The Five Wives of Rupert Murdoch. Challenging Henry VIII.
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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For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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 08 in our series for 2023 and today’s date is Friday March 24.
First, I’ll be talking to I’ll be talking to Ian McAdam, the CEO of Capsifi, one of Australia’s leading software providers for enterprise architecture and innovation. And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures.
But now, let’s talk to Ian McAdam.
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?
UBS has agreed to buy Credit Suisse in an historic, government-brokered deal aimed at containing a crisis of confidence that had started to spread across global financial markets. The Swiss bank is paying more than $US2 billion for its rival. It will be an all-share deal and priced at a fraction of Credit Suisse’s close on Friday, when the bank was valued at about 7.4 billion francs ($US8 billion). The Swiss National Bank is offering a $US100 billion liquidity line to UBS while the government is granting a 9 billion-franc guarantee to assume potential losses from assets UBS is taking over. The plan, negotiated in hastily arranged crisis talks over the weekend, seeks to address a massive rout in Credit Suisse’s stock and bonds over the past week following the co llapse of smaller US lenders. A liquidity backstop by the Swiss central bank mid-week failed to end a market drama that threatened to send clients or counterparties fleeing, with potential ramifications for the broader industry. US authorities have been working with their Swiss counterparts because both lenders have operations in the US and are considered systemically important in Switzerland, Bloomberg reported earlier. Authorities sought an agreement before markets opened again in Asia. UBS had earlier tabled an offer of about $1 billion, or 0.25 francs a share for Credit Suisse, which the firm had pushed back on. The takeover of the 166 year-old lender marks a historic event for the nation and global finance. The former Schweizerische Kreditanstalt was founded by industrialist Alfred Escher in 1856 to finance the build-out of the mountainous nation’s railway network. It had grown into global powerhouse symbolizing Switzerland’s role as a global financial centre, before struggling to adapt to a changed banking landscape after the financial crisis. UBS traces its roots back through some 370 separate institutions over 160 years, culminating in the merger of the Union Bank of Switzerland and the Swiss Bank Corporation in 1998. After emerging from a state bailout during the 2008 financial crisis, UBS built a reputation as one of the world’s largest wealth managers, catering to high- and ultra-high net worth individuals globally. While Credit Suisse avoided a bailout during the financial crisis, it has been hammered over recent years by a series of blowups, scandals, leadership changes and legal issues. Clients had pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows continued even after it tapped shareholders in a 4 billion-franc capital raising.
Banking and financial stocks fell in Australia, London and across Europe on Monday after the emergency rescue of Credit Suisse by rival Swiss bank UBS failed to calm markets. In the In Australia, Financials .AXFJ fell about 1.8%, with all the ‘Big Four’ banks ending in the red. In the UK, Natwest, Barclays and Standard Chartered were all down more than 7%, while HSBC and Lloyds also fell about 5% in early trading, before recovering some ground. European banking shares as measured by the Stoxx Europe 600 Banks Index was down nearly 3% on Monday morning. Credit Suisse shares plunged 60% while UBS was down 7%. The fresh jitters were partly prompted by the terms of the rescue deal, which saw holders of $17bn (£14bn) of Credit Suisse’s bonds wiped out, while equity investors were not as badly affected.
Amazon plans to eliminate 9000 more jobs in the next few weeks, CEO Andy Jassy said in a memo to staff on Monday. The job cuts would mark the second largest round of layoffs in the company’s history, adding to the 18,000 employees the tech giant said it would lay off in January, taking the total number of job losses at Amazon so far to 27,000/ The company’s workforce doubled during the pandemic, however, in the midst of a hiring surge across almost the entire tech sector. Tech companies have announced tens of thousands of job cuts this year. In the memo, Jassy said the second phase of the company’s annual planning process completed this month led to the additional job cuts. He said Amazon will still hire in some strategic areas. The job cuts announced Monday will hit profitable areas for the company including its cloud computing unit AWS and its burgeoning advertising business. Twitch, the gaming platform Amazon owns, will also see some layoffs as well as Amazon’s PXT organizations, which handle human resources and other functions. Prior layoffs had also hit PXT, the company’s stores division, which encompasses its e-commerce business as well as company’s brick-and-mortar stores such as Amazon Fresh and Amazon Go, and other departments such as the one that runs the virtual assistant Alexa.
