The Reserve Bank of Australia’s culture, appointments to its board and its 2 to 3% inflation target will be the focus of the institution’s first independent review in four decades.
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 25 in our series for 2022 and today’s date is Friday July 22.
Today, 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.
The International Monetary Fund will cut its global economic growth outlook “substantially” in its next update, as finance chiefs grapple with a shrinking list of options to address the worsening risks. Surging food and energy prices, slowing capital flows to emerging markets, the ongoing pandemic and a slowdown in China make it “much more challenging” for policymakers, Ceyla Pazarbasioglu, the IMF’s director for strategy, policy and review, said at a Sunday panel in Bali, Indonesia. She spoke after the Group of 20 finance ministers and central bank governors ended their meeting on Saturday without reaching a communique, underlining the difficulty in coordinating a global response to surging inflation and recessionary fears. The IMF already downgraded its outlook for the global expansion this year to 3.6%, from 4.4% before the war in Ukraine, in its April report. In a review due this month, “we will downgrade our forecast substantially”, Ms Pazarbasioglu said. IMF managing director Kristalina Georgieva told the summit the war is causing significant economic distress in the rest of the world, reducing global growth both this year and next.
Australian consumer confidence has notched its first weekly improvement since June, gaining 0.2% last week, according to ANZ-Roy Morgan. Weekly inflation expectations’ softened 0.2 percentage points to 5.8%, its lowest since mid-June. Economic conditions next year’ strengthened 4%. Economic conditions in the next five years’ recovered 3.3%. Current financial conditions’ fell 2%, marking 10-straight weeks of declines.
Treasurer Jim Chalmers has warned Australians to brace for bigger real wage cuts than previously flagged ahead of an economic statement to the Parliament next week. Inflation forecasts would be revised up, and economic growth would be revised down, Dr Chalmers said, and the gap between rising cost of living and people’s take home pays would widen. With the government under pressure to offset new spending in the budget, Dr Chalmers said there would be fresh savings in the October budget, but he played down the prospect of new cost of living measures. The government will face pressure when the $3 billion six-month halving of the local fuel excise ends on September 30, especially with inflation expected to peak around the same time. But Dr Chalmers said he expected it would be too expensive to continue. Real wages fell 2.1% in 2020-21, according to Bureau of Statistics data, and will fall by more than 1% this financial year; though the recent 48-year low jobless rate add upward pressure on growth. In addition to updating core economic assumptions – with inflation likely to peak around 7%– the government will update the budget outlook. Westpac on Monday tipped annual headline CPI to hit 6.1% in the June quarter and peak at 7.2% towards the end of the year.
The Reserve Bank’s culture, appointments to its board and its 2 to 3% inflation target will be the focus of the institution’s first independent review in four decades. Canadian central banker Carolyn Wilkins, Australian National University economics professor Renee Fry-McKibbin and former senior Treasury official Gordon de Brouwer will jointly conduct the first independent review of the bank since its arrangements were instituted in the early 1990s. The trio will deliver their report, with recommendations for the federal government, by March 2023. The last time the RBA’s core operation was examined was as part of the Campbell review that delivered its report to the Fraser government in 1981 Treasurer Jim Chalmers has formally announced the review of the bank will also canvass its performance in meeting its targets, the interaction between fiscal and monetary policy and the RBA’s accountability measures. Chalmers released the terms of reference for a wide-ranging review of the central bank, including its primary task of keeping inflation between 2 and 3%. Mr Chalmers said the RBA had “served Australia well” but the review was about “ensuring we have the world’s best and most-effective central bank into the future”. The review follows a difficult period for the RBA, which lowered the cash rate to a record low of 0.1% during the earlier stages of the COVID-19 pandemic but has recently had to chase surging inflation with rapid hikes. The review will look at the “appropriateness of the inflation-targeting framework” and how the RBA’s moves interact with government spending. The broad terms of reference released by Dr Chalmers reveal the review will be charged with ensuring that monetary policy arrangements and the operations of the bank continue to support strong economic outcomes. In case of future economic crises if interest rates are low and the RBA has limited ammunition to stimulate, the inquiry will also examine the interaction of monetary policy with the government’s fiscal policy and bank lending rules set by the prudential regulator. The review will also consider the RBA’s conduct “during crises and when monetary policy space is limited”, which opens the door to an examination of quantitative easing. Mr Chalmers said the RBA’s performance “in meeting its objectives” would also be scrutinised, a sensitive issue given the central bank’s recent forecasts on inflation — and of its own cash rate moves — have missed the mark. Who sits on the RBA board and how they come to decisions on the cash rate will also be examined, with an eye to potentially making the process more transparent. The “board structure, experiences and expertise, composition and the appointments process” will be part of the review’s remit. Appointments to the RBA are often drawn from the business community, which differs from the approach of countries such as the United States, where the board of its Federal Reserve is comprised of economists. Examination of the bank’s governance and accountability will include a deep dive into the RBA board, which sets interest rates each month. The board structure, experiences and expertise of members, composition and the appointments process will be considered. Some critics believe the board should have more professional economists to challenge the governor and deputy governor on technical monetary policy issues, while unions want worker representation on the board to be restored.
