COP 27 deal in Egypt leaves out more ambitious commitments of emissions peaking in 2025 and a phase-down of all fossil fuels — not just coal as agreed at COP26 in Glasgow.
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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 43 in our series for 2022 and today’s date is Friday November 25.
First, I’ll be talking to the CEO of Profectus Group, Chris Hutchins. He will talk about inflation and the hidden EBIT killer: financial erosion. Financial erosion occurs when businesses such as retailers get overcharged, even slightly, by suppliers along the supply and value chain. While small, these small overcharges snowball and can become a huge issue. It can also come in the form of rebates not claimed by retailers or small oversights with compliance of contracts. To wit, in 2021 Profectus helped recover nearly $29 million in unclaimed revenue or supplier overcharges for its clients across nearly 6,500 claims – which is just the tip of the iceberg. And I’ll be talking to Indeed economist Callam Pickering about the latest wages and jobs figures.
The COP27 climate talks in Egypt, which came close to collapse on their final day, came to a resolution Sunday with a last-minute deal to create a fund to aid poor countries harmed by the impacts of climate change. The agreement marks a landmark moment in global climate politics — an acknowledgment that richer nations are responsible to the developing world for the harm caused by rising temperatures. It was an historic win for the countries facing rising seas, devastating floods and drought. The deal also redraws the old divide between rich and poor nations into a new order that puts countries responsible for planet-warming greenhouse-gas emissions against those suffering the consequences. Still, the approval came at the cost of leaving out of the final agreement more ambitious commitments such as emissions peaking in 2025 and a phase-down of all fossil fuels — not just coal as agreed at COP26 in Glasgow last year. The US went further on a proposal that wasn’t even on the table at the start of the summit. US negotiator Trigg Talley said the world’s biggest economy and largest historic emitter was ready to support the “phase out” — not just “down” — of all fossil fuels. It didn’t go through, with Saudi Arabia, Iran, Russia and other oil-producing countries pushing back hard. At one point, the draft agreement included language that would have weakened past commitments. The final text leaves the commitment to keep global warming at 1.5 Celsius by 2100 hanging by a thread.The deal, which was adopted without a single objection, responds to a key demand of developing nations and small island states. Delegates agreed to establish funding arrangements for loss and damage, as it is known, in the very first minutes of a meeting that convened after 4 a.m. in Sharm El-Sheikh. But they were still deliberating over other thorny issues, including how the world should navigate the transition away from fossil fuels and rein in greenhouse gas emissions driving climate change. Debates were still expected over a potential pledge to phase down all fossil fuels and peak emissions by 2025 — language that had been sought by the EU and other countries. But the loss and damage agreement already marked progress, three decades after Vanuatu first asked other nations to set up an insurance fund to help island nations cope with rising seas. On loss and damage, countries agreed that the most vulnerable nations would be prioritized, and high emitters like China and India may also be able to contribute to the fund. Under the agreement, the nations decided “to establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change, in responding to loss and damage.” That includes a focus on “providing and assisting in mobilizing new and additional resources,” which are meant to complement existing programs and funds. The breakthrough came after a flurry of last-minute negotiations over how to address the increasing toll climate change is exacting from developing nations that have contributed few of the greenhouse gas emissions driving the phenomenon. The issue took on new urgency following monsoon flooding this summer in Pakistan that left more than 1,700 dead and caused at least $30 billion in losses. Vulnerable nations had asked for a new program to provide technical assistance and funding as they deal with more intense droughts, storms and other weather events exacerbated by the Earth’s warming. There are still numerous details left to work out, including how the loss and damage facility will actually work or the amount of money that will go into it.
