International Energy Agency warns that the global squeeze on energy supply that’s triggered crippling shortages and sent power and fuel prices surging may get worse.
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.
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 24 in our series for 2022 and today’s date is Friday July 15.
Today, I’ll be talking to Joshua Emblin, director, APAC for digital commerce platform commercetools. He will share in detail insights on ways in which eCommerce complements brick-and-mortar stores and why the combined experience is the way of the future as the concept of a store and customer expectations continue to transform.
And I’ll be talking to CommSec chief economist Craig James about the market outlook for the week ahead.
But now, let’s talk to Joshua Emblin.
Recession risks for the US and eurozone are increasing, according to economists at UBS. The average of US recession probability models monitored by UBS has spiked to 40%, from 12% in late May, with its “hard data” model at 96%. The eurozone is also “starting to flash red” in terms of “soft data” on survey-based models. US economic data “really fell off a cliff” in May as the UBS model of 60 variables went from eight in negative territory in April to 12 in May. The weakness broadened from housing to “everything that’s affected by real disposable income” – which has suffered from soaring inflation. July employment data appeared strong, but the detail was a lot weaker.
A global squeeze on energy supply that’s triggered crippling shortages and sent power and fuel prices surging may get worse, according to the head of the International Energy Agency. “The world has never witnessed such a major energy crisis in terms of its depth and its complexity,” IEA Executive Director Fatih Birol said Tuesday at a global energy forum in Sydney. “We might not have seen the worst of it yet — this is affecting the entire world.” Dr Birol compared the current situation in global energy to the 1970s, when twin oil supply shocks hit hard and triggered a global recession. The whole energy system is in turmoil following the February invasion of Ukraine by Russia, at the time the biggest oil and natural gas exporter and a major player in commodities, Birol said. Soaring prices are lifting the cost of filling gas tanks, heating homes and powering industry across the globe, adding to inflationary pressures and leading to deadly protests. Like the oil crises of the 1970s, which prompted huge gains in fuel efficiency and a boom in nuclear power, the world may see faster adoption of government policies that speed the transition to cleaner energy, Birol said. In the meantime, security of oil and gas supplies will continue to pose a challenge for Europe, and also for other regions, he said. “This winter in Europe will be very, very difficult,” Birol said. “This is a major concern, and this may have serious implications for the global economy.” Birol’s come as the east coast of Australia is gripped by a sustained energy supply crunch, which has driven up wholesale electricity and gas prices to record levels, hammering industrial customers and households. The crisis has been driven by a wave of outages at coal-fired power stations in the National Electricity Market; high international prices for coal and gas exacerbated by the war in Ukraine; and heightened demand for energy amid cold winter weather just when the contribution of solar power is at its weakest.
Former Formula One supremo Bernie Ecclestone has been charged with fraud over a failure to declare more than £400 million ($706 million) of overseas assets to the British tax authority, prosecutors said on Monday. The Crown Prosecution Service said Ecclestone, 91, faced one count of fraud by false representation. The first hearing in his case is due to be held on Aug. 22 at London’s Westminster Magistrates Court.
Australian consumer confidence is tracking at its lowest level since the early-1990s recession, excluding the sharp coronavirus downturn in early 2020. The prospect of further interest rate rises and house price falls has smashed consumer confidence, which is nearing the pandemic lows seen during the initial lockdowns of March-April 2020. Westpac and the Melbourne Institute’s long-running and widely watched consumer sentiment index dropped another 3% to 83.8, well below the 100-point level that indicates when optimists equal pessimists. The weekly ANZ-Roy Morgan consumer confidence index has been released with confidence plunging another 2.5% amid concerns over the economic outlook and household finances following last week’s 0.5% rate hike by the Reserve Bank. Labour and input costs hit fresh records in the latest NAB Monthly Business Survey, while corporate sector confidence slumped below the long-run average despite strong business conditions and forward orders. Consumer confidence declined for a second consecutive week, falling sharply in NSW, Victoria and Queensland. The falls were driven by concerns about both the economic outlook and household finances amid rising interest rates. Confidence among mortgage holders has fallen 25% since just before the Reserve Bank of Australia moved to an inflation-fighting footing in May, when it increased the cash rate for the first time in a decade. Reflecting near record high petrol prices, consumer inflation expectations hit a near record high 6%.
Australia has signed a new technology partnership with the United States and joined an international alliance to secure global supply of critical minerals as Western nations ramp up efforts to cut carbon emissions and wean themselves off volatile oil and gas markets. US Secretary of Energy Jennifer Granholm, in Australia for the first time, told the Sydney Energy Forum before the signing of the landmark deals that the two countries faced common challenges to turn from being fossil fuel exporters into clean energy powerhouses. Federal Climate Change and Energy Minister Chris Bowen said, in contrast to the long-standing message that climate policy posed risks to growth and jobs in Australia, action on climate change was both in the country’s own economic interest and in the environmental interest of the planet.
