NAB, Crown, SkyCity face AUSTRAC money laundering investigations.
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 19 in our series for 2021 and today’s date is Friday June 11.
First, I’ll be talking to Frank Restuccia, Founder and Global CEO at Finder. And I’ll be talking to IFM Investors economist Alex Joiner about the outlook for the Australian economy.
But now, let’s talk to Frank Restuccia.
Business investment rose to a record high in May consolidating gains over the previous two quarters and suggesting a shift in some sectors from post-pandemic rebound to a period of investment and growth. Capital expenditure has recovered to pre-pandemic levels in all non-mining sectors, and most industries are now well above their long-run average, according to the latest NAB business survey. Overall business confidence fell slightly but is still elevated compared to pre-pandemic levels, while business conditions rose to set a second consecutive record high for the monthly survey. Trading conditions rose six points to be +47 index points, profitability was also up 6 points to be +40 index points, while employment increased five points to be +25 points, all resetting record highs set in April.
But in Creditor Watch’s latest Business Risk Review credit defaults increased by 9% in the three months to May, against the three months to February this year, and external administrations rose by 24% over the last three months.
Business has urged the Morrison government to cut Australia’s 30% company tax rate after the world’s biggest developed economies agreed to a global minimum corporate rate of 15% as part of a crackdown on the tech giants. A deal struck at the Group of Seven finance ministers at the weekend will force large multinationals to pay tax in countries they sell their goods and services in, most notably tech giants such as Google and Facebook. However, tax experts cautioned the agreement was unlikely to deliver a windfall to Australia, raising just hundreds of millions of dollars extra for the federal budget annually. The G7 agreement will go to next month’s G20 finance ministers’ meeting in Italy, which includes Treasurer Josh Frydenberg as well as leaders from China, India, Russia and Brazil. It will then feed into the broader deliberations the Organisation for Economic Cooperation and Development is co-ordinating with 139 countries for a global tax regime. Business groups, the Business Council of Australia and Australian Industry Group, seized on the G7 deal to call on the Morrison government to cut company taxes here.
New research has found about 4 million Australians are likely to purchase digital currencies in the next 12 months, including more than a third of Millennials. A nationally representative survey of 1027 Australians by global researcher YouGov, commissioned by cryptocurrency exchange Kraken, found 21% are readying to purchase digital tokens. The percentage increases to 34% of Millennials and 32% of Gen Z. Men (27%) were found to be more likely than women (14%) to purchase crypto in the next 12 months, while 40% of investors who had sold off their crypto assets indicated they were likely to buy back into the market. The research found one in five Australians have owned cryptocurrency at some point, with 14% currently holding an exposure in their portfolio. Of those, almost 85% indicated they intended to increase their exposure over the next year. On average, Australian crypto owners have 12.5% of their total assets invested in cryptocurrencies, with the vast majority keeping their exposure below a quarter of their portfolio. One in 10 investors held more than 25% of their assets in digital currencies. Wealthier Australians were more found to be more likely to own cryptocurrencies, with 47% of respondents with household income in excess of $100,000 maintaining an exposure compared to 24% of those with household income of $99,00 or below. However, almost 60% of crypto owners said they are likely to sell off some of their exposure in the next 12 months, with 35% “very likely” to sell some of their crypto assets.
Australia’s first sulphate of potash mine will start production this week and five local mines could be producing the specialty fertiliser inside four years. A new export industry will be born on Monday when the company Salt Lake Potash declares first production and claims pioneer status ahead of the flock of rivals building sulphate of potash (SOP) mines on Australia’s ephemeral lakes. If all of them deliver to schedule, Australia will go from zero to five SOP mines in the next four years. They hope to snatch a piece of a small but growing industry that is now worth just over $US4 billion ($5.2 billion) a year globally and is distinct from the $US20 billion plus muriate of potash (MOP) that BHP is likely to enter this year when it is expected to build a new $US5.7 billion Canadian mine. Though SOP is the small end of the potash industry, it is also the premium end with farmers typically paying 50% to 100% more for SOP, which is ideal for fertilising crops such as berries, nuts and citrus.
