an industry-generated code of conduct for platforms and additional powers for ACMA to impose strict standards if it decides the code is not stopping mis- and disinformation. In November last year, X was ejected from the industry code for a “serious breach”, refusing to cooperate with the industry peak body DIGI, and failing to undertake remedial action. The complaint related to X removing the ability of its users to report content that violated its civic integrity policy. The ejection came just weeks before the eSafety Commission launched Federal Court action against the company for allegedly failing to truthfully and accurately provide information to certain questions in the notice, which itself came after the commission fined X $610,500 for failing to comply with a reporting notice. X has not paid the fine and has sought judicial review. Under Ms Rowland’s proposed mis- and disinformation laws, if X refuses to cooperate with an ACMA inquiry or comply with a code of conduct registered under the act, it could face fines of up to $3 million or 2% of annual turnover. If it fails to comply with the ACMA standards, the penalty could be the greater of $7.8 million or 5% of the platform’s annual turnover.
The boom in property construction during the pandemic has led to a booming market for disputes, as developers, builders and funders battle over big-ticket projects gone wrong. Litigation funders are moving to target this growing area, with ASX-listed Omni Bridgeway muscling in on the scene as all sides clamour for funding to bankroll the costly disputes. Omni Bridgeway also has its eye on a ballooning number of renewable energy projects under construction, with many triggering disputes as the complex jobs face cost overruns or disputes between contractors. Law firms are also gearing up for more disputes, following several high-profile property collapses and a long list of troubled projects gone wrong, as cost overruns or build-quality disputes land in the courts. Omni Bridgeway investment manager Mitchell Dearness said construction companies often faced the question of which of their many disputes were worth fighting. “In-house legal and contract management teams are often not adequately resourced to assess claims and, as a consequence, claims are not pursued or they are settled at well below their fair value,” he said. At its recent results Omni Bridgeway revealed it committed more than $260m in the first half of the 2024 financial year to new disputes, with a “strong pipeline of new investment opportunities”. Omni Bridgeway has been funding construction disputes in Britain, Singapore and Dubai for some time, with Australia’s high-rise and major project boom a catalyst for the funder’s attention. Baker McKenzie national head of construction Emanuel Confos said the construction sector was facing a “confluence of … pressure point factors, resulting in an increase in construction disputes”. “In particular, we are seeing a shortage of both materials and labour combined with the record investment in the infrastructure space, leading to price increases at levels that are historically high,” he said. Baker McKenzie national construction practice senior partner Harriet Oldmeadow said while owners, developers and contractors “want a harmonious working relationship”, disputes often descended into protracted fights.
Senators say they have “no confidence” and are “worried” about PwC’s ethical practices as it continues to withhold a global report on its misuse of government information from the inquiry into consulting services. PwC Australia CEO Kevin Burrowes told the Finance and Public Administration Committee on Friday that PwC International had refused to share the document which detailed findings from an independent review finalised in September. Senator Richard Colbeck, who chairs the inquiry, said the lack of transparency undermined the firm’s efforts to right its wrongs in the aftermath of the tax leaks scandal. “I can’t in any good conscience acknowledge that I have confidence when your organisation – and you are part of that organisation – is thumbing their nose at our Parliament,” he said. “This should be released as a demonstration of the so-called ‘new leaf’ that you’re trying to project … but how do we have any confidence in the things you say that you’re doing when we are treated with disrespect?” PwC International commissioned the report from law firm Linklaters in May. It found “no evidence” of PwC personnel outside of Australia misusing confidential information for commercial gain but that six international partners should have “raised questions as to whether the information was confidential”, according to a statement from PwC in September. When Mr Burrowes appeared in front of the committee in October, he admitted no one from PwC Australia was privy to its details. PwC also withheld the report from the TPB and ATO, the regulators confirmed on Friday.
What to make of the sudden departure of more top female talent from Australia Post’s executive team, in the very months after CEO Paul Graham called in consultants to slice fat across the organisation and slim the headcount in the C-suite? A confluence of events that, if one is to believe Australia Post, is entirely coincidental. But the unavoidable truth is that women, once equal in number to the men on the executive, are back to a vanishing small minority. There’s only one left. Cast the mind back to the closing months of 2022 and they were evenly split among the eight-member posse of EGMs. And now? It’s an embarrassment of Windsor knots and bad haircuts. It’s guys named Mike and Paul and Gary and Rod. Leonie Valentine was the first to disappear from the company website, in February 2023, ending her time at Australia Post after a startlingly short 13 months. Valentine had been tasked with leading Australia Post’s Gender Action Plan which, at this point, looks to have been thrown from a high window. It’s getting tougher to keep count of the senior women who’ve left in her wake – chief marketing officer Amber Collins, general manager Fiona da Silva, government relations head Sally Mackenzie. Now add to that the very quiet departure of executive general manager Tanny Mangos. She resigned last month (no word of the departure from Australia Post). Mangos – two years in the role – flagged her exit on LinkedIn with a feting of CEO Graham (“a transformative and fearless leader”) and telling everyone she would take time off before her next career move. Also suddenly missing from the Australia Post executive team is EGM for Retail, one of the highest paid women at the organisation. She left the business in January after a two-year stint. Neither was her exit announced by the mail service, as is their way, both exits having left Susan Davies as the last woman standing among the six fellas at the table. It’s a terrible look, and only Mangos’s position is vacant. Sudden exits like those of Mangos, Noble and Valentine don’t bode well for female longevity at the organisation. And weird, too, how Valentine and Noble were swiftly replaced by men. Noble’s deputy, Josh Bannister, was appointed internally last month, while Valentine’s replacement, Michael McNamara, started in July. There was a brief chance to appoint a female CFO but that was missed when Michael Bradburnwas awarded the role, starting in November. Need it be pointed out that this is all going down while Australia Post lurches forth groping into a great modernisation of its business? Services might be lumbering ahead into the 21st century, but female representation is apparently blazing a path all the way back to … the fifties?
