Highly radioactive’ tiny capsule lost in Australian desert. Mining giant Rio Tinto says ‘sorry’.
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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 01 in our series for 2023 and today’s date is Friday February 3.
First, I’ll be talking to Guy Pearson theCEO and Founder of Ignition, the world’s first client engagement and commerce platform for professional services businesses. Under Guy’s leadership, Ignition supports over 350,000 monthly client engagements for its 5,000+ customers in over 20 countries around the world. And I’ll be talking to Rabobank economist Michael Every about China’s emergence from Zero-Covid and what it means for the Chinese and global economy.
But now, let’s talk to Guy Pearson.
The International Monetary Fund sees a “turning point” for the global economy as it raised its growth outlook for the first time in a year, with resilient US spending and China’s reopening buttressing demand against a litany of risks. Gross domestic product will likely expand 2.9% in 2023, 0.2 percentage points more than forecast in October, the fund said Tuesday in Singapore in a quarterly update to its World Economic Outlook. While that’s a slowdown from a 3.4% expansion in 2022, the IMF said it expects growth will bottom out this year before accelerating to 3.1% in 2024.
The month of January started on a super bad note for employees in the tech world. With Big Tech companies like Microsoft and Google joining the ongoing layoff season, more than 3400 tech employees were being laid off per day on average in January globally. As per the data by layoffs tracking site Layoffs.fyi, 219 companies laid off more than 68,000 employees in January. In 2022, over 1000 companies laid off 154,336 workers, as per the data by layoffs tracking site Layoffs.fyi and the mass tech layoffs of 2022 are continuing into the new year. The sacking episodes have gained speed amid global economic meltdown and recession fears. Deeper layoffs are coming in 2023 as most business economists have predicted that their companies will cut payrolls in the coming months.
Rio Tinto has lost a “highly radioactive” capsule somewhere along a 1400-kilometre highway through the Western Australian desert. “We are taking this incident very seriously,” Rio Tinto head of iron ore Simon Trott said in a statement on Sunday. “We recognize this is clearly very concerning and are sorry for the alarm it has caused in the Western Australian community.” The mining giant and Western Australia’s government are attempting to find the widget, which is as much as 8 millimetres (0.3 inch) in length and contains a small amount of the radioactive isotope caesium-137. While the risk to the general community is low, exposure to the substance could cause radiation burns or radiation sickness, Emergency WA said on its website. The widget was a component in a gauge used to measure the density of iron ore. Rio said the radioactive capsule was collected from the mine on Jan. 12 by a transport contractor and was due to arrive at a radiation storage facility in Perth on Jan. 16. It was only discovered to be missing when its container was opened for inspection on Jan. 25. The Western Australian government said when the package holding the device was inspected, it was found to have been “broken apart with one of the four mounting bolts missing and the source itself and all screws on the gauge also missing.” It comes as Rio Tinto, which is listed in Sydney and London, attempts to rebuild its reputation after destroying a site of sacred significance to Indigenous Australians in 2020 as part of an iron ore mine expansion.
There are clearer signs that consumers are feeling the pain of high inflation and successive interest rate hikes as Australian retailers have posted their first drop in sales in almost a year. Shoppers across the nation spent $34.47 billion in December, a period which coincides with Christmas and Boxing Day sales. That was a sharp fall in sale turnover (-3.9%) compared to the previous month’s record high, according to new data released by the Australian Bureau of Statistics (ABS) on Tuesday. It was also much worse than expected, given Reuters-polled economists were only expecting a slight drop (-0.2%). “This is the first monthly fall in retail turnover for 2022, following 11 consecutive monthly rises,” Ben Dorber, the ABS head of retail statistics, said
Corporate watchdog chairman Joe Longo is poised to reveal the largest shake-up of the Australian Securities and Investments Commission in 15 years next month, in a move designed to streamline enforcement, cut bureaucracy and deliver faster decision-making. The overhaul will cut the number of divisions, which are currently broken into multiple supervisory, enforcement and operations groups, sparking the exits of at least two long-serving executives, while more money will be directed towards filling what Mr Longo called ASIC’s “technology debt”. The regulator will streamline operations – focusing primarily on financial services and wealth, and its associated enforcement group, along with some changes to markets and markets enforcement – in a move designed to make ASIC’s law enforcement less “whack-a-mole” and “silo-ed”, and more strategic to go after eight priority areas, including scams, crypto and cyber.
