Talking Business July 16 2021
The AEMO sets out plans for an electricity grid capable of 100% renewable energy by 2025.
https://play.acast.com/s/talkingbusiness/talking-business24
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 24 in our series for 2021 and today’s date is Friday July 16.
First, I’ll be talking to Lucy Piper, director for WorkForClimate, a world first Australian climate change program offering tools and resources for professionals to accelerate corporations to net zero emissions. And I’ll be talking to RMIT economist Sinclair Davidson about the growing level of government debt and the intergenerational report.
But now, let’s hear from Lucy Piper.
Billionaire Richard Branson’s long-awaited test flight to space, taken alongside five of his Virgin Galactic Holdings Inc. employees, bolsters the company’s plan to debut tourism trips next year. The VSS Unity space plane detached from a carrier aircraft high over New Mexico and rocketed to a speed of Mach 3 on its way to an altitude of about 282,000 feet, or more than 53 miles (86 kilometers) above the Earth. The Unity then glided back through sunny skies and landed at about 9:38 a.m. local time on Sunday — approximately an hour after taking off. The suborbital journey kicks off a landmark month for the future of space tourism, with Branson looking to demonstrate Virgin Galactic’s capabilities nine days before Amaxo.com Inc founder Jeff Bezos plans to fly on a rocket made by Blue Origin, his space venture. Both companies envision businesses catering to wealthy tourists willing to pay top dollar for a short period of weightlessness and an unforgettable view of the Earth and heavens. Virgin Galactic’s test flight demonstrated that such trips — once the stuff of science fiction — are becoming increasingly realistic.
Prime Minister Scott Morrison has announced an increase to the emergency disaster payment from $325 to $375 for people who have lost up to 20 hours of work, and from $500 to $600 for people who have lost more than 20 hours work due to the COVID-19 outbreak in Sydney. Mr Morrison also announced a jointly funded payment of between $1,500 and $10,000 a week to businesses that could demonstrate a 30% decline in turnover. The payment will be contingent on companies maintaining their current staffing levels, and will be paid to a maximum of 40% of a business’s payroll. The new payment will cost half a billion dollars a week, which will be funded equally by the NSW government and the Commonwealth. Mr Morrison said the likely protracted lockdown in Sydney required a new response.
Australia will target running the electricity grid entirely from solar and wind generation by 2025 under a 100% renewable target laid out by the power system operator, which has also backed Snowy Hydro’s controversial NSW gas plant, saying the fossil fuel has a vital place in the energy mix. The ambitious goal – putting the nation on track to lead the world transitioning to clean energy – has been set by the new boss of the Australian Energy Market Operator, Daniel Westerman, who said it would mark “uncharted territory” for the country as it works out how to integrate more renewables into the power system as old coal plants face retirement. Renewables accounted for nearly a quarter of system supplies in 2020, up from 21% in 2019, with coal and gas generating 73% of grid needs. But the AEMO said a system needs to be built that can handle instant renewable penetration of up to 100% when solar and wind are running at capacity. Australia’s abundance of sunshine and wind, its proximity to energy-hungry customers in Asia and its expertise in world-scale gas exports put the country in the box seat when it comes to green hydrogen exports, Westerman said. In the domestic space, cheap low-carbon energy will also provide stimulus for the economy, fuelling the growth needed to eliminate debt built up because of the COVID-19 pandemic.
Melbourne and Sydney CBDs will take four years or more to pass their pre-pandemic economic levels as the country’s cities are smashed by lockdowns analysis by Deloitte Access Economics has found. The forecasts suggests the level of people employed and working in Brisbane and Perth will return to their 2019 levels during 2023. In Adelaide, employment is forecast to return to pre-COVID-19 levels at the start of 2026 (the very end of Deloitte’s five-year forecast horizon). But Deloitte found that of all the states and territories, “Victoria had been hardest hit by the COVID-19 pandemic”. The analysis – which looked at where employees are located to account for the working from home phenomenon – suggests the pandemic has caused a surge in remote working that has persisted even after lockdowns have been lifted. Separate data collected by Roy Morgan and UberMedia mobile devices showed Sydney CBD’s movement fell by 89% two weeks ago from pre-pandemic February 2020 averages after lockdown measures were imposed . Melbourne’s movement levels remained almost 80% down the week of June 28, or around 20% of February 2020 averages, despite its restrictions being lifted – an illustration of the lingering impact of lockdowns. Iconic Melbourne rooftop bar Madame Brussels will become the latest victim of the pandemic when it closes its doors next week after 15 years. The Deloitte analysis finds the Melbourne CBD is forecast to return its pre-COVID-19 peak of around $74 billion in the second half of 2024, a recovery timeline of four years. Employment of people working in Sydney is not forecast to reach its pre-COVID levels within the five-year forecast horizon. However, Sydney is forecast to get back to within 1% (or 3400 workers) of pre-COVID-19 levels – a much narrower gap than the 5.6% (19,700 workers) below pre-COVID-19 forecast for Melbourne employment by the start of 2025. But the new Deloitte analysis does not account for Melbourne’s fourth lockdown last month, Sydney’s current ongoing restrictions or for potential future lockdowns, suggesting the recovery could take even longer.
