Singtel-owned Optus says routine software upgrade caused the massive 14-hour outage. A network shouldn’t implode so spectacularly because a software upgrade was run.
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 42 in our series for 2023 and today’s date is Friday November 17.
First, I’ll be talking to David Chinn, the president and chief marketing officer for Lexer, the Australian-born customer experience and data platform which helps companies better understand their customer data to serve their customers better.
And I’ll be talking to CommSec chief economist Craig James about market conditions next week.
But first, let’s talk to David Chinn.
So what’s happening in the news?
Singetl-owned Optus says routine software upgrade caused the massive 14-hour outage. A network shouldn’t implode so spectacularly because a software upgrade was run.
The United States is one step closer to losing its last perfect credit rating after Moody’s Investors Service changed the outlook of the nation’s debt to negative on Friday after markets closed. While the move does not automatically mean it will downgrade America’s creditworthiness, it increases the chances. Even the prospect of a US downgrade could hurt Americans’ investment portfolios, make it even more expensive for them to borrow money, and make it more costly for the government to pay off its debts. These effects would likely be even more painful if Moody’s does eventually downgrade the US debt. The nation’s diminished fiscal strength, undone by extreme partisanship in Washington, was a key driver of the action, according to a statement from Moody’s. ”In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability,” the statement said.
Australia could suffer supply chain disruptions lasting for weeks as DP World – one of the country’s largest port terminal operators – struggles to bring its systems back online after a serious cyber attack forced a shutdown of its operations. With an estimated 30,000 shipping containers stranded, a supply shock could push up inflation and force the Reserve Bank to raise interest rates for a fourteenth time, experts have warned, putting pressure on DP World to quickly fix the cyber breach. NSB Cyber co-founder and chief executive Shane Bell said recent breaches had shown regaining control could take a long time. Tens of thousands of shipping containers stuffed with consumer goods like electronics, clothing and food remained trapped at ports around the country on Sunday after stevedore DP World Australia was struck by the cyberattack on Friday. The Middle Eastern-owned stevedore, which operates terminals in Sydney, Melbourne, Brisbane and Perth and handles about 40% of the goods coming in and out of Australia was forced to shut down technology systems at 10am on Friday. The shutdown prevented some 30,000 containers of goods from moving in or out of its terminals, including refrigerated containers that can hold anything from lobsters and wagyu beef to blood plasma. While ships could still offload and pick up containers, the technology systems that allow trucks to share data with the stevedore were turned off, meaning trucks could not get into DP World’s terminals to collect or drop off containers. Containers piled up on docks over the weekend, using up about 90% of the stevedore’s storage space. The Danish boss of DP World’s Oceania business, Nicolaj Noes – who has only been running the stevedore for three months after a long career with Danish shipping firm Maersk and its subsidiary Svitzer – said it was difficult to put a financial value on the 30,000 containers. DP World was testing alternatives to its usual technical systems on Sunday afternoon but Mr Noes warned they would not operate at the same scale. He warned there could be a “snowball effect” from the delays in getting containers to customers, partially due to the difficulty of reassigning import and export slots when systems are restored.
Optus, Telstra and other major telco boards will be required to sign off on a new or updated cyber risk management program every year or face hundreds of thousands of dollars in penalties. The changes are part of new laws to be introduced by Home Affairs Minister Clare O’Neil that classify telecommunications as “critical infrastructure” for the first time, requiring company boards to comply with strict rules that already cover hospitals, utilities, ports and energy generation assets. Following the high-profile Optus hack last year and the nationwide network outage, Ms O’Neil said it was necessary to include telcos under the Security of Critical Infrastructure Act. Ms O’Neil previously criticised the Coalition for not including telcos in the critical infrastructure laws back in 2018, accusing her predecessor, Paul Fletcher, of striking a “sweetheart deal” with the companies. At the time, the Coalition was satisfied telcos were adequately covered by other legislation that included necessary sector standards for cybersecurity. But Ms O’Neil described the existing laws as “bloody useless” during the Optus breach back in October 2022, in which an anonymous hacker stole names, birthdates, phone numbers, addresses, passport, healthcare and driver’s licence details of 9.8 million Australians. The crackdown on telcos precedes the release of the government’s cybersecurity strategy this month, and comes amid the major cyberattack on stevedore giant DP World, , which manages container operations at ports in Sydney, Melbourne, Brisbane and Fremantle.