Employers in Victoria and Tasmania were hit the hardest by last month’s surge in COVID-19 and flu cases, as leave rates soared more than 50% higher than the long-term average. In June, Tasmanian workers took 55% more personal, sick or carers leave than the seasonally adjusted average, while workers in Victoria took 54% more time off. However, the winter wave of illnesses has hit the ACT hardest since then, with absences up 48% at the end of June and start of July, analysis of payroll data from MYOB reveals. As the highly contagious BA.4 and BA.5 variants drive a new wave of infections and hospitalisation, employers are being warned to brace for even higher absences this month. The MYOB data, which represents more than 1 million Australian small business employees, revealed sick, personal or carer’s leave in June was 37% higher than the three-year average, compared to a 109% increase in January at the peak of the omicron wave. Tasmania had the highest increase in personal, sick or carers leave last month, followed by Victoria and South Australia. MYOB’s analytics team analysed anonymised data from its SME customers to track the number of employees who were assigned “personal”, “sick” or “carer’s” leave since February 2019. Data for the last week of June and first week of July reveals absenteeism rates are already tracking 24% higher than the long-term average. Helen Lea, MYOB’s chief employee experience officer, said the rise in worker absences was likely due to the combination of the ongoing impact of COVID-19 on top of what has been described as a major flu season. The ongoing absenteeism was further straining small businesses, many of which were already facing staff shortages after 2½ years of the pandemic, she said.
The majority of “Aboriginal” souvenirs on the market are fake according to a new report by the Productivity Commission. Two out of every three souvenirs sold had no connection to Aboriginal and Torres Strait islander people, the draft report found. Around $250m in Indigenous art was sold in 2019-2020, but the average income for an Indigenous artist who sold work through an Aboriginal art centre was just $2700 a year “Inauthentic products can mislead consumers, deprive Aboriginal and Torres Strait Islander artists of income and disrespect cultures,” productivity commissioner Romlie Mokak, a Yawuru man, said. The report called for labelling of “inauthentic” art, strengthened Indigenous Cultural Intellectual Property laws, and extra funding for the Indigenous art code.
The latest State of the Environment report has called on governments to help individuals, businesses and NGOs that want to buy land for conservation do so, with such investments – which already account for 6% of all protected areas in Australia and form a network of privately owned reserves which is the largest in the world – growing since 2016. Under the practice, those buying in include wealthy individuals and companies, who tend to fund direct conservation which has limited financial returns, and private sector investors, who generally fund projects such as carbon offset schemes that may prove profitable. Major players in this space include former IT entrepreneur Norman Pater and his wife Gita Sonnenberg, who are pouring $40 million into efforts to reforest 1 million hectares of cleared land; and companies such as Telstra, which last month invested ijn a government trust that pays owners of natural or undeveloped land to protect it. Last week, Atlassian co-founder Mike Cannon-Brookes and his wife Annie had bought Dunk Island on the Great Barrier Reef for $23.65 million, reportedly intending to preserve its natural environment. But the report said governments could do more to enable private conservation efforts – legal experts have complained of environmental, mining and water regulation stymying investment, for example – in the face of accelerating vegetation and species extinctions.
