Atlassian cuts 500 jobs as tech industry pain intensifies
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 or at Banking Day.
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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 06 in our series for 2023 and today’s date is Friday March 10.
First, I’ll be talking to Andy Squires, the CEO of Securely, the app that provides tradies and subcontractors with a payment platform. And I’ll be talking to economist Nicholas Gruen about how the RBA can control inflation without rate rises.
But now, let’s talk to Andy Squires.
Need legal information or legal advice? Today’s podcast is brought to you by Multi-Award Winning Law firm McDonald Legal, experts in the areas of Dispute Resolution and Commercial and Property Law. For a free consultation on your legal matter, McDonald Legal can be reached on 03 9070 1107 or by visiting the website www.mcdonaldlegal.com.au
So what’s happening in the news?
Federal Reserve Chair Jerome Powell opened the door to a larger half-point interest-rate increase this month and said officials are likely to lift rates higher than they previously expected to fight inflation in a stronger economy. Mr. Powell’s comments, during the first of two days of Capitol Hill hearings, offered his first public acknowledgment that data showing hotter inflation and hiring could lead Fed officials to alter their recent strategy of raising rates in smaller quarter-point increments. “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr. Powell told the Senate Banking Committee. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
Australian tech giant Atlassian has laid off 500 workers – about 5% of its workforce – with the deepening ‘tech wreck’ hitting the software company led by billionaire co-founders Mike Cannon-Brookes and Scott Farquhar. The Sydney-based Atlassian, which builds team collaboration software, had managed to stave off the cuts impacting the likes of Google, Amazon, Netflix and Facebook parent company Meta but on Tuesday announced a “difficult decision” to shed 5% of its workforce. Affected employees will receive 15 weeks of severance pay and can keep their laptops. Their company, which has yet to turn a profit, said in a corporate filing that the lay-offs would incur a charge of between $US70m and $US75m. Between them, the world’s largest tech companies including Australian tech start-ups have laid off hundreds of thousands of workers in recent months amid an economic slowdown. Many tech companies say now they hired too quickly during the pandemic, and other factors including rising interest rates and the ongoing war in Ukraine have forced the tech industry to cut costs.
At its 10 consecutive meeting, the RBA hiked rates by 25 basis points, increasing the cash rate to 3.60%. It returns the cash rate to its highest level since May 2012. The RBA said further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.
The impact of rising interest rates and the slowdown are having an emotional impact on Australians, according to Commonwealth Bank of Australia research. More than half of the bank’s retail customers described themselves as being “extremely concerned” about the rising cost of living, with a third claiming rising expenses have already had a significant impact on their lifestyle and spending behaviour. Renters are feeling the pinch slightly more than owner-occupiers, but both cohorts say grocery bills and utilities are their biggest worry. Just over half of retail customers are spending less on socialising, eating out or entertainment, while 49% have started buying cheaper grocery items. SME owners are adjusting their personal spending, cutting non-essential business expenses, and raising prices to weather the storm
Industry and retail super funds recorded negative annual returns of -5.5% in 2022 compared to 12.9% the year before, as they felt the bite of the broader economic downturn. This slowed the $3.4 trillion superannuation system’s overall growth, data from the Australian Prudential Regulation Authority revealed, and its asset pool value grew just 2.5% over the year despite contributions jumping 11.1% in the same period. But superannuation investment experts expect funds to rally quickly, noting that the sector rarely records two poor years in a row.
Rio Tinto will pay a $15 million civil penalty to settle an investigation by the U.S. Securities and Exchange Commission, relating to an alleged bribery scheme involving a consultant in Guinea. The company, one of the world’s top iron ore producers, has been fined for violations of the Foreign Corrupt Practices Act by the U.S. SEC. Rio Tinto said it would pay the charges without admitting to or denying the SEC’s findings that it violated books and records.
One in three Australians have started a small business or ‘side hustle’ since the start of the COVID-19 pandemic or plan to start one in the next 12 months, according to a new research study just released by the Commonwealth Bank. The research reveals that of those surveyed, 9% of these entrepreneurs started a business between March 2020 and January 2022, while almost twice as many (16%) have started trading in the past 12 months, highlighting what the bank calls “sustained entrepreneurial activity” among Australians since the Covid pandemic. The bank points to Australian Bureau of Statistics data which also shows new business entries increased 19.7% in the 2022 financial year – significantly higher than average – reflecting workplace changes during Covid and hobbies “morphing into side hustles”, as well as opportunities in sectors struggling with labour shortages.
