Elon Musk examines paid verification for Twitter and plans mass lay offs
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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 40 in our series for 2022 and today’s date is Friday November 4.
First, I’ll be talking to Martin Creighan, Managing Director, Citrix Australia and New Zealand about cyber security budgets. And I’ll be taking to Rabobank economist Michael Every about the impact of Ji Xinping’s continued rule over China’s economy.
But now, let’s talk to Martin Creighan.
Now that he owns Twitter, Elon Musk has given employees their first ultimatum: Meet his deadline to introduce paid verification on Twitter or pack up and leave. The directive is to change Twitter Blue, the company’s optional $US4.99 subscription unlocks additional features into a more expensive subscription that also verifies users. Twitter is currently planning to charge $US20 for the new Twitter Blue subscription. Under the current plan, verified users would have 90 days to subscribe or lose their blue checkmark. Employees working on the project were told on Sunday that they need to meet a deadline of November 7th to launch the feature or they will be fired. With the help of Tesla engineers he has brought into Twitter as advisors, he’s planning mass layoffs aimed at middle managers and engineers who haven’t recently contributed to the code base. Those cuts are expected to begin this week with managers already creating lists of employees to cut.
A startling new jump in consumer prices in Europe signals that inflation has more stubbornly burrowed its way across the continent despite slowing growth, complicating policymakers’ efforts to steer economies through a difficult winter and possible recession. Consumer prices in the 19 countries that use the euro as their currency rose at a record annual rate of 10.7% in October, the European Commission reported on Monday. In September, the rate was 9.9%. Twelve months ago, it was 4.1%. More than half of the eurozone countries recorded double-digit inflation rates in the year through October, including Germany (11.6%); the Netherlands (16.8%); Italy (12.8%) and Slovakia (14.55%). In the Baltic countries, rates spilled past 21%. France showed the lowest rate of 7.1%.
The Reserve Bank of Australia has increased the cash rate target by 25 basis points to 2.85%. That’s from a record low of 0.1% in May this year. It marks the seventh consecutive rate hike this year and returns the cash rate to its highest level since April 2013. RBA governor Philip Lowe revealed the bank now expected inflation to peak around 8%, above the 7.75% tipped in last week’s federal budget, and more interest rate rises would be needed to stymie price rises. The RBA also cut its GDP growth forecasts for 2023/2024 to 1.5%.
ANZ-Roy Morgan Consumer Confidence fell 1.2pts to 79.9 this week. In addition, Consumer Confidence has now dropped for five straight weeks (the longest series of declines for over two years since August 2020) and is now 9.9pts below the 2022 weekly average of 89.8.
Australian super funds are suffering as global recession fears bite. For the majority of Australians accustomed to seeing their super balance rise steadily most of the time, 2022 has been a rude shock. Those with their retirement savings in the typical balanced investment option would have copped returns of -5.7% in the past year, and -3.1% in September alone, according to figures from SuperRatings. Funds have been hit by a double-whammy of tumbling sharemarkets and a poor performance in bond markets, bucking the historical pattern in which bonds have tended to perform better when equities are struggling. Australia’s $3.3 trillion super system, one of the world’s biggest pools of retirement savings, is not immune to the global market slump caused by rampant inflation, rising interest rates and the war in Ukraine.
After six months of sliding prices it looks like the worst of the house price declines may be yet to come. Figures from analysts at CoreLogic suggest the price pattern over the year remains mixed, but on a quarterly basis it is clear that declines are kicking in most sharply in the larger capitals. Meanwhile, the black spot in the national market has moved to Brisbane, where house prices are now falling faster than Sydney which had led the way in recent months. Brisbane prices fell 5.4% over the past three months, Sydney fell 5.3% and Melbourne 3.1%.
Forcing down gas prices through government intervention of a cap will be more effective than sending consumers cheques to help them cope with high-energy costs, Treasurer Jim Chalmers said, as he opened the door to imposing a domestic price cap on gas. Dr Chalmers’ preparedness to embrace direct intervention, which was likened by Santos boss Kevin Gallagher to the antics of the Argentinian government, came as political pressure over energy prices following last week’s Budget which forecast massive energy price rises. The budget forecast electricity prices for this financial year would increase by 20%, and by 30% next year, for a total increase of 56%. Gas prices were forecast to rise by 20% for this year and 20% again next year. With the Labor’s election promise to lower average household energy bills by $275 a year by 2025 looking unachievable, and inflation and interest rates running rampant, the government was unable to offer cost-of-living assistance in the budget for fear of making inflation worse. Last week, Dr Chalmers and ministerial colleagues Chris Bowen, Madeleine King and Ed Husic began examining options to try to force down prices without creating sovereign risk. It is understood a departmental taskforce has been formed.