Australian Securities and Investments Commission chairman Joe Longo has warned businesses must close “alarming” gaps in their cybersecurity defences, while experts said it would be “very costly” for telcos to comply with new cyber laws foisted on them after Optus’ network outage. Mr Longo was speaking as the regulator released an annual snapshot of corporate Australia’s cyber preparedness on Monday, which found almost half were not managing third-party or supply chain risks, commonly used by hackers to breach companies. The government is expected to announce a long-awaited national cybersecurity strategy next week. Details have begun to emerge about new requirements for companies to warn the government about unfolding cyber incidents and ransom demands, in addition to adding telecommunications providers to tougher Security of Critical Infrastructure (SOCI) laws. Optus’ outage, rapidly followed by the damaging cyber attack on DP World’s ports,exposed Australia’s soft digital underbelly, which the government is racing to strengthen. In its report, ASIC rates Australian companies on their cyber maturity on a scale of one to four, where four is ideal. It gave a weighted average across corporate Australia of just 1.66, meaning that most companies are reacting to problems as they arise, rather than properly mitigating them. Small companies were markedly worse than larger ones. It found 44% of organisations fail to manage the cyber risks posed by dealing with external third parties such as vendors, suppliers, partners, contractors or service providers, which often have access to their internal systems. It said 58% of companies have limited or no ability to secure confidential information, and a third of companies have no cyber incident response plan.
Optus has finally revealed what caused its entire network to collapse, leaving more than 10 million Australians cut off from essential telecommunication services, as it faces a $400m compensation bill. A routine software upgrade triggered a mass shutdown of routers across its network, effectively unplugging phone and internet services across the country. Some people couldn’t dial triple-zero for emergency services on fixed lines, while Melbourne’s train network was paralysed and phone lines at some hospitals were blocked among broader economic disruption. Analysts at Maybank — Malaysia’s biggest bank by market value and assets — said Optus could be forced to pay up to $400m under an agreement with Australia’s communications regulator. This would equate to about 10% of its half-year revenue.
Optus customers have defected to Telstra following last week’s 14-hour outage, however Telstra chief executive Vicki Brady doesn’t expect the network disruption will cause a significant shift in market share. Speaking at the telco’s annual investor day, Ms Brady said the response of customers was similar to after last year’s Optus hack, when Telstra experienced a short period of new customers signing up.
The annual Rental Affordability Index from SGS Economics and peak body National Shelter found renters in each capital city were now worse off than before the COVID-19 pandemic in 2019. The index, which compares rents to household incomes, shows previously affordable suburbs in cities from Melbourne to Brisbane would now strain the average household budget. National Shelter chief executive Emma Greenhalgh said more households in the cities and regions were under rental stress and many places were the most unaffordable they had ever been. Separate data from the Reserve Bank, which this month lifted interest rates to a 12-year high of 4.35%, noted advertised rents had increased by 30% since before the pandemic, well above rental inflation. “Together with historically low vacancy rates and little sign that tight rental market conditions will ease in the near term, this is expected to keep rent inflation elevated for some time,” the RBA said in Friday’s statement on monetary policy. Rental inflation neared 8% in the year to September and was expected to increase further, the RBA said. A household is considered to be in housing stress once housing costs are greater than 30% of its total income. The Rental Affordability Index found Sydney had become the least affordable capital city alongside Hobart in the 12 months to June 30, as median rents rose by $100 to $650 a week, costing 29% of the average renter household’s income. No coastal Sydney suburbs had acceptable rental affordability, it found, and inner-city locales were either unaffordable or extremely unaffordable. The average household needed to travel at least 15 kilometres from the CBD to suburbs such as Campsie, Lakemba, Rosehill or Parramatta to find acceptable rents. SGS Economics & Planning principal Ellen Witte said this was a deep economic problem. In Melbourne, rental affordability had dropped to 2018 levels, the report found. While an average rental property cost 24% of an average income, which is considered affordable, Witte said affordable pockets were disappearing. “An entire corridor, stretching from Footscray in the inner west, north to Meadow Heights, was considered ‘affordable’ to the average rental household just last year,” she said. “As of the June 2023 quarter, those options that cost less than 15% of a household’s gross income had all but vanished.”
