Australia’s inflation rate fell to 2.8% in Q3 of 2024 from 3.8% in Q2, the lowest figures since 2021.
But the trimmed mean and services inflation is still too high so forget about a rate rise now.
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.
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 40 in our series for 2024 and today’s date is Friday November 1.
First I’ll be talking to Michelle May, principal from Michelle May Buyers Agents. We’ll talk about how to be on the ground with buyers and why there is an emotional connection with property.
And I’ll be talking to Rabobank economist Michael Every about the latest with the Chinese economy and what impact will the US election have on China.
But first, let’s talk to Michelle May
So what’s happening the news?
Australia’s headline inflation sank to its lowest level in more than three years in the September quarter, as lower energy prices and elevated interest rates eased price pressures in the economy. The annual consumer price index for the July-September period was 2.8%, or the lowest since the March quarter of 2021, the Australian Bureau of Statistics reported on Wednesday. That outcome compared with the 2.9% pace expected by economists and the 3.8% headline result for the June quarter. The underlying inflation rate – the trimmed mean that the Reserve Bank watches closely – came in at 3.5%. The result was in line with economists’ forecasts of 3.5% and the 3.9% pace in the June quarter. However, the ABS pointed out that annual Services inflation – which is what the Reserve Bank of Australia is looking out for – was 4.6% in the September quarter, slightly higher than the June quarter and has remained around 4.5% for the past 12 months. Higher prices for rents, insurance, education and medical, dental and hospital services were the main contributors to Services inflation.
Australia’s Treasurer Jim Chalmers says there will be no cost-of-living “free-for-all” in the lead up to the election, promising that responsible economic management would be the defining feature of the Albanese Labor government. Dr Chalmers rejected suggestions the government needed to ramp up cost-of-living assistance to avoid a repeat of Labor’s heavy loss in the Queensland election on Saturday. Ousted Queensland premier Steven Miles tried to win over voters with costly hand outs like 50¢ public transport fares and free school lunches, but failed to convince them he had a coherent economic plan. Dr Chalmers said while there would be extra cost-of-living assistance unveiled before the federal election, due by May next year, the emphasis would remain on responsible economic management, such as minimising debt and deficit and trying to force down inflation. “This election was never going to be, from our side, a free-for-all of public spending. It wasn’t going to be before Saturday’s outcome, and it’s not going to be after Saturday’s outcome,” he said. Dr Chalmers said the government understood people were still doing it tough and “often express that at the ballot box, which is their right”. “And so we will go through the lessons of Saturday with that in mind,” he said. “Everything we will do will be through the prism of what’s responsible, what is affordable, and what will make a meaningful difference to people doing it tough.” Dr Chalmers pointed out that the Albanese government was not in as parlous a position as its Queensland state counterpart was. “Theirs was a government that had been there for almost a decade, ours is a government in its first term,” he said. The prevailing view in federal Labor was not to indulge in a spendathon like Mr Miles, but to craft one or two measures with real cut-though, like the 50¢ bus fares.
The Morrison government’s delays procuring COVID-19 vaccines cost lives and delivered a $31 billion hit to the economy, while Australians have lost trust in government and the health system is still struggling, the first wide-ranging inquiry into the national response to the virus has found. The report, released on Tuesday afternoon, revealed more than $210 billion in federal government stimulus aimed at protecting the economy amplified the inflation pressures still working their way through the country.
Myer’s merger with a big portfolio of clothing brands owned by Solomon Lew’s Premier Investments will let it expand its lucrative loyalty program to younger shoppers and get better deals from its suppliers. It’s the biggest shake-up of the retailer since it returned to the ASX in 2009. The deal, announced on Tuesday, will add 719 stores to Myer and a portfolio of labels that range from those appealing to young adults in Jay Jays and Dotti to older women with Jacqui E. Those chains, known as Premier’s Apparel Brands, also include Just Jeans and Portmans. Mr Lew will personally control about 27% of the bigger Myer group if the transaction is approved by shareholders, and Premier will focus on growing its Peter Alexander sleepwear and Smiggle stationery brands.