A slowing Australian economy has stalled women’s financial progress for the first time in a decade as higher interest rates weighed on female employment. The Financy Women’s Index, which measures the economic progress of women and the time it will take to reach gender equality in Australia, slipped 0.1 points to 76.2 out of 100 in the final quarter of 2022. “While the decline is marginal, even the smallest backward step on this journey is a large policy failure,” independent economist Nicki Hutley said in the report released Monday. “The fact that women didn’t benefit as much as men during 2022 from the economic stimulus from Covid is an indictment of those specific policies as well as broader policies aimed at gender equality.” Weakness in the jobs market amid higher interest rates appears to have weighed on the index and set back progress in closing gender gaps in employment and underemployment, said Financy, which provides software aimed at helping organizations improve performance on diversity, equity and inclusion. The employment sub-index fell to 71.5 points from 71.9 points.
The makers of Australia’s first locally designed and built hydrogen-powered truck say it will be towing cars and potentially collecting garbage this year in a rollout they believe could spur a shift away from highly polluting diesel vehicles. Hyzon Motors says the 27-tonne truck it will unveil at its headquarters in Noble Park, in Melbourne’s south-east, on Monday is an Australian first and shows the trucking industry can go green. Electric models made up 10% of new car sales globally last year, but heavy vehicles have been harder to turn green. The US-headquartered Hyzon is one of several start-ups betting that hydrogen fuel cells are a more viable option than rechargeable batteries, which are large and heavy, and need downtime for recharging. Hyzon established an Australian outpost in 2020 to capitalise on the wealth of industry talent left behind when Holden, Ford and Toyota shut down their local operations, and has grown to a team of just over 50 engineers, fabricators, welders and designers. The truck would go into commercial trials this year, with three on order from the RACV-owned towing company Nationwide Group, and discussions under way with waste management groups and other potential operators. Trucks produce about 4% of Australia’s carbon emissions, and there is growing concern about the impact on public health of the country’s relatively old and dirty truck fleet. Diesel fumes are now recognised as a carcinogen, with fine particulate matter and nitrogen dioxide also causing heart disease, stroke, diabetes and childhood asthma.
With the federal government set to unveil its national EV strategy within weeks, data from the Australian Automobile Association reveals affluent motorists from inner suburbs have embraced the move away from internal combustion engines. But with the price of EVs in Australia mostly over $50,000 – with 10 models available for more than $100,000 – they have also become a status symbol for wealthy inner-city residents who want to show they care about the planet, at the same driving what is essentially a luxury car. Data compiled by the AAA’s electric vehicle index, which went live on Sunday, revealed the Victorian postcode of 3170 (Mulgrave and Waverley Gardens) has the highest number of registered EVs, with 281. This was followed by postcode 2000 (Sydney CBD, Barangaroo and Dawes Point) with 241 registered, then the Queensland postcode 4217 (which includes the wealthy Gold Coast suburbs of Chevron Island and Isle of Capri), with 184. The Victorian regional town of East Sale, near Lake Wellington, had the highest penetration of EVs at 4%. Up to the end of January last year, there were 34,536 registered EVs in Australia, comprising 10,542 in NSW, 9572 in Victoria, 7350 in Queensland, 3324 in Western Australia, 1574 in South Australia, 1377 in the ACT, 757 in Tasmania and 78 in the Northern Territory. The AAA’s “heat map” showed EV vehicles are never far from the centre of areas with large populations.
Teal independents are preparing to push Labor for tougher action to end federal politics’ jobs for mates culture, by creating a new commissioner for merit-based appointments and mandatory selection panels. Mackellar MP Sophie Scamps will table a private member’s bill on Monday designed to introduce safeguards to public appointments, such as the new National Anti-Corruption Commission boss and future government boards and tribunal members. Designed in collaboration with the Centre for Public Integrity, the bill will be supported by Indi MP Helen Haines and independents in the House and Senate. It would involve ministers being given a shortlist of at least three qualified candidates. They would be required to select from the list, without adding possible political appointees, as allowed under current rules. Even more stringent requirements would be added for roles considered as significant integrity appointments. For appointments to bodies such as the Australian Electoral Commission, Office of Public Prosecutions and the Australian National Audit Office, a former superior court judge would be part of the selection panel. Diplomatic appointments would not be included in the plan. Labor has attacked the former Morrison government for politicising a slew of government appointments, and a report by think tank the Grattan Institute last year found political appointees occupied more than 20% of federal board positions.
