Talking Business podcast
February 5 2021
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 1 in our series for 2021 and today’s date is Friday February 5.
I’ll be talking to Michael Jansen, CEO and founder of Chicago based Cityzenith, and he’ll be telling us how COVID-19 will create a boom in smart cities around the world. And then I’ll be talking to economist Saul Eslake about the outlook for the economy this year.
But now’ let’s talk to Michael Jansen.
In a nation roiled by us-against-them politics, the GameStop saga has emerged as a morality tale, ostensibly pitting an army of commoners against an arrogant financial elite and fueling an anti-Wall Street animus that has simmered since bank executives more than a decade ago escaped punishment for their role in triggering the financial crisis. Former White House Press Secretary Anthony Scaramucci claimed on social media that the coordinated effort to inflate the price of GameStop stocks is the start of the “French Revolution” in the business world. The episode has raised questions about whether the financial markets have one set of rules for deep-pocketed professionals and another for the average individual; where democratization of finance stops and recklessness begins; and whether regulators have failed to police or even understand social media’s effects upon markets. It also shows that the same disruptive sentiments that upended American politics in recent years are now taking aim at the financial system. Just as populist forces challenged a system of globalization that favored Wall Street and giant corporations rather than factory workers, a grass-roots reaction against financial markets tilted to benefit the rich may be underway. Organised in online forums and traded with fee-free brokers such as Robinhood, small-time investors have driven a 1,600% rally in the shares of video game retailer GameStop, scooping up assets big fund managers had bet against. The phenomenon spilled over into silver late last week. It peaked at $US30.03 an ounce, having surged by more than 11% overnight — its biggest one-day rise since 2008, taking gains to about 19% since last Wednesday. The jump set off a rally in silver-mining stocks from Sydney to London, with Fresnillo shares soaring 20.5% to top the UK blue-chip FTSE 100 index. The action in silver, following thousands of Reddit posts and hundreds of YouTube videos, suggests a rise in the physical price could hurt large investors with bearish bets, while also marking a foray into a much bigger and more liquid markets than individual stocks.
And some companies have done brilliantly from the pandemic. Amazon capped off its pandemic-fuelled 2020 financial performance with record quarterly sales driven by a surge in online holiday shopping with people stuck at home. The e-commerce giant posted fourth-quarter sales of $US125.5 billion and net income of $7.2 billion. It marked the first time Amazon reported more than $100 billion in quarterly revenue, days after Apple Inc. hit that financial milestone. At the same time, the company announced Chief Executive and founder Jeff Bezos would transition to executive chairman and hand over the CEO role to Andy Jassy, who has run the company’s booming cloud computing business. The company Tuesday said Mr. Bezos would hand over the CEO role in the third quarter of 2021.
And Google parent company Alphabet has released its fourth quarter and fiscal year 2020 results and the numbers are staggering. The company made $56.9 billion in the quarter that ended on December 31st, which is a 23% increase over the $46.1 billion it recorded last year.
Pfizer said it expects to generate $US15 billion, or about a quarter of its total revenue this year, from sales of its COVID-19 vaccine co-developed with German partner BioNTech SE. Sales from the vaccine – on track to be the drugmaker’s top product this year – could top $15 billion if the company signs more supply contracts, it said. Pfizer aims to make two billion doses of the COVID-19 vaccine in 2021. Pfizer also said it expects there could be a long-lasting need for COVID-19 vaccines, to combat new virus variants that emerge and to boost peoples’ waning immune responses. The company is launching a study to determine whether a third dose of the COVID-19 vaccine, administered 6-to-12 months after the initial shots, can extend and improve efficacy with more contagious variants circulating in communities around the world. The Pfizer/BioNTech vaccine is currently administered as two doses three weeks apart. Pfizer expects to supply 200 million doses to the U.S. government by the end of May.
The Reserve Bank of Australia kept the cash rate on hold at 0.1%, as widely expected by market economists, and said it would purchase an additional $100 billion of bonds. The RBA isn’t now expecting to lift interest rates until 2024 “at the earliest.”
A 0.9% rise in house prices last month has taken Australian housing values to a record high, exceeding the peak reached in 2017. Home prices are 0.7% above their previous September 2017 peak. Capital city prices are still slightly below their pre-COVID levels, but regional prices are well above CoreLogic’s latest figures show national average property prices are now 1% higher than before the COVID-19 pandemic and 0.7% above the previous September 2017 peak. The increase was broad-based, with every city and broader region recording a rise in January. The capital city increases ranged from 0.4% in Sydney and Melbourne to 2.3% in Darwin.