Greater Sydney’s lockdown could cost the national economy $1 billion per week, according to AMP Capital’s chief economist Shane Oliver. New South Wales, being the largest state economy, accounts for one-third of Australia’s output. The longer it remains in lockdown, the more time it will take for the national economy to recover and “slow progress in reducing unemployment”, especially because the hardest-hit workers and businesses can no longer rely on the JobKeeper safety net . For Dr Oliver, however, the silver lining is he does not expect Sydney’s lockdown to drag on for as long as that. That would mean NSW’s economy “and by definition the national economy” will not suffer a $15 billion hit like Victoria did last year. Dr Oliver expects the lockdown to have a significant impact on the pace of the country’s economic recovery in 2021. He believes Australia’s GDP growth may slow down to 4% this year (a downgrade from his previous forecast of 4.5%). AMP’s analysis reflects findings by KPMG chief economist Brendan Rynne that showed Sydney’s lockdown is currently costing about $150 million a day.
Consumers face significant delays and price hikes for imported goods ahead of the Christmas rush, as the freight industry warns tough new international arrival caps could force airlines flying cargo to consider pulling out of the Australian market. The Morrison government is considering futher extending its $780 million International Freight Assistance Mechanism (IFAM) scheme, designed to keep open global air links during the pandemic. Freight experts say more assistance and planning is needed to avoid shortages of key goods, including toys and car parts. National cabinet’s savage cuts to the international arrivals are due to come into force on Wednesday, halving the cap to just 3035 people arriving into the country per week
COVID smashed the pay packets of Australian chief executives, with remuneration last financial year falling to its lowest level since 2007. Median fixed pay for ASX100 CEOs fell 5.1% to $1.68 million, less than before the GFC over a decade ago, according to the report, titled CEO Pay in ASX200 Companies. The esearch from the Australian Council of Superannuation I nvestors (ACSI) tracking 20 years of pay packets found one third of top executives at ASX100 companies – the 100 most valuable listed on the stock exchange – received no bonus in 2020. The peak body of largely industry super investors has over $1 trillion in assets and owns, on average, 10% of every company in the ASX200. according to the report, titled CEO Pay in ASX200 Companies. Many top executives are paid with shares or bonuses that are deferred for years to promote long-term thinking. “Realised pay” is cash salary pay plus equity that vested during the year, and in the reporting period it fell 3.6% to $3.99 million for CEOs of ASX100 companies. For the bosses of the second 100 most valuable companies, it dropped 22^ to below $1.70 million.
Bonuses of blue-chip company bosses took the biggest hit on record last year, with nearly a third of ASX 100 CEOs receiving no annual boost to their base salary. Some 31 ASX 100 chiefs received no annual bonus in 2020, double the number from the year before. Among them were those running businesses savaged by the coronavirus epidemic, including Alan Joyce of Qantas, Geoff Culbert of Sydney Airports and Graham Turner of Flight Centre. Other chiefs to receive no bonuses were Brad Banducci of Woolworths, former AMP boss Francesco De Ferrari, Susan Lloyd-Hurwitz of Mirvac and Bendigo & Adelaide Bank’s Marnie Baker. The median bonus size for CEOs who did receive a short term incentive payment fell to 31% of the maximum possible payout, down from 60% in 2019, a survey by the Australian Council of Superannuation Investors found.