Administrators of the local arm of collapsed crypto exchange FTX warn some Australian customers have lost “very significant” sums of money and that many are unlikely to see the return of their investment, as the company’s failure roils the sector. KordaMentha administrator Scott Langdon has asked for more time to convene a first creditors’ meeting, and said in an affidavit that 29,234 separate customers have been identified as having lost significant property, and “recoverability and current value are yet to be determined.” FTX Express has $39m in its accounts and FTX Aust has $3m, the administrators have found so far. More than 280 emails have been received from customers, some using colourful language to demand their funds back. The collapsed cryptocurrency exchange owes its 50 biggest global creditors nearly $US3.1bn ($A4.69bn), according to a separate US bankruptcy court filing. FTX owes funds to an estimated one million creditors, after the parent company led by founder Sam Bankman-Fried filed for bankruptcy in Delaware on November 11, in one of the largest collapses in corporate history.
Anthony Albanese has accused opponents of the government’s controversial industrial relations changes of harbouring “an ingrained ideological objection to workers being paid fairly” as he looks to bring renewed energy to attempts to pass the bill before the year ends.In his first appearance at home after rubbing shoulders with world leaders for the past 10 days, the prime minister told a union event on Monday that opponents of the plan believe the only way to grow the economy is to limit economic opportunity and diminish workers’ security. The intervention comes as employers and the Australian Chamber of Commerce and Industry launch a last-ditch attempt to delay the bill until 2023 or excise multi-employer bargaining provisions entirely. On Sunday, Mr Albanese said he could extend parliament until closer to Christmas to pass the Secure Jobs, Better Pay Bill. He the government wanted to push up wages urgently, despite opposition to the plan from business and employer groups. ACT Independent David Pocock is under pressure to agree to a deal before MPs leave Canberra on December 1, but is so far unwilling to sign on to the multi-employer bargaining rules. He believes the government is rushing the bill unnecessarily, and he wants controversial provisions separated out, to allow for the majority of the plan to pass and multi-employer rules to face further scrutiny next year.
The Australian Securities Exchange has scrapped a $250 million blockchain project after an independent review identified significant challenges with its ability to meet legal requirements. The controversial project was scheduled to replace the legacy CHESS (clearing house electronic subregister system) platform in April after years of setbacks including market readiness and the global pandemic. However, a recent review by Accenture found it would not be capable of meeting high ASX and market standards. Six core issues are indicated in the report including latency and concurrency. Since ASX processes millions of trade settlements daily, any latency (delay) will affect its operations. The Accenture report also pointed out that after seven years, only 63% of the project is completed. Significant technology, governance and delivery challenges are believed to be core issues of the blockchain proposal which would threaten to undo the secure and stable environment created by CHESS since its introduction more than 25 years ago. The ASX will write-off up to $255 million pre-tax in costs associated with the project, which was intended to be used as a world-first example of industrial-scale blockchain use.
Shares are set for another disappointing year, according to leading strategists, and they don’t expect much headway until the Fed not only stops tightening but starts to cut rates. Strategists at Citi, Goldman Sachs, JP Morgan and Morgan Stanley are among those warning of limited upside potential for the US market in 2023. UBS, Macquarie and Morgan Stanley strategists set similarly conservative targets for the Australian market.
The OECD forecasts that Australia’s economy will slow markedly from 4% in 2022 to just 1.9% in 2023, and 1.6% in 2024.The global energy price crisis is as bad as the 1970s, the OECD says, with spending on electricity, natural gas and coal forecast to double year-on-year to the highest level in more than four decades. Soaring energy prices mean global economic growth is forecast to slow to just 2.2% in 2023, according to the latest economic outlook from the Organisation for Economic Co-operation and Development. OECD chief economist Alvaro Santos Pereira said periods of high energy expenditure were often associated with a recession. Spending among OECD nations on electricity, natural gas, oil and coal soared to almost 18% of GDP this year, up from about 10% in 2021, with major leaps across all energy categories.
