Talking Business July 9 2021
Large foreign investment funds warn they could blacklist Australia and cut billions of dollars of investments if the Morrison government fails to join the rest of the world in committing to net-zero zero emissions.
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 23 in our series for 2021 and today’s date is Friday July 9.
First, I’ll be talking to Simon Sheikh, founder of fossil-fuel-free super fund, Super Future. And we’ll be talking about Scott Morrison’s promise to reach net zero emissions preferably by 2050” but vowing he won’t “sacrifice our traditional industries” in regional areas by taxing emissions to reach the goal. But, why wait until 2050 to reach net zero emissions when these could be met tomorrow through where you invest your super? What does net zero by 2050 even mean aside from a lot of empty promises? And I’ll be talking to AMP Capital chief economist Shane Oliver as investors navigate one of the most important Reserve Bank decisions since the pandemic, and the impacts of the delta strain of COVID-19.
But now, let’s talk to Simon Sheikh.
The Reserve Bank has left the official cash rate unchanged at a record low 0.1% as it continues to consider how to guide the nation’s recovery from the pandemic. In a statement following the RBA’s monthly board meeting, Governor Philip Lowe said the board had decided to leave the target at 10 basis points, where it has stood since November last year. The RBA also kept three-year bond yield target at 10 basis points.
Employment opportunities continue to explode in Australia, with 13 consecutive months of increased job vacancies. The Australian Government’s Vacancy Report reveals almost a quarter of a million roles (245,400) available in May – the highest job ad volumes in more than 12 years, and exceeding pre-pandemic levels by 46%.
Large foreign investment funds have warned they could blacklist Australia and cut billions of dollars of investments in the country if the federal government fails to join the rest of the world in committing to a net-zero 2050 greenhouse gas emissions target. The warning backs up concerns of the Reserve Bank of Australia that the economy is at risk from foreign investors withdrawing capital because of perceptions among global fund managers that the Morrison government is resisting strong action on climate change. The $US1.4 trillion ($A1.9 trillion) investment management firm, Invesco, said Australia’s climate change policies were an important consideration for its investments under its environmental, social and corporate governance (ESG) rules. Canadian pension funds, which are big investors in Australian infrastructure assets, said climate change was a strong consideration for their investments. Canada’s Public Sector Pension Investment Board said climate change was one of several long-term structural trends that will “likely have a material impact on investment risks and returns, across different sectors, geographies and asset classes”.
Crown Resorts has admitted to the Victorian government that it underpaid its casino tax for almost a decade but claimed it only owes $8 million, despite some legal advice suggesting the figure could be significantly higher. The group’s newly appointed chief executive Steven McCann told the state’s royal commission on Tuesday that he wrote to the Victorian treasury last week conceding Crown had made illegal deductions from its poker machine tax calculations since 2013. His testimony came as Victorian Premier Daniel Andrews said the prospect of Crown losing its Melbourne licence was “very, very real”.
Crown Resorts has told the market it expected to post a statutory loss this financial year, as lockdowns hit the casino giant’s casinos and restaurants in Sydney, Melbourne and Perth. The James Packer backed casino giant said the result was still “subject to review” and it would reveal the full extent of the losses when it reports on August 30.
The nation’s CEOs, like almost everyone else, aren’t getting pay rises like they used to, a pay report has revealed. The data from a major survey of CEO, directors and senior management pay packets reveals Covid-19 has snipped pay rises to half those of the year before. The Executive Remuneration Report, released by Aon and the Governance Institute of Australia, shows only 25% of the nation’s most senior execs received a pay rise in 2020. This was well down on the 53% who took a pay bump in 2019. The data, drawn from annual reports of ASX 300 organisations on top of 113 participating organisations, also finds that for those who did get a pay rise, the size of the increase was down on the year earlier, at just 1.4%. That is compared to the 2% pay rises enjoyed by the C-suite in 2019.