Australia’s major accounting firms are raking in tens of millions of dollars in remuneration fees amid a surge in insolvencies as rising costs, dwindling revenue and a crackdown on unpaid tax led businesses into financial strife. Insolvency appointments have soared 40% in the 2024 financial year to a record high of 11,049 – surpassing the peak of the Global Financial Crisis – with the latest September quarter 45% above the same period in 2023. BDO business restructuring national leader Duncan Clubb said the process outsourced the business and its liabilities to a third party who had to ensure they would not lose money if it was a viable business. He said fees started at about $50,000 and could easily run into the millions for more complex jobs. “It’s a scalable business model with accounting and you charge by the hour, so it can get expensive very quickly. As examples, Rex and its subsidiaries are shaping up to be the most costly voluntary administration in several years, with EY estimating that its remuneration will be between $6.4m and $7.9m, depending on when a buyer is found. Hall Chadwick, which oversaw the collapse of budget carrier Bonza and later its wind up, collected $3.52m. Godfreys, a seller of vacuum cleaners for almost 100 years, until it collapsed in January and closed for good in May, resulted in a claim by administrator PwC for $3.54m, while the voluntary administration of Booktopia is estimated to have cost up to $900,000 by McGrathNicol before digiDirect acquired it.
Almost one in six businesses are rated at a high risk of collapsing thanks to high interest rates, cost of living and the lingering effects of the Covid-19 pandemic which continues to put pressure on the food and beverage services sector. Credit reporting bureau CreditorWatch’s latest industry risk ratings confirm hospitality is the most under pressure with a mind-boggling 16.2% of businesses rated at a high or very high risk of failure. Administrative and support services are next at 7.2%, and arts and recreation services are at a 7% high or very high risk of collapse. CreditorWatch said the current higher interest rate regime, increased input costs, energy price rises, reduced visitation in CBD locations, and lower consumer demand were negatively affecting discretionary spending.
Retailer Mosaic Brands, which owns some of Australia’s iconic apparel brands like Rivers, Katies and Millers, has collapsed and KPMG has been appointed as receiver. Also appointed as voluntary administrator is FTI Consulting. Working on the receivership for KPMG on behalf of lender Hillco, owed between $20m and $40m, is David Hardy, Gayle Dickerson, Ryan Eagle and Amanda Coneyworth. Rival firm KordaMentha had also been positioning for the receivership role. KPMG said in a statement released to the market that the appointment of the external administrators by the board follows what has been a difficult period for the business which has faced a number of structural challenges and disruptions relating to suppliers and inventory management. “The Mosaic Group and the management team, led by chief executive Erica Berchtold (former boss of The Iconic), see this as a necessary process to reset and a pathway to accelerate its plans to focus on its core brands of Katies, Millers, Noni B and Rivers resolve legacy issues and right size the store network to ensure the ongoing success of the business,” it said. It comes as apparel chains come under increasing pressure, and as a result of the weak economic environment and cost of living crisis, are aggressively discounting stock. Ms Berchtold said the priority was to rationalise and put plans in place to focus on the core brands. Mosaic operates nine retail clothing brands with about 700 stores in Australia and New Zealand, as well as through online platforms. It flagged it would report an operating earnings before interest, tax, depreciation and amortisation loss of between $5m and $10m and an earnings before interest and tax loss of between $15m and $20m for the year to June. It also expected a loss for the first half of this financial year. The disruption of migrating to a fully integrated logistics supply chain and distribution system with a newly appointed global partner has hurt the group.
Prime Minister Anthony Albanese has defended receiving dozens of free Qantas upgrades and his relationship with former Qantas chief executive Alan Joyce. Nine newspapers report that Mr Albanese received at least 22 free upgrades over more than a decade. Mr Albanese told reporters all his upgrades had been declared. “From time to time, members of parliament receive upgrades. What’s important is that they are declared. All of mine have been declared,” he said. “I note that a range of them go back a long, a long period of time [and] that they have all been declared as appropriate.” Joe Aston’s book reportedly claims the prime minister dealt directly with Alan Joyce on several occasions, and that he asked Mr Joyce to make his son Nathan a member of the Chairman’s Lounge in 2022 after the federal election. Mr Albanese’s relationship with the former Qantas boss has been under scrutiny since the government made a decision not to allow Qatar Airways more flights into Australia. He said he had the same relationship with Mr Joyce as he had with the former Virgin CEO John Borghetti. When asked whether politicians should stop taking airline upgrades, Mr Albanese said: “It’s a matter for them.” Opposition Transport Minister Bridget McKenzie said the prime minister had more questions to answer.