Fox Corp chairman Rupert Murdoch is engaged to former San Francisco police chaplain Ann Lesley Smith, his spokesperson has confirmed, which will mark the fifth marriage for the 92-year-old media mogul. Murdoch finalised his divorce from actress and model Jerry Hall in August. Murdoch and Smith, 66, first met in September at his vineyard Moraga in Bel Air, California, and he called her two weeks later, Murdoch told the News Corp-owned New York Post, which broke the news of the engagement. Smith is a widow whose late husband was Chester Smith, a country singer, radio and TV executive. On March 17 in New York, Murdoch presented Smith with an Asscher-cut diamond solitaire ring, according to the Post. They will be married in the northern hemisphere summer. “I was very nervous. I dreaded falling in love but I knew this would be my last. It better be. I’m happy,” Murdoch told the Post. Murdoch’s nuptials are unlikely to change the ownership structure of businesses in which he holds stakes, including Fox Corp, the parent company of Fox News Channel, and News Corp. Murdoch controls News Corp and Fox Corp through a Reno, Nevada-based family trust that holds roughly a 40% stake in voting shares of each company. Fox is currently defending itself in a $US1.6 billion ($A2.4 billion) defamation lawsuit from Dominion Voting Systems. Dominion has accused the cable TV network of amplifying claims that Dominion voting machines were used to rig the election against Republican Donald Trump and in favour of his rival Joe Biden, who won the election. Fox has defended its coverage, arguing claims by Trump and his lawyers were inherently newsworthy and protected by the first amendment of the US constitution.
Avoiding the worst ravages of climate breakdown is still possible, and there are “multiple, feasible and effective options” for doing so, the Intergovernmental Panel on Climate Change has said. Hoesung Lee, chair of the body, which is made up of the world’s leading climate scientists, made clear that – despite the widespread damage already being caused by extreme weather, and the looming threat of potentially catastrophic changes – the future was still humanity’s to shape. This positive framing of a report that makes very grim reading was a deliberate counterblast to the many voices that have said the world has little chance of limiting global heating to 1.5C above preindustrial levels, the threshold beyond which many of the impacts of the crisis will rapidly become irreversible. Finance would be key. The shift to a low-carbon economy would take between three and six times the amounts of funding currently devoted to green investment, according to the final section of the IPCC’s comprehensive sixth assessment report (AR6) of human knowledge of the climate. IPCC scientists and climate experts emphasised that this decade would be crucial, as decisions made now would affect the future of the planet for hundreds and perhaps thousands of years.
The nation’s prudential regulator has begun asking banks to declare their exposures – in some cases daily – to start-ups and crypto-focused ventures following the collapse of Silicon Valley Bank and volatility at global lenders. The Australian Prudential Regulation Authority has told banks to improve their reporting around crypto assets and provide daily updates to the agency as it sought to gain more insight into exposures and vulnerabilities in the system. The increased supervision comes after start-ups pulled funds deposited with SVB, triggering its collapse, and after Credit Suisse suffered outflows from its customers concerned about its profitability as it attempted a complicated and lengthy restructuring process.
Australian mortgage holders might finally be in for a reprieve on interest rates, with the Reserve Bank indicating it will consider a pause in hikes at its next meeting. Minutes from the bank’s March meeting, released on Tuesday, show the RBA board members acknowledged that the “economic outlook was uncertain”, and monetary policy was now restrictive. “Members agreed to reconsider the case for a pause at the following meeting, recognising that pausing would allow additional time to reassess the outlook for the economy,” the minutes from the March 7 meeting said. “The considerations meant it would be appropriate at some point to hold the cash rate steady to assess more fully the effect of interest rate increases to date.”
Environmental lobby group Market Forces has accused five super funds and their leadership of greenwashing and failing to use their voting power to push big emitters to clean up their act. In a report published on Wednesday, Market Forces accused Aware Super, AustralianSuper, AMP, Australian Retirement Trust, and Commonwealth Super Corp of greenwashing. Market Forces alleges the five funds overstate their green credentials to retirement savers, claiming they support net-zero goals but fail to exercise their voting muscle to force dirty companies to clean up their operations. These funds are alleged to be relying on influencing fossil fuel companies, including Santos and Woodside, by engaging with management to meet climate targets. But Market Forces said the funds have failed to adopt or implement “effective active ownership practices” across five criteria. The environmental lobby group, which has previously targeted several retirement savings giants, claims these funds “are legally required to have ‘reasonable grounds’ to believe they will achieve their goals”.
Non-bank lender Latitude says a “sophisticated, well-organised and malicious cyberattack” remains active inside its systems, and it is not taking on any new customers after being forced to isolate some of its technology platforms. Latitude also revealed on Monday that more customers – including past customers and applicants for credit – could fall victim to the attack, after it said last week about 330,000 customers had had their personal identification stolen. The non-bank lender confirmed that Medicare numbers and “copies of passports or passport numbers” were included in the theft of personal information affecting approximately 333,000 customers and applicants. In an update to the ASX the lender said it was “continuing our forensic review of our IT platforms to identify the full extent of the theft of customer information as a result of the attack on Latitude”. The stock remains in a voluntary suspension and has not traded since Wednesday after the attack on three of its software vendors was announced before the market opened last Thursday. The shares will remain suspended for another few days pending any earlier announcement. The incident is being investigated by the Australian Federal Police. The update comes as a major cybersecurity conference gets under way in Canberra and follows major cyber breaches at Optus and Medibank last year. Latitude has not said whether the attack has included any demands for a ransom to be paid to prevent customer information being posted on to the dark web. The source of the attack also remains unclear.