National Australia Bank, Crown Perth and SkyCity are all facing the possibility of multi-million-dollar penalties for potential breaches of anti-money laundering laws. Crown Perth is now facing a money laundering investigation by AUSTRAC SkyCity Adelaide is also being investigated for potential breaches by the financial crimes regulator And NAB has been referred to AUSTRAC’s enforcement team due to “potential serious and ongoing non-compliance” with anti-money laundering laws In separate statements to the ASX this morning, NAB, Crown and SkyCity told investors that they had been referred to AUSTRAC’s enforcement team following the identification of potential “serious non-compliance” with anti-money laundering and counter-terrorism financing laws. AUSTRAC is the federal financial regulator tasked with preventing organised criminals and terrorists. Crown’s casino in Melbourne was already under scrutiny for practices that may have facilitated money laundering. SkyCity’s Adelaide casino is under scrutiny for potential failures in the casino’s treatment of high-risk and politically exposed customers in two periods, July 2015 to June 2016 and July 2018 to June 2019. The casino operator said it was in discussions with AUSTRAC and no decision had yet been taken by the regulator about whether, and what, enforcement action might be taken. NAB said it has publicly disclosed its ongoing discussions with AUSTRAC regarding potential non-compliance since 2017. It added that since June 2017, NAB had spent around $800 million in a multi-year program to improve its fraud and financial crime controls and employed more than 1,200 staff in that area. The bank noted that AUSTRAC had a wide range of enforcement options available to it, including civil penalties (fines), enforceable undertakings (where the bank promises to do, or not to do, certain things), infringement notices and remedial directions.
Crown Resorts has avoided paying the Victorian government almost $200 million over the past seven years by classifying marketing costs such as free parking as “winnings” paid out from poker machines when calculating its gambling tax bill. Victoria’s royal commission into Crown heard that the casino has been deducting the cost of free accommodation, meals and loyalty scheme points from the money it takes through the 2628 poker machines at its Melbourne casino since at least 2014. Crown’s executive general manager of gaming machines, Mark Mackay, said that in February this year Crown Melbourne CEO Xavier Walsh asked him to calculate how much this had saved Crown between 2014 and 2019 . Compiled in a spreadsheet entitled “potential gaming tax underpayments”, the total came to $167 million. However, Mr Walsh said the total could be closer to $200 million if the past two years were included. Mr Walsh said Crown believed it was entitled to make the deductions, but he agreed that the spreadsheet exercise had been carried out because of concerns about the “ambiguity” in the state’s gaming tax legislation. Counsel assisting the inquiry, Geoffrey Kozminsky, said that Crown Melbourne is supposed to pay Victoria gambling tax based on “gross gambling revenue” – which is the total sum of money received through gambling, minus whatever it pays out as winnings.
The ABC will pay $100,000 to cover Industry Minister Christian Porter’s legal and share of mediation costs as part of a settlement after he withdraw a defamation action against the broadcaster. Appearing before a Senate estimates committee, ABC managing director David Anderson also revealed Mr Porter made two earlier offers to settle the case but the ABC rejected them. Mr Anderson said the ABC’s costs for defending the case had cost taxpayers $680,000. But if the broadcaster did not settle and the case had gone to trial, the exposure to taxpayers could have been as high as $1.5 million.
Qantas has written to four criminal intelligence agencies seeking further details of a “disturbing” report which alleges organised crime figures have infiltrated the nation’s biggest airline. It said no law enforcement agencies had been in contact over the report but moved to reassure stakeholders it regularly conducted criminal checks on staff and supported intelligence checks from regulators and investigators. The report – known as Project Brunello, and revealed by an investigation from 60 Minutes, the Sydney Morning Herald and The Age on Sunday – alleges near 150 Qantas staff have links to criminality and have used their positions to import drugs among other illegal activities. Qantas’ freight and baggage handling arms were identified as the divisions at the highest risk of infiltration.
Soaring demand for commodities and record iron ore prices have driven a surge in the value of Australian exports to China in the first five months of the year, despite tariffs and bans on billions of dollars’ worth of goods More broadly, data released also showed that China’s appetite for raw materials had imports in May growing at their fastest pace in 10 years. However, supply chain bottlenecks and small COVID-19 breakouts around China’s southern ports slowed the pace of exports more than expected. Customs data showed the value of total trade between Australia and China rose 32.6% year-on-year between January and May, to $US62.4 billion ($80.7 billion). Imports increased 33.3% during that period and exports were up 30.6%. High iron ore prices, which hit a record of more than $US230 a tonne last month, drove the increase in trade values at a time when diplomatic relations hit rock bottom and China warned it was seeking alternative markets to fuel its steel-making industry. China’s total iron ore imports measured by volume increased by 6% to 444.89 million tonnes in the first five months of the year. By value, they rocketed 85.7% to $US40.4 billion. China is largely dependent on Australia and Brazil for its iron ore.