Rupert Murdoch’s News Corp will hike the cover price of its metropolitan tabloids across Australia as it braces for an ageing print readership and a weaker advertising market. The New York-based media company was also planning a major redesign of the print editions of The Daily Telegraph, The Herald Sun, and The Courier-Mail, as part of the changes. The price increase – expected to be substantial – was approved by global News Corp chief executive Robert Thomson. News Corp owns a range of other local assets, including The Australian as well as cable TV operator Foxtel and streaming services Kayo and Binge. The company has not provided reasons for the proposed changes, but this masthead reported last year the publishing industry was facing major increases in the cost of paper, caused by soaring electricity prices and shipping costs. News Corp, as the largest print publisher in Australia, was facing the prospect of limits on how much paper it could use. Last August, it bumped the Saturday and Sunday cover price of the tabloids by 50¢ to $4. The weekday editions cost $2.50. That compares to $4 for The Sydney Morning Herald and The Age and $4 for The Australian. News Corp is one of a number of local media companies facing broader financial pressure from rising costs that have coincided with a weaker advertising market. The redesign could be indicative of a change in editorial strategy, but is more likely to do with falling print circulation figures and a need to generate income to offset costs associated with print.
Shares in India’s Adani Group have plunged up to 20% as the company considers legal action over allegations of stock market manipulation and accounting fraud. Investors began selling Adani shares after a Hindenburg Research report alleged market manipulation Adani’s net worth increased nearly 2000% in recent years to as much as $174.82 billion. Some Adani companies have been suspended amid the selling. The public’s reaction has been swift and so far unforgiving. Indian mining magnate Gautam Adani’s business has been massacred on the stock market as investors react to the news. At time of writing, the mass sell-off has seen $US52 billion ($A73 billion) wiped out from the overall market value of the various companies relating to the Adani Group. The Hindenburg research group has accused the Adani group of “brazen accounting fraud, stock manipulation and money laundering at Adani, taking place over the course of decades” which they also said they had proof for. Hindenburg also revealed it had taken a short position in Adani Group — meaning it is betting that the company’s stock price will plunge. The heavy selling of Adani-linked shares, which wiped out billions of dollars’ worth of market value for India’s second-largest conglomerate, caused trading in some Adani companies to be suspended or temporarily halted. The Adani group’s Australian arm, Bravus Mining and Resources, has faced heavy opposition and controversy over its construction of the Carmichael mine in central Queensland. In a 413 page rebuttal, Adani likened the US investment firm’s report to an attack on India amid mounting financial pressure on the coal conglomerate.
Australian Treasurer Jim Chalmers pledged to deliver “values-based capitalism” in Australia by revamping markets, renovating institutions and urging the private sector to co-invest with the government as the global economy confronts an inflation crisis. “Australia can do more and do better than just batten down the hatches in 2023 or hope for the best,” Chalmers wrote in a 6,000-word essay that will be published in Australian magazine The Monthly on Monday. “We can build something better, more meaningful and more inclusive.” In the article, Chalmers, who took office in May after Prime Minister Anthony Albanese’s Labor Party took power, criticized the neoliberal approach of the previous government and promised to “redefine and reform our economy and institutions.” “We will renovate the Reserve Bank, responding to the RBA Review,” Chalmers wrote, saying the Productivity Commission would be turned into a think tank to advise the government. Chalmers said the way markets allocate and arrange capital also needs restructuring. The treasurer said co-investment with businesses was a “powerful tool,” and the government would look to employ it in the industry, housing and electricity sectors.
Treasurer Jim Chalmers is working on plans to attract banks and superannuation funds to set up a social impact investing fund to tackle “entrenched disadvantage” in the May federal budget. A social impact investing fund would aim to improve education, disability care, aged care and homelessness, and deliver social benefits and financial returns to investors. Securing money from the private sector would also help a fiscally constrained Labor government achieve its social policy objectives without blowing the budget. Prime Minister Anthony Albanese and Dr Chalmers are understood to be closely considering recommendations from the government’s Social Impact Investing Taskforce led by former Macquarie banker Michael Traill. The major banks have expressed in-principle support for considering seed equity funding for a social impact investing “wholesaler”, which may require $200 million of private funding, potentially to be matched by a similar amount from the federal government. The blueprint borrows from the former UK Labour Blair and Brown governments’ Big Society Capital institution jointly set up with £400 million from the government and commercial banks.
