World’s richest billionaires lose $1.4 trillion in worst half ever
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 23 in our series for 2022 and today’s date is Friday July 8.
First, I’ll be talking to Garret Flower, CEO and Founder of ParkOffice.io all the way in Ireland, which uses a COVID-19 focused solution allowing employers to track which staff members require parking at the office on a given day. An algorithm then allocates available parking to those who are most vulnerable or whose need is greatest. By leveraging the ParkOffice solution, companies will be able to increase parking availability by up to 40%. ParkOffice is a leading parking management software solution for smart offices that optimizes employee parking by assigning and releasing parking spaces as required, reducing administrative costs, and adding value to real estate.
And I’ll be talking to AMP Capital chief economist Shane Oliver about how the market is performing.
But now, let’s talk to Garrett Flower
Brokerage firm Nomura Holdings expects recessions in the euro area, the U.K., Japan, South Korea, Australia and Canada next year as central banks move to aggressively tighten monetary policy to fight surging inflation,
Australia’s central bank delivered its first ever consecutive half-percentage point interest-rate hike and reaffirmed a commitment to do whatever it takes to quell accelerating inflation. The Reserve Bank of Australia took the cash rate to 1.35% — the highest since May 2019 in a move that was predicted by economists. Tuesday’s tightening was the RBA’s third interest-rate increase in as many months as it follows global peers in moving aggressively to prevent inflation from spiraling out of control. The RBA is expected to continue to hike aggressively over the remainder of the year, with rates rising at most meetings between now and December. The RBA is tipped to lift the official interest rate to 1.85% in August in the most aggressive tightening cycle in almost 30 years. The market is pricing in a cash rate of 3% by year end, rising to 3.5% by April next year.”
Elon Musk’s fortune plunged almost $US62 billion. Jeff Bezos saw his wealth tumble by about $US63 billion. Mark Zuckerberg’s net worth was slashed by more than half. All told, the world’s 500 richest people lost $US1.4 trillion in the first half of 2022, a dizzying decline that marks the steepest six-month drop ever for the global billionaire class. It’s a sharp departure from the previous two years, when the fortunes of the ultra-rich swelled as governments and central banks unleashed unprecedented stimulus measures in the wake of the COVID-19 pandemic, juicing the value of everything from tech companies to cryptocurrencies. With policymakers now raising interest rates to combat elevated inflation, some of the highest-flying shares – and the billionaires who own them – are losing altitude fast. Tesla had its worst quarter ever in the three months through June, while Amazon.com plummeted by the most since the dot-com bubble burst. Still, though the losses are piling up for the world’s richest people, it only represents a modest move toward narrowing wealth inequality. Musk, Tesla’s co-founder, still has the biggest fortune on the planet, at $US208.5 billion, while Amazon’s Bezos is second with a $US129.6 billion net worth, according to the Bloomberg Billionaires Index.
The deluge of rain again sweeping NSW has delivered another devastating blow to farmers, upending agricultural operations with food prices set to rise further. The NSW floods disaster has endangered $1bn in produce, threatening a new shock to food prices. As farmers warned that the latest floods in Sydney’s agricultural basin would keep the price of vegetables high for weeks, on top of elevated energy and fuel costs, new economic figures showed the jobs and housing markets remained robust. Farmers and industry groups said the damage to cropping added to the strain of rising fuel and fertiliser costs, stymying western and central NSW’s recovery from years of drought followed by 2021’s mice plague. NSW Farmers Association President James Jackson said the agricultural value of the Sydney city basin affected by the floods was about $1bn and the price of leafy vegetables including lettuce would remain elevated. Mr Jackson said he was receiving reports from canola growers that they had lost between $50,000 and $100,000 worth of seed. Mr Jackson said that after being hit by natural disasters three times this year and four times in 18 months, people on flood plains would be “reassessing their options” and whether to continue in the industry.