The Australian higher education sector will have lost $3.8 billion in revenue by the end of 2021, with billions more expected to evaporate in the coming years as the pipeline of international students slows to a trickle. The sector has taken a bucketing from closed borders compounded by a lack of government intervention and strategic planning in getting international students back into the country. There is now, however, a glimmer of hope as some states – NSW, South Australia and to a lesser extent Victoria – advance plans to bring small numbers into student-specific quarantine facilities. Experts say the aftershocks of the revenue shortfalls will be felt most keenly in the research capacity of universities.
Petrol and diesel supplier Ampol is the “secret ingredient” in a green hydrogen energy start-up that will target the $1.5 billion a year remote diesel power generation market offering the potential for reliable energy that is clean and affordable. Ampol is taking a 20% stake in CSIRO-backed Endua and is the commercial partner for the venture, which is developing renewables-based hydrogen power units that could be used at mines, farms and residential communities that are not connected to the grid. Endua is a child of the “venture science” model of business creation pioneered by the CSIRO’s technology and science investment fund Main Sequence Ventures which has already given rise to plant-based meat champion v2ood backed by Rich lister Jack Cowin and space start-up Quasar. The model starts with identifying a major challenge that offers a commercial opportunity to be solved, then assembling the science capability to tackle it from CSIRO, and introducing a pathway to market through a leading industry player which is involved from the start. Venture investment is injected by Main Sequence.
At least seven Australian firms are among dozens of companies that were infected with the same ransomware that last week crippled meat processor JBS. JBS was forced to shut down operations in Australia and locally stand down about 11,000 employees. JBS also suspended operations in the US after the attack, attributed to REvil software. Hackers have posted a list of victims of the REvil software on the dark web – an area of the internet that is hidden from conventional search engines. Australian companies on the list include a law firm, accounting firm, consultancy, an organisation for mental health carers, a chemical packing firm, a liquor group cooperative, an online clothing retailer and a strategy-focused consulting company. The hackers encrypt company software, files and backups to paralyse a firm’s operations. The cybercriminals also issued an ultimatum to these companies: pay up or face having your internal files published online. If companies refuse to pay, the hackers increase the pressure on firms by leaking bits of their data day by day. They threaten to make the files downloadable and in some cases hold auctions to make the data available to those firms’ rivals. The dark web listings seem not to include companies that gave into the cybercriminals and paid up. Publishing a company’s internal records, including details of employees and customers, puts those people at risk. In some cases cybercriminals have posted photos of employee passes, credit card images, and passport identification pages.
A renewable solar-hydro energy plant will be built on the site of the Liddell coal-fired power station in the Upper Hunter region of NSW. Operator AGL has engaged energy firm RayGen to develop the new plant, which will use a field of mirrors to direct sunlight onto a tower of solar panels, which in turn store energy in water reservoirs in conjunction with batteries AGL and RayGen also revealed plans to build a $27m plant in north-western Victoria using the same technologies. The planned 2023 closure of the Liddell power station has led the federal government to commit to building a controversial, taxpayer-funded, gas-fired power station in nearby Kurri Kurri in the Hunter region.
ASIC investigators are reviewing the level of control that Macquarie Group held over its 76%-owned subsidiary, Nuix, in the lead up to the $1.7 billion IPO of the glamour tech stock last December. The corporate regulator has issued Section 19 notices to Nuix and Macquarie as ASIC considers whether Nuix overstated forecasts ahead of its listing in an investigation that has been running for weeks. Nuix investors have seen $2.9 billion wiped from shareholdings from the peak in January, after the data analytics company issued two earnings downgrades.
And that’s it for this week. And next week, I’ll be talking to Neil Littlewood, the CEO of national shipping container company Royal Wolf which has created a bespoke shipping container solution for a Griffith University product investigating the production and use of maggots for medicinal purposes. And I’ll be talking to economist Nicholas Gruen.
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.