The federal government may have to ramp up its policymaking machinery quickly in response to the challenge of the ChatGPT, chief scientist Cathy Foley has warned. Dr Foley said that although she did not want to pre-empt any ministerial decisions, she anticipated that her office might be asked to prepare a Rapid Research Information report on the implications of the new AI tech. ChatGPT is a highly sophisticated new chatbot that can generate remarkably human-like text, which can be very hard to distinguish from the real thing. Besides its potential impact on the labour market, ChatGPT and its ilk also have other features with potentially complex policy implications. They open up the prospect of a new kind of plagiarism-type problem at schools and universities. There are also copyright and compensation issues over ChatGPT’s trawling of online material. There is also the risk of impersonation and fraud, and there is the simple fact that ChatGPT often confidently and quite convincingly generates inaccurate information. Tools like ChatGPT can create enormous opportunities for companies that leverage the technology strategically. Chat-based AI can augment how humans work by automating repetitive tasks while providing more engaging interactions with users.
Here are a few of the ways companies can use tools like ChatGPT:
● Compiling research
● Drafting marketing content
● Brainstorming ideas
● Writing computer code
● Automating parts of the sales process
● Delivering aftercare services when customers buy products
● Providing customized instructions
● Streamlining and enhancing processes using automation
● Translating text from one language to another
● Smoothing out the customer onboarding process
● Increasing customer engagement, leading to improved loyalty and retention
Customer service is a huge area of opportunity for many companies. Businesses can use ChatGPT technology to generate responses for their own customer service chatbots, so they can automate many tasks typically done by humans and radically improve response time. Still, is ChatGPT a good source of information about the world? Absolutely not. The prompt page even warns users that ChatGPT, “may occasionally generate incorrect information,” and, “may occasionally produce harmful instructions or biased content.”
After a disastrous year of flooding for Eastern Australia, soaring insurance premiums mean more people in disaster-prone areas are facing the grim reality that they cannot afford to protect their biggest asset. Julia Davis, policy and communications officer at the Financial Rights Legal Centre, says there are cases in flood-ravaged Lismore where the annual cost of home insurance jumped from about $1400 a year to $15,000 a year, once flood cover was included. The cost is even higher, at $25,000, for home and contents insurance. Experts predict this type of bill shock will get worse, as extreme weather events become more common due to climate change. Those who tend to be the most affected are low-income earners, who can least afford to shell out thousands of dollars on their home insurance.
Australian insurers are bracing for ballooning losses from a second round of catastrophic weather after New Zealand’s North Island was pounded by flash flooding and landslides. Insurance Australia Group warned it could face a maximum losses of $236m flowing from the Auckland floods, but Suncorp said its reinsurance arrangements would limit losses to $45m. Suncorp warned it was facing 3000 claims across its Vero and AA Insurance brands, with the number likely to swell as its customers returned to homes and properties. However, with more rain on the way, insurers may face a second hit if New Zealand is struck by repeated rounds of disastrous weather.
The leaders of major Australian arts companies have welcomed the cultural policy unveiled by the Albanese government on Monday, as much for its arts-affirming rhetoric as for the $286 million in new funding it has promised for the sector. The centrepiece of the policy, full funding details for which will be revealed in the May budget, is the replacement of the Australia Council with a new grants-making body, Creative Australia. This will provide more support for commercial art forms competing for global audiences, which were hitherto marginalised in government funding decisions. The contemporary music industry gets $69 million for the creation of Music Australia, which will play a role identical to the one Screen Australia plays for the film business, with a remit to invest in the development, production and promotion of Australian music.
AMP is growing its home loan assets as it offloads its asset management business to focus on banking and wealth management, with Nano tipping in between $500 million and $1 billion in loans. Fintech and non-bank lenders that do not have a solid differentiator or track record in securitisation have struggled under the weight of tighter funding markets, forced to pass on more than the Reserve Bank of Australia’s 3% increase in interest rates to their customers since May. Nano is understood to have unsuccessfully tried to tap the market for $75 million in August.
Virgin Australia will roar back to its first full-year profit in a decade after a surge in first-half revenue to $2.5 billion, as it ramped up preparations for its float and appointed former Macquarie chairman Peter Warne to the board. Chief executve Jayne Hrdlicka said the reborn airline would turn over “roughly $2.5 billion” in revenue in the first half of the 2023 financial year, with a profit margin of 5%, the first time it has disclosed these figures. That figure is more than the $2.2 billion recorded in full 2022 financial year, and implies it is set to deliver $125 million in profits for the six months to December 31. Virgin would not confirm whether the profit margin figure reflected bottom-line profits or earnings before interest, tax, depreciation and amortisation.
And that’s it for this week. And next week, I’ll be talking to Peter Kokkinos, the Vice President and Managing Director of online learning platform Udemy APAC. And I’ll be talking to CommSec chief economist Craig James about what’s ahead in the market.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. And if you want leave a comment. For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business on the Apple podcast store or on my website leongettler.com.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.