PwC tax leak crisis could see more executive heads roll with corporate veteran Ziggy Switkowski to lead internal probe.

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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 16 in our series for 2023 and today’s date is Friday May 19.

First I’ll be talking to the Matt Keon, the CEO of GenieUs, the Aussie startup on a mission to tackle the world’s fastest-growing long-term health risk: neurodegenerative diseases.  And I’ll be talking to AMP Capital chief economist Shane Oliver about the Budget.

But now, let’s talk to Matt Keon.

So what’s happening in the news?

Recession has arrived, judging by corporate America’s earnings. With the first-quarter earnings season drawing to a close, the profits of S&P 500 companies are estimated to have dropped 3.7% on average, compared to a year ago. While data compiled by Bloomberg Intelligence shows that 78% of firms surpassed forecasts, that’s less impressive than it sounds, given analysts had slashed their expectations before the season kicked off.  More crucially, it was the second straight    quarter of earnings declines for corporate America. Bearish earnings forecasts now centre around the April to June period, for which a 7.3% profit slump is pencilled in, according to data compiled by Bloomberg Intelligence. And the pinch from higher interest rates and wilting consumer demand will extend into the third quarter of 2023, analysts reckon, backtracking on earlier predictions that earnings recovery would kick in around then. That implies a longer profit recession than during the pandemic. An earnings drop of more than three quarters was last seen in 2015 to 2016, when the Federal Reserve started its last interest rate hiking cycle.


One of Twitter’s new chief executive Linda Yaccarino’s prime tasks will be to lure back marketers who suspended spending on advertising in Twitter out of concerns Elon Musk would weaken content moderation or that there was too much uncertainty surrounding the company.   She has a head start advising Mr Musk: After advertisers bolted last year, Ms Yaccarino reached out to help him navigate Madison Avenue and understand advertisers’ concerns better. Inside NBCUniversal, the 60-year-old is regarded as an advertising sales machine. She is nicknamed the “Velvet Hammer,” because her hard-nosed negotiation tactics come wrapped in a friendly package.  Ms Yaccarino got her ad dollars back — and then some, ad executives say. During her 12-year tenure at NBCUniversal, Ms Yaccarino and her 2,000-plus-person advertising sales team have generated more than $US100bn in ad sales, according to the company. In a tweet Friday announcing the news, Mr Musk said Ms Yaccarino will focus “primarily on business operations,” while he handles product design and technology. “Looking forward to working with Linda to transform this platform into X, the everything app,” he said.

The nation must kickstart productivity or homeowners will be hit with more interest rate hikes, the Reserve Bank of Australia has warned. The warnings were sounded a week after Jim Chalmers’ second federal budget predicted a swift decline in price growth over the next year, and as consumer confidence tumbled to recessionary levels on the back on the shock rate hike earlier this month. The minutes from the RBA board meeting showed members debated the case for a pause versus a hike and, while it was a “finely balanced” decision, there were “multiple arguments” for an 11th increase in 13 months. In particular, board members had become increasingly concerned that the nation’s flatlining productivity performance since the depths of the pandemic could make it difficult to bring inflation back under control. With unions pushing for the Fair Work Commission to ­approve a 7% increase to the minimum wage in coming weeks, the RBA said its forecast peak in economy-wide wages growth of 4%  was consistent with ­inflation slowly returning from 7%  to 3% in two years. But that forecast was “predicated on productivity growth returning to around the modest pace recorded prior to the pandemic”. “If this did not occur, growth in unit labour costs would be uncomfortably fast,” the minutes read. They flagged this as “another upside risk to inflation”. RBA board members said the two-year runway to bring ­inflation back to 3%  “left little room for upside surprises … given that inflation would have been above the target for around four years by that time”.

Former RBA Governor Glenn Stevens has warned that interest rates are unlikely to fall amid ‘once-in-a-generation’ inflation battle. Speaking as a keynote guest at the gas industry’s annual conference, organised by the Australian Petroleum Production and Exploration Association (APPEA), Stevens said households and businesses should brace for interest rates to staying higher for longer. The man who ran the RBA for a decade between 2006 to 2016 said it was a “no-brainer” for central banks to move aggressively last year to try to stamp out inflation with steep rate rises. “Central banks are in a once-in-a-generation battle to return inflation to the very low and stable levels that it was at, and that was such a strong foundation of the preceding several decades of prosperity,” he said. Mr Stevens also poured cold water on the prospects of getting inflation under control without a recession, in comments directed at the US, but similarly relevant to RBA governor Philip Lowe’s statements about the “narrow path” Australia’s economy faces.


Apple, Google and Microsoft are believed to be among 23 US tech firms that PwC Australia contacted hours after treasurer Joe Hockey announced an anti-tax avoidance law in the May 2015 budget, to say the big four firm had a workaround plan for the legislation. While the 14 US tech giants who took up PwC’s plan and engaged the firm to sidestep the multinational anti-avoidance law (MAAL) are likely to already know that they are named in internal firm emails released on May 2,  they would have been unaware the advice was developed using leaked Australian government tax information. The MAAL was part of a worldwide effort to tax multinationals, and PwC’s partners saw the confidential information as a way to give them an advantage to sell their services internationally. PwC believes the identities of these companies are likely to be released by order of the Senate in the coming weeks, meaning the tech companies now find themselves embroiled in the expanding scandal.