And the profit reporting season continues. CAR Group reported revenue rose 60% to $531 million and adjusted net profit jumped 34% to $162.7 million, when compared to 2023 same half. Electronics and white goods retailer JB Hi Fi posted sales of over $5.16 billion, as net profit fell nearly 20% to $264.3 million. Aurizon’s interim net profit doubled to $237 million. Oil and gas producer Beach Energy has reported a slip in production and wound back its full-year guidance, despite posting higher sales in its latest half-year report. Production for the six months came in at 8.8 million barrels – down 11% on 2023’s same half. Sales revenue rose 16% to $941 million. Global construction materials giant James Hardie’s adjusted third quarter net income jumped 39% to $US179.9m. Fourth quarter guidance is for net income to be a lower $US165m or slightly higher $US185m. Temple & Webster posted sales of $253.8m, up 23%, as interim net profit lifted 6% to $4.1m. Seven West Media’s interim profit revenue fell to $775m from $814m (down 4.8%) in the six months to December. Its net profit also plunged to $54m, down from $114m in the same period in 2022 (down 52.6%) and its group EBITDA was $124m, down from $205m (down 39.4%). CSL announced revenue of $US8.05bn for the half year, up 11% on a constant currency basis, while net profit after tax and amortisation – the company’s preferred measure – was 11% higher at $US2.02bn ASX-listed financial services company Challenger has beat analyst expectations posting a $56m interim profit, up 80 on the prior corresponding period’s $28m result. Breville, which makes juicers, toasters and kettles, has reported a net profit of $83.9m for the December half, up 6.7%, as sales lifted 2%to $905.8m. Seek net profit for the first half of FY24 was $35.2 million, a 74% decline on the same period in previous year. Adjusted net profit is expected to $190m-$220m compared to $220m-$260m. Vulcan Steel’s interim profit has fallen more than 50% coming in at $26.1m vs $55.4m. Commonwealth Bank’s cash profit fell 3% in the first half of the financial year to $5 billion. Seven Group’s overall earnings before interest and tax climbed 18% for the half year, while statutory net profit dropped 36% to $225 million and underlying net profit climbed 31% to $474 million. Fletcher Building earnings before interest and tax declined 27% to $264 million, according to its latest half-year results. Car parts maker GUD Holdings’ revenue increased 8.6% to $492.6 million. Statutory net profit jumped 19.5% to $51.4 million. IDP Education has recorded an increase to its revenue, up 15% to $579 million. Earnings before interest and tax increased 25% to $159 million. Net profit jumped 23% to $107 million. Graincorp expects to report FY24 underlying EBITDA in the range of $270–$310 million, down from $565 million in FY23. Underlying net profit is projected to be in the range of $55–$95 million, down from $250 million in FY23. Domain’s first-half revenue climbed 11% to $202.2m, driven by a rebound in property listings in Sydney and Melbourne, which offset sluggish conditions in the other cities. Profit was up 48.7% to $25.8m. Downer posted a net profit of $72.1m, up 5.9%, with revenue in the first half came in at $6bn, down 1.9%. The company posted a heavy loss of $385.7m for FY23 due to write-downs on its acquisition of Spotless. Financial services group AMP has posted a 32% fall in full year profit to $265m. 360 Capital’s values of its investments will likely result in an unaudited statutory loss of $5.4m. Real estate group Dexus recorded a statutory net loss after tax for the half-year of $597.2 million, compared to a statutory net profit after tax of $23.1 million a year ago. Computershare’s half year net profit slumped 40.6% to $US105.2m ($A162m).
And that’s it for this week. And next week I’ll be talking to Matt Vitale, co-founder and CEO of Birchal, Australia’s leading equity crowdsourced funding platform. Matt is passionate about democratising access to capital for Australian startups, and as a disrupter in equity funding.
And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures.
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
