Stocks globally are tumbling as renewed worries about China’s economy pile on top of markets already battered by rising interest rates, inflation and the Ukraine war.
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 15 in our series for 2022 and today’s date is Friday May 13.
First, I’ll be talking to Gustavo Quiroga, the Vice President & GM of Mobiquity for APAC. Mobiquity partners with the world’s leading brands and banks to design and deliver compelling digital products and services.
And I’ll be talking to AMP Capital chief economist Shane Oliver about interest rate rises.
But now let’s talk to Gustavo Quiroga.
Stocks globally are tumbling as renewed worries about China’s economy pile on top of markets already battered by rising interest rates, inflation and the Ukraine war. Wall Street has tumbled to its lowest point in more than a year, the Australian sharemarket is set for more heavy losses with Australian shares hitting a three month low. In Asian stock markets, Japan’s Nikkei 225 and South Korea’s Kospi are down as are European markets with France’s CAC Germany’s DAX and London’s FTSE sliding.
A survey has found Australians were struggling even before the Reserve Bank of Australia rate rise. A survey by financial comparison website Finder revealed almost one-in-three Australian home owners were feeling the pinch even before the RBA raised the cash rate to 0.35% from 0.1% last week, the first increase since 2010. The outlook does not get any easier, with the RBA indicating it will do whatever it takes to curb inflation. It is forecasting inflation to reach 6% by the end of this year, almost double what it expected just a few months ago.
The Australian Council of Trade Unions (ACTU) is now calling for a minimum wage increase to be lifted to 5.5%, rather than the original 5% they were originally pushing for, to deal with inflation. ACTU Secretary Sally McManus said this was the only way workers “could keep their heads above water” with growing cost of living. “Inflation is now 5.1%. Unions wanting 5.5 is reasonable in that circumstance,” McManus said. McManus said if workers can’t get 5.5%, they may be forced to resort to taking stronger action. And Labor leader Anthony Albanese has sparked a political storm by backing an increase in the minimum wage of at least 5.1% despite businesses claiming the higher costs would destroy jobs, widening an election row over economic planning. Business groups rejected his call to lift the minimum wage to keep up with inflation, arguing it would drive small employers to the wall because they could not afford the higher pay rates. The Fair Work Commission is taking submissions on the minimum wage ahead of a decision expected in June, and its outcome will determine rates affecting about two million Australians who are paid the current minimum of $20.33 per hour or whose incomes are linked by a higher industry award.
Power bills are going up no matter who wins the election. Retail electricity prices are expected to jump by up to 10% on July 1, following a surge in wholesale prices in the past year. This is despite claims from the Coalition and Labor that prices are going to stay low or fall after the May 21 election. Prime Minister Scott Morrison and Labor leader Anthony Albanese are targeting cost of living pressures during the election campaign. But energy experts said the idea power prices were going to fall after the election was disingenuous. Grattan Institute’s energy program director, Tony Wood, said it was inevitable the sharp rise in wholesale power prices in the past year would flow through to retail prices from the middle of the year, regardless of who won office. Wholesale power prices have increased significantly over the past year. That is due to a range of factors, including the war in Ukraine, global energy woes and unplanned maintenance of coal-fired power stations in Australia. The Australian Energy Market Operator said the average wholesale power price in the March quarter rose 141% from a year earlier to $87 a megawatt hour. Prices rocketed higher again last month amid stretched coal and gas markets, and disruptions at coal power generators. The Australian Energy Regulator has delayed its final determination of the default market offer until May 26 – the week after the federal election.
Coles and Woolworths’ suppliers are hitting up the major retailers for multiple price rises, which could see the cost of products on shelves increase by a whopping 12% this year, new research has revealed. Shoppers in the US and UK are already being battered by huge price increases and Aussies are about to experience the same as the cost of living skyrocketed to 22-year high. Ben Gilbert, retail analyst at investment bank Jarden, warned price rises at supermarkets are “coming now and are large”. A survey of 45 suppliers from Jarden found they were seeking a price rise of up to 6.8% each year on average on their products, with 66% already pushing the increase through, while 20% were still in negotiations. Gilbert said further increases are planned, either a second or a first at a planned weighted rate of 7.4% This paints a scenario whereby we could see an annualised run-rate of more than 12% through 2022.
Westpac chief executive Peter King says multiple official interest rate rises will contribute to a fall in GDP growth of 2 percentage points next year, as consumers rein in spending to ensure they can afford higher interest payments to banks. .Guided by its chief economist, Bill Evans, Westpac expects the economy to expand by 4.5% this year, but then to slow to 2.5% next year as rate rises start to bite. This was similar to the RBA, which said on Friday that GDP would grow by 4.25% this year and fall to 2% next year.
Australia’s big four banks — ANZ, CBA, NAB and Westpac — now hold a whopping $1.87 trillion in home loans. Australia’s big four banks — ANZ, CBA, NAB and Westpac — now hold a whopping $1.87 trillion in home loans. Throughout 2021, as Australian house prices skyrocketed, Australians kept on taking bigger mortgages — many worth more than six times their income — pushing up the profits of the big four banks. EY analysis of big four bank 2022 half-year results, has found that they had a combined cash profit after tax of $14.4 billion. That’s up $700 million from the 2021 half-year results, or an increase of 5.1%. The big four’s $1.87 trillion share of home loans makes up the bulk of the nation’s total housing loans, which is worth almost $2 trillion all up. EY found that of a $2.9 trillion loan book held by the big four (including home loans, personal loans and business loans), about $1.87 trillion is made up of home loans. In the year to March 2022, EY says that home loans written by the big four grew 2.4 %, or by $43.9 billion.