Incoming Queensland premier David Crisafulli, who is now the highest-ranking conservative leader in Australia, is expected to hold firm to his repeated rejection of his federal counterpart’s nuclear energy push. Mr Crisafulli will be sworn in as premier after securing a comfortable mandate at the weekend’s election, with his ascension compounding an awkward schism in the energy policies of the state and federal party branches. Establishing a nuclear energy grid across the country, which includes two nuclear plants in Queensland, will form federal Opposition Leader Peter Dutton’s headline policy at the next national poll, due by May. Mr Dutton joined Mr Crisafulli in the opening days of the state election campaign when they were peppered with questions about their differences on nuclear energy. Two of the proposed sites – Tarong and Callide – are in Queensland, but Mr Crisafulli has said he would not repeal the state’s nuclear ban. “Friends can have differences of opinion – that’s healthy,” the now premier-elect said at the time. The Queensland-based federal leader will be eager to shore up the Coalition’s dominance in the Sunshine State, where it holds 70% of the seats, but it was unlikely to secure the support for nuclear from the incoming premier. Nationals leader David Littleproud, another Queensland figure, has in the past been infuriated by the state branch’s refusal to fall in behind the energy policy and on Sunday again said he expected all states to back nuclear if the coalition forms government. “We expect that if the Australian people give us that mandate, the state premiers around the country respect that mandate, and we get on with the job,” he told the ABC on Sunday.
The super fund for butchers and meat industry workers will emerge as the largest shareholder in fruit and vegetable processor SPC when it relists on the ASX in December. The butchers’ super fund was called the Australian Meat Industry Super Trust until a rebrand in late 2023 to Australian Food Super. It will hold 16.5% of the enlarged SPC Global when it relists on the ASX. The butchers’ super fund has almost 68,000 members and $3.2 billion. SPC chairman Hussein Rifai’s private entity Hajer Pty Ltd will hold 12% of the new listed SPC Global upon completion, while private equity group The Eights will hold 15.2%. Shareholders of the Original Juice Co, chaired by former Victorian premier Jeff Kennett, will vote on November 22 on a proposed transaction where the much larger SPC business will join forces with Original Juice Co and the infant formula business Nature One Dairy. It will have combined annual revenue of $400 million in 2024-25.
The cyberattacker in Optus’ 2022 data breach had “a high degree of knowledge” of its confidential systems, the telco has claimed, as it seeks to counter allegations from the communications regulator that the hack was unsophisticated. Optus is being sued in the Federal Court by the communications regulator, alleging it did not protect customers’ confidential information before being struck by a cyberattack on September 17, 2022, at 8.17am. The attack lasted until about 3.45am on September 20. The Australian Communications and Media Authority filed proceedings in May related to the September 2022 cyberattack, alleging the Singaporean-owned company had failed to protect the personal information of its customers. In its statement of claim filed last week, ACMA alleges the hack was “not a highly sophisticated cyberattack and did not require advanced skills” and that it was “carried out through a process of trial and error”. ACMA alleges that a publicly accessible internet domain, known as the “target domain” was readily identifiable by examining Optus’ web or mobile sites. “From 12 July 2018, a post on the website GitHub.com identified the target domain and code to retrieve data using one of the target APIs [application programming interfaces],” ACMA said. APIs allow computer programs to communicate with one another. The cyberattack was able to get customers’ personal information due to a coding error in September 2018 that did not adequately protect the target domain, ACMA claims. ACMA claims Optus’ actions breached the Australian Telecommunications Act on at least 3.6 million occasions. Each contravention carries a maximum penalty of $250,000. But Optus has denied ACMA’s allegations, arguing that it was the target of a criminal act that deliberately targeted its systems. “The cyber-attacker commenced the cyber-attack with a high degree of knowledge of Optus’ systems. Optus admits that its mobile business collected personal information from its customers but denied that it “held” information such as driver’s licence numbers, Medicare card number, birth certificate details and names and addresses. “The personal information was stored in databases owned by Optus Systems Pty Limited, another entity in the Optus group of companies, accessible to and by Optus Mobile for authorised purposes,” the company said. Optus has already lost a separate court battle after trying to stop information in a report it commissioned from consultants Deloitte into the 2022 cyberattack from being released as part of class action proceedings brought by Slater & Gordon on behalf of the telco group’s customers. In May, the Federal Court dismissed an appeal brought by the telecommunications group to try to keep the Deloitte report confidential. While Deloitte’s forensic investigation report on the causes of the cyberattack in September 2022 will not be publicly released, some of the information in the report could become public through the class action proceedings.
And that’s it for this week. And next week, I’ll be talking to Amsterdam based Stephanie Walker, a product owner at NMS Productions who uses the Noa Coach team which provides an unparalleled AI-driven coaching platform designed to provide cost-effective, time-saving, and highly personalized support to individuals dealing with workplace stress and anxiety.
And I’ll be talking to economist Saul Eslake about Australia’s latest inflation figures.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.