In the wake of the floods, Suncorp renewed its own reinsurance – insurance for insurers to meet the cost of disasters – but warned investors the costs of that cover “have increased significantly”. Suncorp also will wear more damage itself for reinsurance for a string of smaller calamities, such as hailstorms in regional areas. Analysts said the new reinsurance cover was likely to have cost Suncorp at least 20% , and the higher excess levels in some cover likely reflected reinsurance being uneconomical if renewed at previous levels. Insurers were receiving claims on Monday following several days of rain, with numbers rapidly rising. Sydney-based IAG whose brands include NRMA, on Monday afternoon had recorded 711 claims since June 30. Hunter Green insurance analyst Mark Tomlins said the risk was the latest flooding would be so costly that it tripped levels where insurers’ own reinsurance kicks in. That could focus attention on development in flood-prone areas, he said. He added it could also trigger questions about any correlation between recent flooding leaving the soil too saturated to absorb more water, worsening any successive flooding now, and how insurers could price for such risk. Any additional reinsurance claims would potentially feed into insurers feeling pressured to raise premiums, he said
PwC has put a partner on leave over allegations that include threatening a former staff member in a phone call and attending male-only events where female personnel were rated on their attractiveness. PwC has launched an investigation into the partner, calling in law firm Ashurst to handle the inquiry. The partner allegedly made threats of assault during a phone call to a former staff member and then repeatedly redialled the number after the call ended. The partner is also accused of attending a strip club with PwC personnel and taking part in a yearly men-only gathering referred to internally as the “Section 5-5” event. During the event, those involved would allegedly rate the top five most attractive females in the firm, according to the complaint.
Millions of superannuation fund members across the nation are facing their first negative returns since the Global Financial Crisis, with estimates of the potential dip in retirement savings as high as 5%. The nation’s largest fund, AustralianSuper, kicked off the super fund reporting season on Monday by telling its 2.7 million members that its balanced option – which 90% of them are invested in – delivered a return of negative 2.73% for the financial year. This is better than expected from the industry across the board, with estimates from analysts ranging from a 3% fall to as much as 5% for the most popular balanced options. And all are warning that the strong rebound in super fund returns that occurred in the 2021 financial year is unlikely to be replicated soon, as interest rate increases, inflation and global political turmoil continue to unsettle investment markets. AustralianSuper delivered the first negative return for its balanced fund since 2009, when member balances fell 13.3% in the wake of the GFC.
Thousands of Australian companies collapsed in the last financial year marked by a string of high profile construction company insolvencies and with interest rates and inflation on the rise there are expectations of a wave of failures in 2022-23. In the last 12 months the construction industry suffered a perfect storm of conditions, including supply chain disruptions, skilled labour shortages, skyrocketing costs of materials and logistics and extreme weather events. Household names such as Probuild, Privium, BA Murphy, Condev, ABD Group, Waterford Homes and Pivotal Homes were just few of the building sector’s casualties in the last 12 months. Across all sectors in Australia in 2021-22 there were 3917 liquidations or administration appointments. The biggest number of collapses was in NSW at 1536, followed by Victoria with 1022 and Queensland at 665. That was followed by 350 for Western Australia, 196 for South Australia, 91 for ACT, 29 in Tasmania and 28 in the Northern Territory. Equifax head of product and rating services Brad Walters said creditor wind-ups have triggered the majority of insolvencies, and the construction sector has grown to represent 28% of all Australia-wide insolvencies.
Qantas’ offer of a one-off $5000 bonus has failed to placate the engineers’ union, which has got permission from the Fair Work Commission to ask members if they are prepared to take industrial action as they battle for higher pay. The Australian Licensed Aircraft Engineers Association (ALAEA) got the go ahead to conduct the protected industrial action ballot on Wednesday as it negotiates with Qantas for new enterprise bargaining agreements.
Europe’s biggest hydrogen project is stepping up its search for Australian imports to help quadruple supplies of clean energy and cut the continent’s reliance on natural gas in the wake of the Russian invasion of Ukraine. Seeking millions of tonnes of hydrogen imports, the Port of Rotterdam wants to scale up the supply of Australian hydrogen in one of the world’s biggest projects to import and generate the clean and transportable fuel. But Australia is in a race with other countries to generate hydrogen from solar and wind at enough scale to export energy in vast quantities to meet a European Union goal of using 20 million tonnes of hydrogen each year by 2030, up from a target of only 5 million before the energy crisis.
Westpac will close another 24 branches shortly, taking the number of branch closures recently to more than 100. Westpac will close branches under the Westpac, Bank of Melbourne and St George brands in Victoria, South Australia, Queensland and Western Australia. The Finance Sector Union said 76 staff would lose their jobs in Westpac’s “return to its aggressive branch closure program”. The bank’s Australian branch numbers fell by 80 to 851 over the year to the end of September 2021, while New Zealand branch numbers fell by 18 to 116.