Employers are bracing for record sick leave over the next month, with absences already running at 50% above average levels, as the highly contagious BA.4 and BA.5 variants drive a new wave of infections and hospitalisation. Sick leave from fever and coughs is already five times last year’s levels, with the latest FluTracking data showing 2.25% of people off work from sickness, compared with the five-year average of 1.5%. The data tracks people sick from respiratory illness such as influenza and COVID-19.
Data from the workplace software platform, Deputy, shows much higher absences in the aged care and retail sectors over June. More than a third (36.8%) of aged care shifts went unfilled in NSW in the month. The national rate for aged care was 14.5%. 7% of retail shifts went unfilled, with the highest rates present in Western Australia (9.8%) and NSW (8.1%). Worker absences typically peak in August but health authorities expect the combination of late season influenza B cases and rising COVID-19 infections to cause record taking of sick and carers leave. Hospital admissions have leapt by more 1000 in the past 10 days to 4000, with admissions forecast to rise across the country to well above 5000. Australia’s chief health officers said in a communiqué issued on Friday that the effect could be similar to January’s BA.1 wave without further public health action. The chief health officers warned BA.4 and BA.5 are “associated with increased immune escape” and so new cases among those previously infected with an earlier COVID-19 variant are likely. As well, reinfections may occur as early as 28 days after recovery.
Employers are calling for an urgent ramp-up of skilled migrants as a priority fix at Labor’s jobs summit in September as unions warn that they will fight for more safeguards to ensure temporary visa workers are not exploited. Quick wins sought by business include a temporary two-year increase in skilled migration to 200,000 places a year, and making temporary skilled migration more accessible and responsive to employer needs by scrapping the so-called targeted occupation eligibility list. An overhaul of the migration system is emerging as a headline issue at the summit with changes likely in the October budget. Prime Minister Anthony Albanese and Treasurer Jim Chalmers said the summit would help drive reforms in participation, productivity, migration and women’s economic security.
Ramsay Health Care, a $16bn ASX-listed health giant, has begun moving its mental health services outside hospitals and into the community, opening 11 psychology clinics across Australia, with plans to establish 20 more in the next two years. It is a model Ramsay has adopted across its Swedish operations, and comes as demand for mental health services is soaring during the pandemic. The 200 psychologists running Ramsay’s Australian clinics have completed about 10,000 consultations in the past year. The community clinics have helped keep Ramsay’s 1100 mental health hospital beds for those who are acutely unwell. Ramsay hopes it can partner with state governments to ease chronic shortages across the public system. The community clinics offer more than counselling services, providing treatment for all mental health concerns including those associated with mood, anxiety and substance misuse, eating disorders and PTSD as well as psychometric testing for cognitive impairment, attention deficit disorder and other behavioural problems. It comes after Ramsay, which is subject to a $20bn takeover from global private equity firm KKR, launched a $3m public-private partnership with the NSW government to provide more mental health services to adolescents and young adults late last year.
A probe has been launched into Bunnings and Kmart Australia’s use of facial recognition, after an investigation exposed those retailers using the controversial technology. The Office of the Australian Information Commissioner (OAIC) has opened an investigation into the use of the technology on customers by the two retailers, which are both owned by Wesfarmers Bunnings and Kmart, as well as The Good Guys, were referred to the body by consumer group Choice two weeks ago for potential breaches of the Privacy Act. Choice had found all three retailers had been analysing CCTV footage to create profiles or “face prints” of their customers without consent. The OAIC added it had “commenced preliminary inquiries” with The Good Guys, which “paused its use of facial recognition technology” in the wake of the expose.
The price of food has continued to rise, with new data showing that every supermarket aisle has been hit by hikes, not just fruit and vegetables. The soaring prices have led researchers to call on the federal government to help subsidise growers, amid concerns it’s costing some lower socioeconomic families 40% of their income to buy a week’s worth of healthy food. Comparing the cost of 28 staples between June 2020 and June 2022, researchers from Deakin University’s Institute for Health Transformation found that the price of lettuce and broccoli had the biggest jump, increasing by more than 100% within two years. In 2020 a head of lettuce would have cost $2.50, but now costs more than $5, and broccoli jumped from $5.90 to $11.90 a kilogram. Tomatoes saw the third-highest jump, going from $6.90 to $9.90 a kilogram over two years, but it wasn’t just fruit and vegetables, with Christina Zorbas, a researcher at Deakin University, calling the increase a “crisis” The recent floods in New South Wales and Queensland, coupled with the increase in the cost of fuel due to the war in Ukraine, have meant almost everything is more expensive at the moment.
National Australia Bank has rejected allegations from its former head of repo trading that she was harassed and bullied in her job, calling for the Federal Court to throw out her application. Dikele Diawara had alleged she was subjected to a “boys’ club culture” in NAB’s trading team, claiming that she was underpaid and threatened with a baseball bat. NAB disputes this, claiming the baseball bat was a “souvenir” and denied her allegations the trading team was “overwhelmingly” male. NAB admits “approximately 90-94% of those working on the Sydney trading desk were male.