Medibank could face a $1 billion compensation bill from the damaging cyberattack that has affected 10 million customers, as hackers targeting the company released the biggest tranche of sensitive data yet in another attempt to pressure it into paying a ransom. The ASX-listed private health insurer confirmed on Sunday morning that another 1500 customer records containing sensitive health information had been released on the dark web – the largest release of health data so far in the incident. Hackers demanding a $10 million ransom have drip-fed sensitive health information about Medibank customers on the dark web over the past week. The hackers also stole data on Medibank employees, including mobile and work device numbers. Medibank has said it will not pay the ransom, in line with government policy. The company has said the incident will cost it up to $35 million, but this figure excludes the potential costs of litigation which could increase the hit to shareholders significantly. Bloomberg Intelligence analysts have estimated the hack could ultimately cost Medibank $700 million if customers sue for damages. And this figure could hit $960 million if 10% of affected customers join either of the class-actions and are paid the maximum $20,000 in damages, it said.
Induction stoves are more precise than gas, easier to clean and can be powered by renewable electricity, says celebrity chef Darren Robertson, backing a push by commercial landlords Lendlease and The GPT Group to get rid of all gas from their buildings. Mr Robertson, a partner in the famed Three Blue Ducks chain of five restaurants, says plans by two of Australia’s largest landlords to make their kitchens gas-free by 2040 reflects a wider trend away from gas and towards electricity for tasks such as cooking. Lendlease and The GPT Group have joined the Global Cooksafe Coalition, a network of property, energy and development bodies committed to building no new kitchens with gas connections by 2030 and retrofitting all existing kitchen assets with energy-efficient electrical appliances. For the two Australian landlords, that means also making 3.84 million square metres of office, industrial and retail property they own – 2 million sq m for Lendlease and 1.8 million sq m for GPT – gas-free by 2040.
Vicinity Centres’ former chief executive, Grant Kelley, quit just days after receiving a first and final warning after a sexual harassment complaint against him by the shopping centre giant’s top corporate affairs officer. A second, separate and equally damning report found a high degree of workplace dysfunction in senior executive ranks stemming from Mr Kelley’s behaviour. The two reports led to a board-level discussion with Mr Kelley, followed by his departure The initial report, concluded earlier this month, was delivered by an independent investigator appointed by the board. It upheld multiple allegations against Mr Kelley, including that he made intrusive comments about the woman’s attractiveness and boasted to her about his sexual conquests. The board received legal advice that Mr Kelley’s statements constituted sexual harassment, breaching Vicinity’s workplace behaviour policy, and it imposed immediate sanctions: a first and final warning and compulsory workplace behaviour training that was to be face-to-face and one-on-one. The second report, whose results were lodged soon after the first, was the outcome of a “360 review”, a performance appraisal which takes in feedback from a wide range of colleagues and which had been commissioned well before the sexual harassment complaint arose. The 360 review focused on Vicinity’s three top executives and concluded there was significant dysfunction and discord arising from some of Mr Kelley’s behaviours.
Australian coal exporters have been falsifying data to suggest their coal is cleaner than it is in order to increase its export price in a scam involving two testing laboratories, major accountancy firms and an investment bank, federal MP Andrew Wilkie told parliament on Monday. Wilkie says he has been provided with thousands of pages of documents by an industry whistleblower and called for a parliamentary inquiry into the allegations, days after the corporate watchdog decided against taking action against one of the laboratory companies. According to the whistleblower and the documents he has provided, coal testing laboratories that certify the quality of coal shipments leaving Australia have been falsifying data to suggest the coal is of higher quality than their tests show. The falsified data shows the coal to be drier than it is. Since drier coal burns more cleanly, less of it is needed to be burnt for electricity and it creates fewer emissions per kilowatt produced so can be sold for higher prices. For years Australian industry leaders and politicians have justified ongoing coal exports as the world grapples with climate change on the grounds that Australian coal displaces the comparatively dirtier competitors’ coal that would produce more greenhouse gas emissions when burnt.