The big four banks’ exposure to the Australian resources industry has sunk to a decade low and lending veterans say an erosion of technical nous and risk appetite means the local banks will struggle to capitalise on the next boom in “future facing commodities”. Data compiled by Bridgend Capital Advisory shows the big four Australian banks’ combined exposure to mining, oil and gas clients had declined by almost $25 billion since peaking at $64.7 billion in 2015. The decline has been particularly sharp at Commonwealth Bank, where the nation’s biggest export industry ranks as just the 15th biggest lending market and the total committed exposure to resources has slumped from almost $17 billion to barely $7 billion between 2015 and 2022. The resources sector has slumped from 1.9% of Commonwealth Bank’s total loan book to 0.6% over the same period. NAB has been the most resilient, with resources exposure declining from 1.2% of its book to 0.9% over the same period. The decline has been driven by a combination of cyclical and structural factors; an era of high commodity prices has filled miners like BHP and Rio Tinto with cash and reduced their need for loans, while banks have also deliberately reduced their exposure to fossil fuel producers. But the big four banks have also missed the boom in “future facing” or “critical” minerals like lithium, graphite, hydrogen and rare earths over the past eight years because the opaque and immature nature of those industries meant local banks were not confident managing risk through futures markets and hedging as they do for traditional commodities. Australia’s critical minerals producers have instead been funded by end consumers, shareholder equity, offshore banks or government lending agencies like Export Finance Australia, the US Department of of Defence and Japan’s Green Innovation Fund.
Victoria’s wage theft laws are facing a constitutional challenge that would neutralise states’ powers to bring criminal charges over underpayments if successful. Regional restaurant Macedon Lounge – the first business to be charged with wage theft offences – has applied to the High Court in a bid to argue the Victorian laws are invalid because they clash with federal laws governing underpayments. The challenge will have ramifications for other Labor governments’ state wage theft laws, including Queensland and South Australia, as well as the Albanese government’s upcoming criminal laws for underpayments. Victoria’s wage theft offences took effect in July 2021 and the Andrews government set aside $17.5 million to fund a new agency, the Wage Inspectorate Victoria, to enforce the laws. However, the government was criticised at the time by the Coalition and experts for wasting millions of dollars on laws that would be made redundant by upcoming federal laws or otherwise rendered unconstitutional. The Victorian Wage Inspectorate proceeded to hit the Macedon Lounge and owner Gaurav Setia with 94 criminal charges in November for allegedly underpaying four employees a total of $7265 over a five-month period. The inspectorate took 17 witness statements over the allegations and produced 275 pieces of documentary evidence, according to court documents. Mr Setia, if convicted, faces up to $218,000 in fines or as much as 10 years in prison and the restaurant can be fined more than $1 million. Barrister Leigh Howard, for Mr Setia and Macedon Lounge, flagged at Broadmeadows Magistrate Court last week that the parties had launched a constitutional challenge to the case. According to documents filed in the High Court by Mr Howard and barrister Justin Bourke, KC, the wage theft laws and the inspectorate’s powers to investigate them are invalid according to s109 of the constitution. That section says when a state law is inconsistent with a commonwealth law the latter should prevail.
The time it takes for a couple to save a 20% deposit to buy an entry-level house has shrunk by eight months nationwide since interest rates started rising last May, as falling prices reduce the amount they need to stash away and improving wages and higher interest rates on savings bolster their finances, a new report from Domain shows. But the portion of income needed to service their mortgage has blown out to 41 per cent – a new record, sparked by the 10 consecutive rate hikes. Meanwhile, a separate study from the Australian Housing and Urban Research Institute (AHURI) found that it was virtually impossible for any 25-34 year olds to save up enough deposit on their own, amid higher property prices and surging costs of living. Domain’s analysis found that a couple buying their first home would now need six years and eight months to save a deposit on an average entry level house around the country, after sharp falls in home prices slashed the amount they have to accumulate. Since interest rates started rising, home values have dropped by 9.1% or the equivalent of a $69,983 discount nationwide according to CoreLogic. Despite the marked reduction in the time it takes to save a deposit, the amount of mortgage a Sydney couple need to service a mortgage has ballooned to a new high of 51% of their income, a large jump from the 31.5% recorded during the recent boom. In Melbourne, the share of mortgage repayments rose to 42.1%, up from 29% in 2021. The portion of mortgage repayments expanded to 29.8% in Brisbane, 35% in Adelaide and 45.3% in Canberra. First-home buyers in Hobart now need to spend 42.1% of their income to repay their mortgage, 26.2% in Perth and 25.6% in Darwin.
And that’s it for this week. And next week, I’ll be talking to founder of Renovatio – one of the country’s fastest growing health and wellness brands, renovation.com.au. Dr Vincent is a food scientist, clinical nutritionist, researcher and health and wellness exp. And I’ll be talking to Rabobank economist Michael Every about how the Chinese economy is going with the re-opening.
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.