Former NBN co-chairman Ziggy Switkowski has been appointed to lead an independent review of PwC’s troubled Australian operations, with the power to fire people involved in the scandal around the firm’s use of confidential tax policy information, as former chief executive Tom Seymour resigns from the firm. The move follows the news that some of PwC’s top executives flew into the country to take control of a problem that is now affecting some of its biggest global clients. PwC Global’s general counsel, Diana Weiss; the head of its tax and legal operation, Carol Stubbings; and chief risk officer Coenraad Richardson are in Australia to oversee an independent review to rebuild the firm’s reputation. On Monday afternoon, PwC announced Switkowski would lead an independent review of the firm’s governance, accountability and culture following the issues identified by the Tax Practitioners Board’s investigation into the firm’s use of confidential information. At a Senate estimates hearing in March, the Tax Practitioners Board said up to 30 PwC staff were involved in emails sharing the confidential information. PwC has confirmed that some are still in senior positions at the firm. On Monday, PwC announced that Seymour would “retire from the partnership on 30 September, 2023, to enable an orderly transition”. Seymour has also stood down from the board of a well-connected military contractor that is chaired by former defence minister Christopher Pyne.

US gold giant Newmont Corp secured a $28.8 billion ($US19.2 billion) deal to buy Australian rival Newcrest Mining Ltd, consolidating its position as the world’s biggest bullion producer with mines across the Americas, Africa, Australia and Papua New Guinea.  The transaction, now unanimously approved by Newcrest’s board but pending regulatory approval, is the gold mining sector’s largest deal to date, surpassing Newmont’s purchase of rival Goldcorp Inc. in 2019. Newcrest, whose then chief executive officer stepped down abruptly at the end of last year, rejected initial overtures, though it had indicated earlier this month that it planned to recommend an improved takeover offer from its suitor. Newmont’s acquisition adds more exposure to gold at a time when bullion is testing a record high, and the deal will crucially also boost its resources of copper — a metal where demand is expected to outpace supply as the transition away from fossil fuels gathers pace.

Banks, telcos and the big social media platforms will be liable to reimburse consumers who lose money to scams, under a new cross-industry code to take down fraudsters’ websites and verification of businesses to stop fake accounts and advertising. Financial services minister Stephen Jones committed to the development of the mandatory co-regulatory code by the Australian Competition and Consumer Commission over the next six months after formally launching a new national anti-scam centre (NASC). Borrowing from a United Kingdom and Canadian initiative successfully used for anti-terrorism, money laundering and cyber crime prevention, the scam centre will establish special “fusion cell” hit squads to disrupt scams using a new $44 million intelligence platform. Last week’s budget allocated $58 million for funding over the extra three years. Mr Jones said the threat sharing and notification platform is expected to take two years to develop. Additional funding has also been given to the investment regulator, the Australian Security and Investment Commission (ASIC), to identify and take down phishing websites and others that promote investment scams. A $10 million SMS registry, similar to a Singaporean system, is also being developed to block fraudulent texts purporting to come from government agencies and companies.

Telstra has raised the prices of its postpaid mobile plans by 7%– approximately $4 a month – in line with inflation but slightly above analyst expectations, after it announced prepaid customers would be hit by a 20% price rise from July. The telco updated its website on Monday morning with the pricing increases, which follow a jump from $1 to $2.50 for the amount it charges customers who pay over the counter at Australia Post, in Telstra’s own stores or by cheque. The price rises are yet to take effect, but customers are being notified of the changes when browsing information about Telstra’s mobile plans. The company’s cheapest mobile plan – 40GB for $58 per month – will rise to $62 per month under the changes, amid an ongoing cost of living crisis. Telstra’s move to lift prices has sparked speculation whether Optus and TPG will follow suit.

The Australian Tax Office will crack down on landlords’ dodgy deductions, after a review found nearly nine out of 10 landlords made mistakes on their annual returns and incorrectly claimed expenses. People claiming tax deductions for working from home will also come under the microscope, as will people who earn income by putting their homes on short-term rental websites like Airbnb or Stayz, or who run a business from home, but then dodge paying capital gains tax when they sell. The ATO received $89.6 million in last week’s budget to implement the new crackdown, which is expected to increase Tax Office receipts by $474.9 million over five years. The Tax Office has estimated that in 2019-20 there was a tax gap of about $9 billion as taxpayers paid 94.4% of the total theoretically owed to the Commonwealth. Deductions for rental property expenses – such as people incorrectly claiming negative gearing deductions – contributed $1.3 billion to that gap. Assistant tax commissioner Tim Loh said the Tax Office was targeting areas where people often made mistakes on their returns by, for example, leaving out rental income, overclaiming expenses or claiming for an improvement to their home – even though 87% of individual rental owners use a registered tax agent to prepare their income tax return. The method used to calculate people’s working from home expenses has changed and people can either deduct the actual cost, or use a fixed-rate method offered by the Tax Office – with proper record keeping required in both cases.  Loh said while the family home was exempt from capital gains tax, it was vital that people kept records of any period in which their property was used to produce income because of the tax implications when it came time to sell.