ANZ Australian Job Ads rose 2.3% in January, the eighth consecutive monthly gain, pushing annual growth up to 5.3%. Job Ads is now at its highest level since April 2019. Job Ads is heading in the right direction and is now 5.3% higher than its pre-pandemic level.
The Bureau of Statistics says payroll jobs rose by 1.3% in the fortnight to January 16, but are still below the levels recorded at this time last year. The data is not seasonally adjusted – the ABS began recording payroll job levels only at the start of last year and seasonal adjustments typically require at least three years of data.
Federal Labor has opted for a fight on industrial relations by resolving the block the government’s omnibus bill of reforms, before a Senate inquiry into the changes is even complete. Labor is vehemently opposed to one key proposal in the bill – to allow employers hit by the pandemic to negotiate two-year workplace agreements that do not comply with the Better Off Overall test. It is also unconvinced by changes to stop the increasing reliance on casuals. Despite the bill containing other measures which Labor and the unions supported, caucus resolved on Tuesday, without debate, to block the bill in both Houses, rather than try and amend it.
The wharfies’ union is gearing up for a major industrial dispute at the Port of Melbourne in a bid to tear up an enterprise agreement that it views as an existential threat to its power on the waterfront. Maritime Union of Australia members on Tuesday overwhelmingly voted for industrial action options, including 24-hour strikes, at the fully automated Webb Dock terminal controlled by Victoria International Container Terminal (VICT). The union is pushing for wage increases of up to 20% and wants to bring in minimum manning levels and a rostered week off every three months that VICT believes will force it to increase its workforce by about 25% just to maintain operations. The claims seek to overturn the only non-MUA stevedore agreement in the industry and standardise the conditions of a workplace that largely sidelines the union’s traditional membership through automated control towers. It comes as VICT is set to expand its operations this year to the point where it will control 50% of container volumes going through the port.
Facebook’s founder Mark Zuckerberg has lobbied senior federal ministers about the proposed code forcing the digital giants to pay media companies, and the prime minister has engaged with Microsoft amid threats from Google about removing its search engine from Australia. With a lobbying offensive in overdrive with Labor expected to endorse the Morrison government’s code after a shadow cabinet meeting this week, and with a Senate inquiry continuing to hear from stakeholders – the treasurer, Josh Frydenberg, confirmed the conversation with Zuckerberg on Sunday. Facebook has branded the proposed code unworkable in its current form and has asked for digital platforms to be given six months’ grace to negotiate deals with news companies directly before being hit with mandatory regulations. Frydenberg told the ABC his discussion with Zuckerberg had been constructive, but the tech mogul had not convinced the Australian government to back down. With parliament set to resume for 2021, the platforms have engaged politically connected lobbyists and are pulling out all stops to try to scale back or scuttle the proposal. Google has threatened to remove its search engine from Australia and Facebook has warned it will remove news from its feed for all Australian users if the code proceeds.
Microsoft has discussed with Scott Morrison expanding its Bing search engine into the Australian market should Google withdraw in protest over plans to force tech giants to share revenue with media outlets for republishing their content. The Prime Minister held talks last week with Microsoft chief executive and president Satya Nadella, as well as the company’s Australian hierarchy, following threats by Google to withdraw its search engine from Australia if the laws pass Parliament.
Prime Minister Scott Morrison has spurned industry calls for another big stimulus to replace the JobKeeper wage subsidy when it stops at the end of March, saying the economy is still gaining the benefit from federal payments worth $251 billion. The subsidy will be terminated after March, and the government will also be reluctant to bake in a permanent, significant increase to unemployment benefits. When it came to the jobseeker payment, which is the old Newstart with a Covid-19 supplement added that doubles the rate, the Treasurer Josh Frydenberg said the government had made a point during the pandemic of not baking in structural spending – spending that carries on in perpetuity.
CSL, the nation’s biggest health company, has brought forward its first delivery of an Australian-produced COVID-19 vaccine, confirming it is on track to provide the federal government with a million doses a week by the end of next month. CSL had scheduled to deliver its first of more than 50 million doses sometime during the second quarter of this year. But production is humming along at its factory at Broadmeadows, in Melbourne’s north, so much so that delivery will now only be three weeks behind the start of the government’s COVID-19 -immunisation program. The news comes as Health Mnister Greg Hunt has played down fears of a potential delay of 3.8 million doses of an AstraZeneca coronavirus vaccine — known as AZD1222 and the same type CSL is producing under licence — that are expected to ¬arrive from Europe before the end of this month. This is despite Australia not being among the countries exempted from the EU’s threat to ban exports of AstraZeneca’s vaccine amid production problems at AstraZeneca’s plant in Bel-gium and claims the UK has ¬“hijacked” doses of the vaccine produced in Brussels. Still, preparations are gathering pace for the Australian rollout. Pharmacists are ready to start administering the first jabs by early March after Mr Hunt confirmed they would be part of the immunisation program.