BHP, the largest Australian mining company, has reported a slump in iron ore shipments in the past quarter as new waves of COVID-19 infections hit its workforce and add to labour shortages across its operations. The mining giant’s output of the steel-making raw material from its operations in Western Australia’s Pilbara region fell 2% to 71.7 million tonnes in the three months to June 30 compared to the same time last year, missing most analysts’ forecasts for 76 million tonnes. Despite shipping a record-breaking amount of iron ore across the full-year, BHP chief executive Mike Henry on Tuesday warned of significant looming challenges for the company. Iron ore – the raw material used in steel-making furnaces to churn out liquid metal – is Australia’s most valuable export, bringing in $133 billion in the nation’s overall export earnings in the past financial year. However, BHP and rival iron ore miners Rio Tinto and the Andrew “Twiggy” Forrest-led Fortescue Metals Group are facing the threat of falling prices. Benchmark prices, which averaged between $US110 and $US140 a tonne during the past financial year, have fallen to as low as $US100 a tonne this week as COVID-19 restrictions soften steel demand in China, the world’s largest iron ore consumer. BHP on Tuesday told investors it was targeting between 278 million tonnes and 290 million tonnes of iron ore in the coming financial year. The forecast was lower than many analysts had been expecting.
ANZ Bank confirmed it will raise $3.5 billion in fresh capital to finance its $4.9 billion purchase of Suncorp Bank to boost its Queensland presence. In the most significant bank buyout since deals during the financial crisis, ANZ pledged to keep Suncorp branches open in Queensland, maintain staff numbers for at least three years and commit $25 billion of lending to the state’s energy transition and fund infrastructure projects for the 2032 Brisbane Olympics. The sweeteners failed to impress the Finance Sector Union, which warned that thousands of jobs could be lost when the three-year period expires, while other regional banks lamented the deal could entrench banking power in Sydney and Melbourne. But ANZ said it was necessary to provide more firepower to get bigger in Queensland, and ANZ chief executive Shayne Elliott lsaid scale would help ANZ compete more aggressively with the Commonwealth Bank. Mr Elliott said ANZ would make a case to regulators that the deal would improve competition and not just in Queensland, in a dramatically changed landscape where banks faced more pressures from non-banks. At $4.9 billion, the deal would be the biggest Australian bank M&A transaction since Westpac Banking Corp bought St George for $18.5 billion in 2008. The deal would see ANZ add Suncorp’s $60 billion in loans to its balance sheet, mostly housing loans to residents in Queensland and NSW. It would also leave Suncorp as a pure-play insurance company for the first time in its 120-year history. Suncorp opened its first bank branch as Queensland Agricultural Bank in 1902 and has grown into a $13.7 billion, top-50 listed company. Under the deal, ANZ will continue operating under the Suncorp Bank brand for five years as it takes on an additional $47bn in home loans and $45bn in deposits. The acquisition will need to be approved by the Australian Competition and Consumer Commission and the federal treasurer, Jim Chalmers. Suncorp was previously Queensland’s State Government Insurance Office, which traces its origins to 1916. It merged with Metway Bank in 1996, with the state government relinquishing its shares in the new entity in coming years.
Grocer giant Woolworths Group has snapped up retail digital media company Shopper Media Group for $150 million cash. Woolworths’ retail media business, Cartology, will buy all the equity in the digital, out-of-home, media company that offers targeted shopper advertising through a national screen network of more than 2000 screens in more than 400 shopping centres. Cartology helps the Woolworths supplier base engage better with customers along the path to purchase by providing detailed customer data and insights into ad campaign effectiveness Cartology is the exclusive retail media partner for brands to connect with Woolworths’ 13 million Everyday Rewards members.
Unions have criticised Qantas for offering company executives millions in bonuses following cancellations and baggage losses. In May, the airlines’ departures and arrivals were on schedule just 60% of the time, while more than 7% of flights were cancelled. But the company’s executives have now been promised large bonuses, the airline workers’ union says. Transport Workers Union National Secretary Michael Kaine said the money “rubs salt into the deep wounds inflicted upon illegally sacked workers”. n an announcement to the ASX last month, the company said four executives would receive shares worth more than $4 million. The bonuses are to be paid out in August 2023 under the conditions of the retention and recovery plan. Executive bonuses were paused the past two financial years as the airline battled to stay afloat, receiving $2 billion dollars of taxpayer support through the pandemic.
And that’s it for this week. And next week, I’ll be talking to Brandon Bach, the president of CCT, the makers of the EEASY Lid – the first jar lid innovation in over 75 years. The lid allows consumers to vent a jar by simply press a button the lid which opens a tiny slit that breaks the seal. Believe it or not, there are about a third of consumers who struggle to open jar lids. While a stubborn vacuum-sealed jar lid might be a minor inconvenience to some, it can be a major struggle for others with disabilities or physical limitations. The future of packaging is dependent on inclusive adaptation, and CCT is leading the charge. And I’ll be talking to economist Saul Eslake.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.