AustralianSuper has rejected an 11th-hour overture from the Brookfield and EIG consortium to join their takeover of energy giant Origin as the suitors scramble to firm up shareholder support for their near-$20 billion bid in the face of hardening opposition from the country’s largest super fund. The consortium sent the super fund – which manages almost $300 billion for 3.2 million members – a letter on Monday outlining proposed terms that would give AustralianSuper a seat at the transaction table, a last-ditch advance that the super fund swiftly rejected. Brookfield and EIG have locked horns with AustralianSuper, the power retailer and generator’s largest shareholder, as they attempt to muster Origin Energy’s 122,000 stockholders to accept their “best and final” offer of $9.53 a share, ahead of a vote on November 23 by all shareholders that will decide the takeover. Brookfield’s head of renewable power and transition in Australia, Luke Edwards, said there was room for the super fund inside the consortium. But by not joining, AustralianSuper was “standing in the way” of retail investors receiving a compelling premium for their shares. The super fund said an unsolicited letter contained an offer for it to engage with the consortium about acquiring an interest in Origin should the takeover on the terms proposed in Origin’s scheme booklet be successful. “AustralianSuper has rejected an 1th-hour and unsolicited letter received from the Brookfield and EIG consortium today and has reaffirmed that it will be voting against the Origin Energy takeover,” the fund said. AustralianSuper said its position, previously made public, is unchanged on the upcoming vote as it believes the offer remains substantially below its estimate of Origin’s long-term value. The fund won’t reveal its own valuation but market speculation puts it around $12 a share. The suitors need 75% of votes cast at the meeting to back their bid for it to succeed, and a strong turnout from nearly all shareholders is crucial. Typically, about 60% of shareholders vote or appoint proxies at scheme meetings and under that scenario AustralianSuper’s 15% stake will knock out the takeover as it would represent 25% of the shares cast.
ANZ reported a record full-year cash profit of $7.4 billion, 14% higher than a year earlier, boosted by its diversification into institutional banking for large companies amid competitive pressure in Australian housing.
Commonwealth Bank of Australia’s profit was flat in the first quarter due to lower net interest margins from continued competitive pressure for deposits. Unaudited cash profit was $2.5 billion in the three months to September 30, according to a statement Tuesday, flat on the second half 2023 quarterly average.
News Corp chief executive Robert Thomson has said the market is undervaluing the media company and the potential of its portfolio of digital assets, despite losing subscribers in Australia in the first quarter of fiscal 2024. The media company, controlled by Rupert Murdoch, on Friday posted a 1% jump in revenue to $US2.5 billion ($A3.92 billion) for the three months ended September 30, 2023. Earnings for the period rose 4% to $US364 million ($A571 million). News Corp’s overall performance was buoyed by its Dow Jones business, with profits for the unit up 10% to $195 million. However, revenues for News Corp Australia fell by 7%, due to foreign currency fluctuations and lower advertising revenues across both print and digital. Digital subscribers at News Corp Australia’s news mastheads, which include The Australian, The Daily Telegraph, The Herald Sun and others, rose slightly to 937,000 across the year, however compared to the most recent quarter, fell by 6,000. It was also a challenging quarter for majority Murdoch-owned pay TV company Foxtel, with earnings before interest, taxes, depreciation and amortisation down 13% to $152 million compared to the year prior. While total subscribers grew year-on-year marginally, 38,000 customers left its streaming platform Binge in the quarter. Despite the subscriber loss, Thomson said the overall News Corp business was thriving, adding that print revenues now account for less than 5% of the company’s total revenue, compared to 39% in 2014.
Billionaire philanthropist Andrew Forrest is an “evil spirit” whose iron ore miner Fortescue Metals Group has torn apart a Pilbara Indigenous community, according to witness statements freshly released by the Federal Court. The written submissions of 10 Yindjibarndi elders and members who testified in the group’s ongoing legal challenge against Fortescue earlier this year were officially made public by the Federal Court on Friday, shedding new light on the miner’s controversial early land access negotiations and the lasting cultural and social fallout from its activities. The statements also describe in detail some of the violence that has occurred between members of the Yindjibarndi Aboriginal Corporation and their counterparts from Wirlu-murra Yindjibarndi Aboriginal Corporation. WYAC was formed as a splinter group after YAC knocked back offers from Fortescue when the miner was trying to expand its Solomon iron ore operations. While the Fortescue-backed WYAC went on to strike deals with the miner, YAC in 2019 was granted exclusive native title over much of the Solomon area. The Federal Court case is considering what sort of compensation should be paid to YAC, with some estimating the claim could be worth up to $1 billion. In one of the recently released witness statements, Yindjibarndi elder Stanley Warrie described Dr Forrest as a “joona”, or evil spirit. “When I first met Andrew Forrest, I trusted him because he told us he grew up with Aboriginal people at Mindaroo Station … He knew about our suffering from being taken off our land. I thought that he was a good bloke,” Mr Warrie said. “Looking back now, I can see that there was no respect, and he was going to stop at nothing to build the mine without taking the Yindjibarndi people’s permission, culture or feelings into account.”
And that’s it for this week. And next week,. I’ll be talking to David Fairfull, the founder and CEO of Metigy about his company’s AI-powered digital marketing solution for SMEs. And I’ll be talking to Callam Pickering from Indeed about the latest jobs 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