Australia’s biggest pension fund notched a record return in fiscal 2021 as strong market performance in the wake of the pandemic lifted assets under management. AustralianSuper Pty.’s default investment option returned 20.43% in the 12 months ended June 30, the 12th consecutive year of gains, the fund said in a statement Monday. The Melbourne-based fund’s assets under management rose to $225 billion from $180 billion a year ago as money keeps flowing into the country’s compulsory retirement savings system
Billionaire retailer Solomon Lew has launched a new attack on Myer, calling on the entire board to resign after confirming he spent $16.4 million this week increasing his stake in the embattled department store retailer to at least 15.8%. Mr Lew, the chairman of Premier Investments, said he would work with other shareholders to reconstitute the Myer board, appointing directors who had expertise in retail, property, logistics and e-commerce to help Myer reverse its decline.
Tumbling rates of smoking, a drop in alcohol consumption and the rise of electric vehicles will punch a hole in the federal budget worth tens of billions of dollars and force the slack to be filled by ordinary taxpayers. There are already signs the sharp increase in cigarette excise over recent years, aimed at encouraging people to give up tobacco use, is hitting the budget with revenue falling more than $2 billion short of expectations in a single year. It follows years of large increases in excise, by both sides of politics, cigarette plain packaging and a change in the timing of excise collection that delivered a one-off $3.2 billion increase in excise in the 2019-20 financial year. These increases had made tobacco excise the fourth largest individual tax collected by the federal government at an estimated $15 billion last financial year. The Commonwealth collects more in tax on cigarettes than on superannuation ($11.7 billion), fringe benefits tax ($3.9 billion) or petrol excise ($5.9 billion). But tobacco consumption has cratered over the past two years, in part due to the excise increases. In the 12 months before the COVID-19 pandemic it fell by 12.8% while over the past year it has fallen by another 11.1%. This is eating into revenue expectations. Pre-COVID, the government was expecting to collect $16.5 billion in tobacco excise in 2021-22. Now, it is expecting $14.8 billion. The hit is even larger in 2022-23, with tobacco excise down by $2 .4 billion on pre-COVID forecasts. It’s not just tobacco excise where there are growing gaps. Alcohol and petrol excise are at risk with the intergenerational report, released last week by Treasurer Josh Frydenberg, highlighting the threat they posed to the budget.
The Morrison government’s four-phase exit plan from the pandemic means Australia will be locked away from the rest of the world until late 2022 and its economic recovery “held hostage to vaccine hesitancy”, Ai Group CEO Innes Willox has warned. Other business leaders agreed with the grim assessment, saying that unrealistic vaccination targets for reopening and lack of a clear timeline meant Australia would continue to face lockdowns and talent shortages as the rest of the world speeds towards recovery.
International airlines claim they could be forced to suspend services to Australia from next week after national cabinet agreed to halve the number of people allowed to enter the country – and they say any suggestion of price gouging is “insulting and bizarre”. From 14 July, overseas arrivals will be slashed from 6,070 to 3,035 a week – crushing the hopes of thousands of Australians stuck overseas and looking to get home. According to the most recent figures from the foreign affairs department, there are 34,000 Australians stuck overseas still waiting to return home.
The Australian Competition and Consumer Commission is preparing a second assault on Facebook and Google. The failure of a landmark anti-monopoly case against Facebook by the US Federal Trade Commission will not stop global regulators from waging an aggressive campaign against the social media giant over the next two years, Australian Competition and Consumer Commission chairman Rod Sims has said. Following last week’s court decision in Washington, which pushed Facebook’s market value above $US1 trillion ($A1.33 trillion), Mr Sims said Facebook and Google’s power was as big a problem as the millionaire Rockefeller family’s control of the global oil refining market a century ago, which was ultimately ruled an illegal monopoly by the US Supreme Court. He said the ACCC was gathering evidence of market power abuses by the American companies and planned to use two current inquiries to launch a new assault on them in conjunction with counterparts in Europe, Britain, the US and Canada.