The chief executive of Australia Post says the postal service is likely to develop a broader footprint over the next five years as the company considers new store formats beyond the traditional post office. With the federal government now reviewing Australia Post, with the review outlining a range of ideas, from increasing stamp fees to reducing the frequency of letter deliveries, to sustain Australia Post as snail mail declines, chief executive Paul Graham said he expected its physical presence to grow in coming years as Australia Post trialled new ways of sending and picking up mail. There is still a strong appetite for buying gift and birthday cards at a local post office, but the company is focused on working out the needs of different areas so it can better target the services it provides, Graham said. Along with letter and parcel deliveries, Australia Post operates a vast network of more than 4300 post offices across the country. These process bill payments, sell gift cards, phones and general merchandise and accept passport applications. The group’s 2513 post offices in rural and regional areas have a heightened importance, providing services and goods where fewer other retail options are available.
Pacific National says it will step in for Scott’s Refrigerated Logistics customers after the freight operator collapsed, and its receivers said they were unable to guarantee deliveries to major supermarkets. Anchorage Capital Partners, which acquired Scott’s in 2020, called in administrators last week before creditors appointed Korda Mentha. Scott’s was acquired by Anchorage from ASX-listed Eagers Automotive for $75 million and is contracted to deliver refrigerated goods for Coles, Woolworths, IGA and Aldi. It competed alongside Linfox, Lineage, Americold and Lindsay. Many of its customers are also small- and medium-sized businesses, some based in Queensland’s north. A last-minute sales process has failed, although some assets are expected to be sold later this week. With the loss of a major national refrigerated trucking player, Pacific National said on Monday that it would draw on the experience of dealing with COVID-19 supply chain chaos to manage the instability triggered by the collapse of Scott’s. Pacific National chief executive Paul Scurrah said it was important to keep the refrigerated network intact, adding rail would pick up more cold containers, known as reefers, to protect the continuity of complex supply.
Coles has conceded to its suppliers at a recent forum that its customers are “feeling the pain” of rising interest rates and cost-of-living expenses, and are rushing to take advantage of sales and promotions to help stretch their household budgets further. At a forum held by the nation’s second-largest supermarket chain late last month, Coles executives revealed to its food and grocery supplier base the attraction of value offers, with a sales promotion launched in January triggering a 22 per cent spike in sales for those marked-down groceries. The suppliers were told that the second iteration of Coles’s ‘Dropped & Locked’ campaign – which put more than 300 essential grocery items on discount – resulted in a 22 per cent lift in a mix of sales and volumes for those basket of sales goods. Coles executives also said the impact of inflation was reflected in a shift by consumers to cheaper foods, such as trading down to cheaper cuts of meat or more affordable protein, such as chicken. Coles told the suppliers that customer trust on the issue of value was becoming more crucial, and involved keeping prices down and building customer trust via its “Dropped & Locked” campaign, while private label groceries also played a role. The reporting season shed a light on the growing fickleness of the consumer in the wake of nine months of interest rate rises – with expectations of further increases to follow – and other cost-of-living pressures.
A new cybercriminal gang called Medusa is using a range of tactics, including pretending to be a cybersecurity professional, to grow its profile as it hacks into more businesses, including in Australia. BGH Capital-backed cybersecurity firm CyberCX has found at least 20 victims of so-called double extortion operations carried out by Medusa since January 11, including in Australia and the Pacific. Double extortion is a common cybercriminal gang tactic of both encrypting and stealing data, so companies cannot access their files and face the threat of hackers releasing it publicly. It is used as leverage to force businesses to pay a ransom. It is unclear where Medusa is based, but most cybercriminal gangs are in Eastern Europe and Russia. Katherine Mansted, director of cyber intelligence and public policy at CyberCX, said Medusa was not using a traditional hacker method of getting into companies’ systems via phishing, where links in emails open the doors for malicious software. Medusa is hitting a range of sectors across manufacturing, telecommunications, energy, hospitality and professional services. It posted about an Australian data breach on February 2, and has also attacked businesses in the United States, Indonesia, Singapore and Tonga. Ms Mansted said there was enough difference between how Medusa and other cybercriminal groups operated to give CyberCX confidence it was a new group. Medusa was highly experienced and appeared to include hackers who had worked before in different criminal groups. CyberCX found several social media and messaging accounts across Facebook and Telegram that it believes are operated by Medusa.
And that’s it for this week. And next week I’ll be talking to Dr Sanjay Warrier about the The business of health care during the pandemic. And I’ll be talking to EY economist Cherelle Murphy about Australia’s GDP and outlook.
This show was brought to you by Multi-Award Winning Law firm McDonald Legal, experts in the areas of Dispute Resolution and Commercial and Property Law. For a free consultation on your legal matter, McDonald Legal can be reached on 03 9070 1107 or by visiting the website www.mcdonaldlegal.com.au.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. And if you want leave a comment. For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business on the Apple podcast store or on my website leongettler.com.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.