An English appeals court has given 200,000-plus Brazilian litigants the green light to pursue their £5 billion ($8.8 billion) class action against BHP over the 2015 Samarco dam disaster. The long-running courtroom saga can now go to a full trial, after class action law firm PGMBM on Friday succeeded in getting the Court of Appeal to overturn BHP’s initial victory in March last year. In November 2020, a lower court vetoed the lawsuit, ruling that the huge class action would be too complex and costly, and might duplicate litigation efforts in Brazil. The claimants then lost an appeal against that decision last March – which seemed to kill off the case. But last month they won an “exceptional appeal” hearing to reconsider that verdict. The ruling in their favour was handed down on Friday. The judges said the court case should proceed because the remedies on offer in Brazil were “not so obviously adequate that it can be said to be pointless and wasteful to pursue proceedings” in England. The collapse of the Fundao iron-ore tailings dam in 2015 killed 19 people and left hundreds homeless, as well as wreaking environmental and infrastructure damage that extended across two states. Within weeks, a Brazilian class action was launched that ultimately won a settlement of 20 billion Brazilian reals. In a statement, PGMBM said: “BHP will now finally face their day of reckoning in the English courts … [and] will have to account for their role in the 2015 disaster.” The litigants say they have had to turn to the English legal system because they are getting only slow and inadequate redress through the Brazilian courts – where a second, 155 billion-real lawsuit is under way – and from the Renova Foundation. BHP still has the option to try to prevent the trial by appealing against Friday’s decision to the Supreme Court. A spokesman said the company was considering its response.
Mobile phone companies face up to $250,000 in fines if they fail to comply with a new code launched today to block SMS scam messages. Mobile providers will be required to identify, trace and block text message scams, share information about scam messages with other providers, and report scams to the authorities Australian Communication and Media Authority chair Nerida O’Loughlin said the new rules should have a similar impact as a 2021 code to eliminate scam phone calls The Australian Competition and Consumer Commission’s annual scam report released last week found the call code had led to a 50% drop in complaints about scam calls in 2022, but the gap had been filled by SMS scams. SMS scams accounted for 32% of all reported scams this year to date, accounting for $6.5m in losses compared to $2.3m in the same period last year. Scams across all mediums are increasingly targeting vulnerable sections of the community. Scammers stole $66m from Indigenous Australians, people with a disability, and culturally diverse communities in 2021 — almost double the amount taken in 2020.
The nation’s major airlines are on track to record one of their worst on-time performances on record after more than half of all domestic flights last week were delayed or cancelled. From Monday to Sunday, Qantas cancelled 6.7% of domestic flights and had an on-time performance of 44%, while Virgin Australia cancelled 14.7% of flights and had an on-time performance of 43%, according to figures privately compiled by the airlines. The growing delays – during a busy holiday period and with both Qantas chief executive Alan Joyce and Virgin managing director Jayne Hrdlicka in Europe – have been compounded by illness not only among airline staff, but also air traffic control. Airservices Australia confirmed on Monday that 10% of the air traffic control team was absent in the past week, but did not say where the shortages were most acute. Wild weather has also exacerbated delays, with Sydney Airport operating only one of three runways on Friday and fog slowing arrivals into Melbourne. Official on-time performance figures are not due until late July. Bureau of Infrastructure Transport Research Economics data for May showed an average on-time performance for Qantas of 60.7%, and a cancellation rate of 7.1%. Virgin had an on-time rate of 65.7% and a cancellation rate of 5%. During the Covid-19 pandemic, Qantas cut 9400 jobs and Virgin – which fell into bankruptcy – cut 3000 jobs. Both airlines have been racing to restaff as demand for travel has rebounded. Qantas has recruited 1000 people since Easter.
The famed Dunk Island is poised for a reboot as a major Queensland resort after the dilapidated property sold to Atlassian chief executive Mike Cannon-Brookes for about $25m. The low profile deal comes in the wake of a failed bid by Upsense Media Capital to buy the property and turn it around in the wake of a failed scheme by property funds house Mayfair to transform it into a $1.5bn tourism mecca. The latest owner is likely to come up with a more manageable plan to resuscitate the island as domestic tourism booms prompts rises in room rates as packed flights again head to local resorts. Cannon-Brookes, the founder of software giant Atlassian and minority owner of the Utah Jazz basketball team, has put together a series of high-profile properties, although the island resort is a departure for him. His purchases include a luxury, sprawling manor Wattle Ridge in the NSW Southern Highlands and he has also been linked to a sandstone heritage cottage on Scotland Island on Sydney’s Northern Beaches. His portfolio also includes a beachside home at Coaster’s Retreat at Pittwater. In 2018, the tech billionaire and his wife Annie bought Australia‘s most expensive house, Fairwater, in Sydney’s Point Piper, for about $100m, ending more than a century of Fairfax family ownership.
And that’s it for this week. And next week I’ll be talking to Grant Case, the Regional Vice President for APAC of Dataiku, the centralized data platform that moves businesses along their data journey from analytics at scale to enterprise AI. And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures.
In the meantime you can catch me on Facebook, Twitter Instagram, LinkedIn and YouTube. 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.