The Foreign Investment Review Board has given the nod to the $9 billion acquisition of Coca-Cola Amatil by Coca-Cola European Partners. The investment watchdog raised no objections to the deal pitched at $12.75 a share. The FIRB told Coca-Cola Amatil it had no objection to Coca-Cole European Partners acquiring full control of the bottler, satisfying one of the conditions of the scheme of arrangement. The scheme also needs approval from Amatil shareholders, who are expected to meet in early April to vote on the deal.
AGL Energy is expanding its move into the telco space, launching a new range of mobile phone plans in a further sign of the convergence between utility services. The mobile SIM plans will offer discounts for customers who combine the service with an energy plan from AGL, which is ramping up its telecommunications product offering as Telstra takes strides T into its energy domain. The power and gas retailer made it clear when it snapped up regional telco player Southern Phone Company in 2019 that it intended to build up the business, even though its entry into the sector was a vastly scaled-down version of its initial plan – an ambitious and subsequently abandoned $3 billion tilt at Vocus Group.It started offering broadband services in November, and take-up has exceeded expectations, said chief customer officer Christine Corbett
In a big breakthrough for Brisbane-based Ellume, the Biden administration has struck a $US230 million ($A302 million) deal for the Australian diagnostic specialist’s rapid COVID-19 home tests. The White House announced the deal on Monday (Tuesday AEDT) saying it would drive mass production and slash the cost of quick tests, seen as a critical way to reopen large parts of America’s battered economy. While Australia has clearly missed out on becoming a major manufacturing hub for the tests, Ellume’s success comes after it last year became the first and only company so far to win US Food and Drug Administration approval, under the former Trump administration, to make home COVID-19 detectors that don’t need a doctor’s prescription or laboratory access. The company’s test involves a nasal swab that is inserted into a cartridge and linked to a smartphone app. A result is generated in 15 minutes, raising the prospect that it could be used in a vast array of scenarios where social distancing is difficult or impossible.
Macquarie Group has upped its bet on the future of solar energy in Europe, spinning out assets, projects and key people into a separate development company, Cero Generation. Cero, which will be a standalone business within Macquarie’s Green Investment Group (GIG), starts life with 40 staff running a portfolio of more than 150 projects across Britain, France, Italy, the Netherlands, Poland and Spain, with a combined capacity of 8 gigawatts. Cero will be a developer, financier, builder and operator, focused on utility-scale projects, onsite generation and integrated storage.Although Britain and the European Union are aiming for net-zero carbon economies by 2050, with substantial transition targets for 2030, much of the region is not exactly known for its preponderance of sunshine.
In the first blush of the profit reporting season, online retailer Temple & Webster made almost twice as much profit in the December- half as it did in the entire 2020 year, even though sales growth has slowed since peaking in July and August. Releasing unaudited results for the six months to December 31, chief executive Mark Coulter said earnings before interest, tax, depreciation and amortisation soared to $14.8 million, compared with $8.5 million in the 12 months ending June 2020 and $2.3 million in the previous December-half. Sales rose 118% to $161.6 million for the half – falling slightly short of consensus forecasts around $170 million – after soaring as much as 160% in July and August.
London-listed global betting firm Entain has confirmed it has lodged a takeover proposal for Tabcorp’s wagering business, which would break up the Australian $9bn gambling giant. Entain announced to the London Stock Exchange on Tuesday night Australian time that it had “made a non-binding indicative offer to acquire [Tabcorp’s] wagering and media business.” The announcement came as shareholder calls for the split of Tabcorp’s strong performing lottery business away from its struggling wagering arm look set to be heeded,
And that’s it for this week. And next week, I’ll be talking to Matt Riemann, founder and chief scientist at ShaeWellness and we’ll be talking about the company’s free 30-day AI-powered personalised health program to help businesses support employees in 2021, with the
aim to provide mental, physical and emotional health support to those who may fall through the gaps in small to medium enterprises. And I’ll be talking to AMP Capital chief economist Shane Oliver about the market outlook for this year.
In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on 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.