The federal government should phase out policies that encourage greater extraction of oil and gas and provide funding for green steel and aluminium industries so that Australia can seize the opportunity to flourish in a net zero global economy, the Grattan Institute says. Strict emissions reduction requirements need to be imposed on industrial plants, while a fund should be set up to share the risk of major capital investments to install low-emissions technology, the institute said in a report recommending measures Australia should adapt for “the next industrial revolution”. The Grattan Institute says government and industry need to forge a new strategic partnership to take advantage of the opportunities, creating jobs and boosting prosperity in a net zero world. It calls for all or most coal royalties to be directed to coal regions for as long as coal mining continues, and for the creation of sovereign wealth funds so that the benefits of the pending mining boom in critical minerals can be shared with future generations. Grattan warns that unless governments manage the coming industrial revolution well, Australia’s “social fabric could tear”, especially in the regions of NSW and Queensland where tens of thousands of coal-mining jobs will disappear by 2050.
Crown Resorts is facing another up to $100 million fine from Victorian regulators, this time for breaches of responsible gambling laws, after the bruising royal commission into its Melbourne Southbank casino. It adds to the $80 million the Victorian Gambling and Casino and Control Commission (VGCCC) has already fined the company following the inquiry. Still, this could just be the tip of the iceberg for Crown as regulators continue investigations and say they are considering “further potential disciplinary proceedings arising from other matters highlighted by the royal commission”. Of the issues canvassed by the royal commission, the now privately owned casino giant has received fines for its illegal use of China Union Pay credit and debit cards to fund gambling at the casino, evading the bank’s internal controls and anti-money laundering laws, and its relationship with junkets. Though the probe covered the latter in detail, the fines that Crown incurred for failing to conduct adequate due diligence and/or failing to cease business with unsuitable junket operators came from investigations started before the royal commission, so there could be more action on this front in future. Further, the VGCCC has yet to announce any disciplinary action arising from Crown’s underpayment of state gambling taxes. Crown paid back $61 million in unpaid taxes in July last year, but told investors the Victorian Commission for Gambling and Liquor Regulator – the forerunner to the VGCCC – was still investigating the matter to determine the final amount of tax due.
The amount of grid-scale battery storage in Australia is expected to more than quadruple over the next five years – a far cry from 2017, when the Elon Musk-backed big battery in South Australia was considered controversial. By 2027 Queensland is expected to overtake Victoria as the state with the most storage capacity at 1.8 gigawatts, the Clean Energy Council estimates, while Edify Energy recently signed off on what it says will be the largest grid-forming battery in the nation, in the Riverina region in NSW. The CEC says there are currently 15 projects capable of providing 800MW across the nation. The largest is Neoen’s 300MW battery in Victoria, which contributes to that state currently leading the nation with 376MW of capacity. “Over the next five years it is expected an additional 18 projects will be introduced that are currently either under construction, reached financial close or have development approval,’’ the CEC says. “This is expected to bring an additional 3.6GW (a 351.63% increase) of power to the market.’’ And out to 2050, according to the Australian Energy Market Operator’s Integrated System Plan released this week, that figure will grow rapidly, with 47GW of new battery and hydro storage envisaged by that point. While batteries naturally can store energy for use at a later point – a key role in providing dispatchable power from renewable energy sources such as solar and wind – they also play a key role in grid stability in a number of ways, including providing “frequency control ancillary services”.
Lettuce at more than $10 a head could soon be a thing of the past, thanks to a $56 million cash injection into automated vertical farming business Stacked Farm, which will increase the production of leafy greens in Australia. Flooding and supply chain problems forced KFC to put cabbage in burgers in lieu of lettuce last month, and products such as spinach and lemongrass have been in short supply in some supermarkets. Stacked will use the $56 million to accelerate the establishment of its first commercial scale vertical farm, a 5000 to 7000 square metre facility that will have the largest output of leafy green produce per square metre of any indoor vertical farm in the world. Vertical farming involves growing crops indoors in vertically stacked layers, and requires vastly less water and no pesticides or agrochemicals. Stacked chief executive Conrad Smith said the first facility would focus on green leaf vegetables, lettuce and herbs, but the start-up is also investing in ways to grow strawberries, blueberries, grapes and other staples.
Victoria’s workplace regulator has charged an aged care home where dozens of residents died of Covid-19 in 2020. WorkSafe charged St Basil’s Homes for the Aged with failing to provide a safe working environment for its staff and others during the pandemic. The charges relate to an alleged failure to implement the use of personal protective equipment after a staff member tested positive. A subsequent outbreak resulted in 94 staff testing positive for the virus and 45 residents dying of Covid-related complications. St Basil’s has been charged with nine breaches including failing to provide or maintain a safe working environment and failing to allow workers to perform duties without a risk to their health. Each breach carries a maximum fine of $1.49m, and if convicted St Basil’s could face a penalty of up to $13.41m.
And that’s it for this week. And next week, I’ll be talking to Josh 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.
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.