Mining companies that fail to live up to industry super fund HESTA’s standards on gender relations may find themselves dumped from the fund’s portfolio, or their boards could be targeted in shareholder action.  HESTA, which holds more than $72bn in funds for its one million members, has spent several months engaging with Australian mining companies over sexual harassment and support for women in the workplace.  In a report released on Monday, HESTA said it had engaged with 19 companies across its $3bn portfolio of Australian mining companies, but remains concerned about two operators who failed to engage. HESTA responsible investment general manager Kim Farrant said the fund was concerned about the risk to shareholders and the need for corporate responsibility.  She said mining companies that failed to act on sexual harassment risked exposing themselves to serious legal action.

A venture capital fund partly owned by New York’s largest healthcare provider will invest $US12m ($A   17.75m) into a Melbourne-based medical technology start-up that is harnessing artificial intelligence for the detection of debilitating eye diseases such as glaucoma and could one day provide early warning of heart attacks and strokes. Eyetelligence, a Melbourne-based health technology company that uses advanced AI technology and renal imaging to screen for eye and systemic diseases, has won the first ever funding deal from the new specialist American VC fund. It places Eyetelligence at the centre of the looming AI revolution and among the ranks of tech giants such as Google and Apple which are searching for ways to use AI in a range of disciplines including health to create new diagnostics, medicines and treatments. Springing out of research from the University of Melbourne and the Centre for Eye Research Australia, Eyetelligence’s cutting edge AI technology is targeting screening for three common eye diseases – diabetic retinopathy, age-related macular degeneration and glaucoma – which can be detected far earlier using algorithmic renal image analysis. Its backers, a group of Australian scientists, doctors and entrepreneurs, believe this could be just the tip of the iceberg. AI could one day discern diseases that affect the microvascular system, providing an early warning for cardiovascular diseases. These are the hopes of big US investors led by Northwell Holdings – a fully owned for-profit subsidiary of Northwell Health, which is one of the largest healthcare providers in the US as well as being the biggest in New York – and its VC partner New York-based Aegis Ventures. Together Northwell Health and Aegis have created a new VC fund called Ascertain, which will help fund the research and creation of new health and medical applications backed by AI. The $US12m investment in Eyetelligence marks the funds’ maiden investment and its first seed investment outside the US, with Ascertain committed to accelerating the development of healthcare AI companies globally with a keen eye on Australia.

Nine net zero zones could be created across Australia where more than 90% of emissions from heavy industry could be neutralised through shared infrastructure for carbon capture and storage. That is the concept aired in a new report by the oil and gas industry association APPEA, which is stepping up advocacy for the controversial technology in the face of mounting pressure to cut emissions in LNG and in other heavy industrial processes. The zones could be in areas such as Adelaide-Port Augusta, the Pilbara, Melbourne-Gippsland, Sydney-Newcastle and Queensland’s Surat Basin, and could cover almost 80% of the 215 facilities covered by the Labor government’s safeguard mechanism and 92% of their emissions, according to the report, which was compiled by the CSIRO. Samantha McCulloch, chief executive of APPEA, said the zones could become “  magnets” for regional investment and provide a framework for different industries to work together to accelerate the path to net zero emissions.

The Transport Workers Union says wall-to-wall Labor governments across the ­nation give it an “historic opportunity” to push for significant pay rises and better conditions for 10,000 aviation workers.  In a challenge to incoming Qantas chief executive Vanessa Hudson to “repair the damage” caused under Alan Joyce, TWU national secretary ­Michael Kaine said it was time for a fresh start and to rebuild aviation from the ground up. “The electoral map is overwhelmingly red, and we have a federal government and governments in five states and two territories who share our goal of creating a better, fairer, more equal Australia,” Mr Kaine said. “This is an historic opportunity.”  In a keynote address to the union’s national council on Tuesday, Mr Kaine revealed that the union will run a work value case in the Fair Work Commission “to substantially lift pay and conditions” for aviation workers. The union will also explore award-specific applications to insert new allowances, enhance conditions and provide roster protections. It said the aviation workers to be impacted included pilots, cabin crew, baggage handlers, refuellers, catering staff and cleaners. The union estimates in excess of 10,000 workers will be affected. While yet to work out the size of the pay claim, the union believes the work of aviation workers is undervalued.

And that’s it for this week. And next week, I’ll be talking to Rowan Wilde, the Co-Founder of Australian fintech HelpPay, which is designed to help financially distressed Australians navigate the cost of living. And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures.

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

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 Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week