Lockdowns in Sydney, Melbourne, Brisbane and Perth will shatter the confidence of people booking interstate holidays for the rest of the year, the tourism industry warns. While tourism operators across the country had hoped for a bumper school holiday period, multiple coronavirus outbreaks ended that, with mass cancellations in key markets leaving businesses trying to salvage what remained of the mid-year break. Tourism & Transport Forum chief executive Margy Osmond said the multiple lockdowns across states had shaved $6 billion off the forecast $10.2 billion in tourism consumption for the school holiday period. NSW was worst-affected, with its two-week lockdown costing about $150 million in lost business, with city hotels emptying out. Sydney’s two-week lockdown has been the biggest headache, effectively killing Queensland’s largest tourism market, especially in the coastal hot spots of the Gold Coast, Noosa and North Queensland. Queensland Tourism Industry Council chief executive Daniel Gschwind said the end of Brisbane’s four-day lockdown on Saturday night was a boost to the sector, but people will now be gun-shy about taking an interstate trip in the September school holidays.
As Australia’s vaccine rollout slowly pick up pace, a South Australian startup is launching clinical trials of its COVID-19 shot in Iran in the hope of getting emergency approvals by the end of the year. Adelaide-based biotech Vaxine launched phase 2 trials of its vaccine in May as part of an agreement with its Tehran-based biotech partner, CinnaGen. The phase 2 study involved 400 patients being injected with either Vaxine’s product or a placebo, with two doses given 21 days apart. The vaccine, which has been called COVAX-19 but could be rebranded to Spikogen if commercialised, is a protein-based vaccine that uses a synthetic version of the virus spike protein to prompt an immune response. Vaxine founder and Flinders University professor Nikolai Petrovsky said the company had to look overseas, where there are considerable coronavirus cases, to launch human trials. CinnaGen approached the firm to negotiate a development partnership. Iran has recorded more than 3.1 million cases of coronavirus and 84,000 deaths. There is still a long way to go before the product can be launched, with data from the project’s trials yet to be published and peer-reviewed. Vaxine, which was founded in 2002, works on vaccine development for a range of diseases. The company has pushed hard for smaller businesses to have more involvement in the development of COVID-19 vaccines, and the company has had to find international partners to set up trials.
ASX-listed Sydney Airport has received an unsolicited $8.25 per share takeover proposal from a consortium of infrastructure investors that values the business at $22 billion. The consortium comprises of IFM Investors, QSuper, and Global Infrastructure Management. Sydney Airport has told investors that they should take no action on the unsolicited $22 billion takeover bid. The airport, which makes most of its money from international travellers, has struggled during the pandemic. International travellers are far more lucrative than domestic travellers for the airport because the fees charged on international passengers are much higher, and they spend more money at airport shops.
Andrew Forrest joined a band of big-name billionaires each investing a minimum of $US50 million ($A66 million) in a Bill Gates-led venture capital fund focused on emerging greenhouse gas-reducing technologies. Other investors in Breakthrough Energy Ventures (BEV) include Amazon founder Jeff Bezos, Virgin founder Richard Branson, businessman and former New York City mayor Michael Bloomberg, Saudi Arabia’s Prince Alwaleed bin Talal and LinkedIn executive chairman Reid Hoffman. BEV’s initial venture capital fund raised $US1.1 billion from more than 20 billionaires, who BEV said “embrace the need to take significant technical risk” to achieve net-zero carbon emissions targets. The fund kicked off with investments in 46 businesses across agriculture, construction, electricity, manufacturing and transport.
Westpac has moved to liquidate Forum Finance and freeze the assets of several executives behind the equipment leasing company after uncovering an alleged $260m fraud. The bank launched legal action against the Sydney headquartered firm after telling investors on Friday it was subject to “significant potential fraud”. The Federal Court has ordered that a provisional liquidator be appointed to Forum Finance by the end of this week. It is understood the Westpac board learned of the alleged fraud about two weeks ago, and was informed that fraudulent paperwork and invoices were involved. The Westpac investigation into Forum Finance comes as Societe Generale also took separate legal action against the finance firm, alleging deceptive conduct with a potential exposure of $9m. Forum Finance, which started in 2011 in Sydney, has expanded to establish offices in Melbourne, Brisbane and Perth. The alleged scandal has seen several customers of the lease finance business caught up in the matters.
And that’s it for this week. And next week 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.
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