Banks are closing more than three branches each week as foot traffic plummets and customers go online. The big four banks have closed or plan to close 350 branches between January 2020 and Christmas 2021 as foot traffic in once busy areas plummet and the shift to digital accelerates. The figure has been revealed in answers to questions on notice from a parliamentary committee tasked with reviewing the four majors and contains 50 more closures than the Finance Sector Union last estimated in April. According to the data, the big four have closed or plan to close branches at a rate of around three a week. ANZ is leading the charge with the closure of 145 branches followed by Westpac with 80, NAB with 72 and Commonwealth Bank with 53. The closures leave ANZ customers with a total of 425 physical branches they can visit to conduct their banking. Unlike customers from rival banks, they are unable to do their banking at Australia Post locations after the bank baulked at a $22 million a year access fee in 2018. Finance Sector Union national secretary Julia Angrisano said the shift to digital had been overstated by the banks, with the crisis being used as a smokescreen to close more branches and prop up profits.
The prudential regulator wants banks to be prepared for zero and negative interest rates, and has called on them to take all “reasonable steps” to ensure their technology systems can deal with extreme monetary policy settings. The Australian Prudential Regulation Authority said it wrote to banks seven months ago asking them to tell the regulator if they would have any issues implementing negative interest rates. The Reserve Bank has said a negative cash rate would be highly unlikely in Australia. But such a setting could support economic activity, by keeping downward pressure on borrowing rates and exchange rates.
The owner of Bunnings and Kmart has made a bid for the group behind Priceline to branch into pharmacies and beauty stores for the first time.
Wesfarmers, which also owns Target and Officeworks, announced on Monday that it had lobbed an offer to Australian Pharmaceutical Industries of $1.38 cash per share, valuing it at almost $68m. The proposal has already won the backing of API’s biggest shareholder Washington H. Soul Pattinson, which is best known for its pharmacies but has broader investments including TPG Telecom, giving Wesfarmers an immediate 19.3% stake. Thousands of community pharmacies have been keen to play a role in Australia’s Covid-19 vaccine rollout but are only doing so in some jurisdictions, with news over the weekend that TerryWhite Chemmart in Waroona had become Western Australia’s first, a development the Pharmacy Guild of Australia described as a “long overdue advance”. Wesfarmers has already expressed its desire to help with the rollout, suggesting to the federal government that Bunnings or Officeworks carparks could be used to give jabs.
Social news media site Reddit is opening an Australian headquarters to massively expand its media and advertising business, and to feature more Australian content. Reddit, dubbed “the front page of the internet”, and ranked as the 18th most visited website globally by Alexa Internet, will build its Australian presence from an office at Sydney’s Barangaroo. Reddit said it now has 52 million daily active users. It said Australians spent an average of 31 minutes per day on Reddit, which was more than they did on Instagram, Snapchat, Twitter and Pinterest. Australians collectively contributed 158 million posts, comments and votes on the platform every month. Some 62% of Reddit’s Australian users were in the 18 to 34-year-old segment, with 28% aged between 35 and 49. The company said a substantial number of its users didn‘t use Facebook, Twitter, Instagram, Snapchat or TikTok.
Women have officially taken over the legal profession in Australia, with 53% of solicitors now female and every state and territory reporting more women lawyers than men for the first time. The 2020 National Profile of Solicitors shows numbers have grown by 45% since 2011 and that women were responsible for 67% of the increase. The report by research firm Urbis recorded 83,643 practising solicitors as at October 2020. The largest proportion were registered in NSW (43%), followed by Victoria (25%) and Queensland (16%). The gradual takeover is demonstrated by the five national profiles to date. The first in 2011 reported that 46% of solicitors were female. In 2014 that number had risen to 48% by 2016 it was 50% and in 2018 52% of all solicitors were women. While most States flipped in either 2016 or 2018, Western Australia reported a majority of women as solicitors for the first time in 2020. It was 50-50 in 2018. The ACT (60%) and the Northern Territory (61%) had the highest percentage of female solicitors which, the report said, may be driven by the greater proportion of government solicitors in those jurisdictions. NSW Law Society CEO Sonja Stewart, who supervised the project for the Conference of Law Societies, said women were coming into the profession at a ratio of almost two for every one man.
The federal Labor Party is set to go to the next election vowing to leave untouched the stage three income tax cuts if it forms government, heading off a Coalition campaign to portray it as high taxing and anti-aspirational. Following several days of conversations, Labor’s hierarchy has decided against trying to either unwind or amend the cuts if elected.
And that’s it for this week. And next week, I’ll be talking to tech guru Mick Esber who created the new and innovative app bhapi which rates, classifies, and blocks negative, fake, biased, hate, violent and explicit content using best-in-class technology. It has been designed to deliver easy-to-use tools for users to manage what they send and receive, is completely Ad-free, and does not sell personal data to third parties. And I’ll be talking to Indeed economist Callam Pickering about Australia’s latest jobs figures.
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