The NAB’s latest business survey revealed employers’ labour cost growth lifted to 3%, while purchase cost growth reached 4.6%. Quarterly price inflation eased from the previous March levels, with companies reporting their final prices climbed 1.7% over the three months to April, while retail prices were up 2.1%.
DoorDash and the Transport Workers Union have signed a landmark agreement to ensure fairness for gig workers, including a commitment to regulating the industry. The charter is the first of its kind between an Australian union and a delivery platform. The union said it recognised the flexible nature of gig work while agreeing to the need for enforceable industry-wide standards, set by an independent body. Its six core principles, developed over several months, include transparency, a collective voice for workers, dispute resolution, training resources, allowing workers to access “appropriate” rights and entitlements, and a “three-stage approach towards achieving regulation of the on-demand transport industry”.
Tech billionaire Mike Cannon-Brookes says AGL Energy’s almost total disregard of the need to decarbonise in the documentation for its demerger will persuade many institutional shareholders to vote against the split. Cannon-Brookes said AGL Energy’s investors would reject its plan for a demerger given widespread climate concerns among its share register and its failure to execute a strong business case for the split. The billionaire was due to hold talks with AGL chairman Peter Botten on Monday evening, the first talks between the pair since he took his 11.3% stake to become the company’s largest investor. Mr Cannon-Brookes said he read the 182,000 words contained within the AGL scheme booklet and said he was incredulous at the company’s failure to consider a Plan B if the split is rejected and its failure to meet Paris climate targets. AGL was hit with a huge backlash on climate change at its 2021 annual general meeting after more than half of investors demanded steeper carbon cuts in a result hailed by Mr Cannon-Brookes at the time as a defining moment for Australia’s climate ambitions. Both Mr Cannon-Brookes’ Grok Ventures camp and AGL’s board and executives are holding meetings with major investors this week at the beginning of the five-week race to win support.Grok said it wanted to inform shareholders of the risks of the restructure. Superannuation giant HESTA, which owns 0.36% of AGL, said last week that it might vote against the demerger at the June 15 meeting unless the it would achieve emissions reduction in line with the Paris Agreement and an equitable transition for affected workers Last year, more tha 52.5% of proxy votes supported an activist group resolution calling for the company to set Paris-aligned targets, and Mr Cannon-Brookes said he expected support for his anti-demerger position to grow among that cohort. The demerger needs 75% approval to go ahead.
Woodside Petroleum’s latest attempt to be more transparent about adapting to climate change faces a high-profile backlash at the oil and gas giant’s upcoming annual general meeting. Key proxy adviser CGI Glass Lewis, which provides advice to large investors, has recommended shareholders reject the company’s inaugural climate change report, saying it lacks detail and might overly rely on carbon offsets. Last year, following investor activism, Perth-based Woodside agreed to put its climate reporting to a non-binding advisory vote at this year’s AGM. But Glass Lewis recommended investors vote against the report at Woodside’s AGM on May 19 when shareholders will also vote on the $63 billion deal to merge with BHP’s petroleum business. Glass Lewis said the plan lacked “substance and specificity”. While issues were complex, the firm said Woodside “may be lagging its industry peers [about] the details provided as well as its consideration of Scope 3 emissions in its target setting process. Scope 3 emissions are indirect emissions such as those coming from suppliers or customers.
Woolworths has turned on paying with QR codes, a move that will let it link rewards and gift cards to payments to improve the checkout experience for customers and may eventually pressure card giants Mastercard and Visa. Using the COVID-19 check-in method to pay for groceries could also allow Woolworths to reduce payment costs by encouraging customers to pay by linking their bank account to its app. Millions of customers shopping at Woolworths and Big W stores will be shown a unique QR code at checkouts from Wednesday, which can be scanned with a smartphone, linking them to Woolworths’ Everyday Rewards app. Customers will be able to link payment cards directly to the app. The technology, developed with Eftpos, now part of Australian Payments Plus (AP+), will allow Woolworths to combine its rewards programs and other services with a payment, linking data and making its app more useful. Woolworths may push QR code payments to other retailers via its payment arm Wpay, which is advising other companies on payment innovation.
And that’s it for this week. And next week, I’ll be talking to Dr Aengus Tran, a medical doctor and world-ranked Al engineer and data scientist who is the co-founder and CO of harrison.ai, a clinician-led healthcare Artificial Intelligence (AI) company tackling some of the biggest issues in healthcare causing inequitable diagnosis and treatment today. They have rapidly developed breakthrough AI software in in-vitro fertilisation (IVF), chest X-rays, brain CTs and soon skin conditions, all with the aim of helping clinicians make the right diagnoses faster and treat patients sooner. And I’ll be talking to KPMG economist Sarah Hunter about the interest rate rises and inflation.
In the meantime you can catch me on Facebook, Twitter Instagram 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.