Australia’s buy now, pay later providers would need to obtain a credit license and meet responsible lending obligations under two of three options put by Treasury to the government for assessment. In a discussion paper to be released on Monday, Treasury officials say that BNPL’s “relatively looser regulatory environment” – together with the sector’s rapid growth – may be contributing to poor consumer outcomes. Issues raised with the officials, the document notes, include inappropriate lending practices, which are contributing to financial stress. Some 19% of BNPL consumers surveyed by the corporate regulator, Treasury adds, said they had cut back or gone without essentials to make repayments. The least fulsome of three options put forward by the Treasury officials would amend the Credit Act to impose a requirement for BNPL providers to check that a product is not unaffordable for a person before it is offered to them. Under that option, income and expense information would only be assessed if the amount being lent was above a certain figure and if a person was identified as risky.
A senior PwC partner has been accused of being involved in a $3.3m fraud scheme with her husband, the proceeds of which allegedly went to funding a high-flying lifestyle including the purchase of a Porsche Cayenne and a major home renovation. Hong Shao, a Sydney-based assurance partner at the consulting major, is alleged to have had “actual knowledge” of the apparent fraud perpetrated by her husband Di Wu – or had “shut her eyes to the obvious”, documents filed with the Federal Court allege. The claim, lodged by advertising materials business Creative Promotions, alleges Mr Wu, over a period of about 12 years from mid-2010 to about July 2022, “obtained money dishonestly and fraudulently from Creative Promotions’’. Creative Promotions claims Mr Wu, who was employed as an “overseas production assistant’’ in 2005, later started issuing fake invoices to the company’s accountant for payment to three companies – Pretty Arts Products, Best Promotions, and Wenzhou Kindcare Import & Export. Two of these were legitimate suppliers, while Best Promotions was not. Mr Wu allegedly generated invoices which were entirely fraudulent or which were for amounts in excess of services rendered, with the payments made into at least eight accounts at the Bank of China, JP Morgan Chase, Bank of America, the Agricultural Bank of China and HSBC. It is alleged payments were eventually routed back to Mr Wu’s Westpac account and a Bank of China account in Ms Shao’s name.
The cost of catastrophe claims at QBE is climbing faster than expected, with the insurance giant warning of an estimated $100 million blowout to its yearly target amid extreme weather events and exposure to the war in Ukraine. The ASX-listed insurer released a third-quarter update on Monday, which showed the net cost of catastrophe claims in the nine months to October was tracking at around $880 million, with catastrophe allowance for November and December set at about $180 million. This means QBE’s assumed net catastrophe costs for 2022 will come in at $1.06 billion, higher than its previous allowance of $962 million. Catastrophe claims include cyclones, storms, floods and bushfires.
Snowy Hydro paid nearly $30m in staff bonuses during the 2022 financial year, triggering Labor to ask the Remuneration Tribunal to review pay at the company. Data tabled to a Senate committee showed the government-owned group paid $29.6m in short-term incentives across 1446 employees in the last financial year, with an average payment of $20,492 per staff member. That compared to $24.9m or $17,100 for 1457 staff members in the 2021 financial year. Snowy said none of the payments were made for its long-term incentive program in the last two years as the performance targets had not been met. The Remuneration Tribunal, which handles the pay of commonwealth offices, will consider remuneration at Snowy as part of a review, sources said. Snowy chief executive Paul Broad quit in August following revelations of the cost crunch and tensions with Energy Minister Chris Bowen over green hydrogen at the company’s proposed NSW Hunter gas plant. Mr Broad boosted his pay by more than $500,000 to $2.77m in the 2021-22 financial year after being granted a short-term bonus boost, compared with his $2.24m pay packet in the previous year. Snowy’s annual underlying profit after tax fell by 30% to $189m from $271m in 2021, with the company blaming an extreme winter that featured price caps and the suspension of the electricity market.
And that’s it for this week. And next week, I’ll be talking to the APAC general manager of WeWork Balder Tol. And I’ll be talking to economist Nicholas Gruen about citizens’ juries.
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.