An additional $100 billion must be spent on renewable energy infrastructure for Australia to meet its 2050 net zero emissions target, according to new research, as regulators warn Australians could face higher power prices thanks to capital investment linked to decarbonising the grid. Deloitte Access Economics estimates the extra capital will be needed to invest in new wind, solar, battery and transmission assets, as the Energy Security Board determined last month the grid required “massive physical investment and wide-ranging policy reforms” which will put ongoing pressure on prices. This comes after last Tuesday’s federal budget papers predicted electricity prices would rise 20% in late 2022 and 30% in 2023-24 – but Deloitte says it could be a lot worse if Australia fails to invest in a clean energy power grid. Gas prices, which are a key determinant for wholesale electricity prices, are also predicted to rise by more than 40% over the next two years thanks to Russia’s invasion of Ukraine having sent gas prices skyrocketing. “The price Australia is paying for a disorderly transition is now becoming evident,” Deloitte Access Economics said. Federal Energy and Climate Change Minister Chris Bowen vowed all options would be considered to intervene in the market to lower power prices.
A Qantas pilot who advocated for gender equality at the airline is now suing the company, alleging she has been sexually harassed and discriminated against. Davida Forshaw, who has been with Qantas for 23 years and still serves as a first officer, alleges that she was sexually harassed by some of her male colleagues during her career in a claim statement she filed in federal court on Wednesday. In the court documents, Ms Forshaw alleges she was told to dye her hair and wear a push-up bra, received a poor performance rating after rejecting sexual advances and fetching pilots coffee. Ms. Forshaw also filed five complaints with Human Resources in the span of three months alleging three senior pilots discriminated against her because of her gender.
Qantas CEO Alan Joyce’s $4 million pay day faces an investor backlash and possible protest vote against the airline’s remuneration report and share rights at a shareholder meeting on Friday as an influential proxy firm recommended investors oppose the two items. ISS – one of the three major proxy firms – said, while it approved of the CEO’s participation in the long-term bonus scheme, it recommended shareholders vote against his involvement in a shorter term executive retention scheme as the performance targets set may not have been “sufficiently challenging”. The executive retention scheme was detailed in February, following earlier commitments to offer non-executive staff 1000 share rights in a bid to stop them leaving the airline to take up other jobs. Mr Joyce’s entitlement under the program is some 698,000 shares, worth about $4 million at the stock’s last closing price Among the targets in the scheme were: keeping the group’s net debt below a target level; cutting $1 billion of costs from the business by next June; and returning the airline to profitability by the 2023 financial year. ISS not only queried the size of the reward relative to the broader market, but also accused Qantas of giving investors a “false choice” on the matter. “The CEO’s remuneration is set well above the market median and has been identified as a high concern for misalignment of pay with underlying company performance over the past three years,” ISS said. Earlier this month, the airline said it would post a $1.3 billion underlying pre-tax profit in the half year to December as a boom in travel demand lifted it from a pandemic-induced nadir earlier than expected. The recovery has not come without its troubles though, with persistent reliability troubles hounding Qantas and its competitors for much of the year. The industry is, however, slowly improving to pre-pandemic service levels with the latest government data showing 67% of domestic flights departed on time with 3.4% of flights cancelled in September. Yet Qantas-owned budget carrier Jetstar was unable to keep up, as engineering woes forced it to cancel 1 in every 10 flights that month with just 57.5% of services departing on time.
Companies are adding an average premium of nearly 20% to starting salaries in tech and accounting roles to snare workers in a tight labour market, new data shows. The research from recruitment agency Robert Half shows that 93% of Australian business leaders are paying a salary premium to get workers through the door and that this is leading to tension among staff. More than six in 10 (65% ) of the 300 Australian hiring managers surveyed said staff had expressed concerns about unequal pay between new and existing employees – prompting 72% to offer pay raises in response. Robert Half Asia Pacific senior managing director David Jones said reducing staff turnover was key to managing the issue, as companies that retained staff did not have to pay a premium to replace them
The prospect of industry wide strikes and small businesses being dragged into multi-employer bargaining against their will are chief among the concerns of the independents who are demanding the government delay the passage of its industrial relations legislation and subject it to greater scrutiny. In turn, the government, while indicating a willingness to negotiate, said the Senate crossbench risked perpetuating low wages growth by insisting on delaying passage of the bill beyond the preferred deadline of December 1 until at least February next year. There were suggestions from the crossbench that Prime Minister Anthony Albanese become involved in negotiations to help break the rapidly looming impasse. The Prime Minister had not spoken with key Senate crossbencher David Pocock since July when there was a row about staff allocations for independents. The government’s Secure Work, Better Pay Bill, an omnibus of industrial relations changes, was introduced last week and will be subject to a brief parliamentary inquiry which must report by November 17, so the legislation can be passed by December 1. The Greens support the bill, but the government also needs the Senate vote of one of either One Nation, the Jacqui Lambie Network, or Senator Pocock. One Nation opposes the bill and on Monday, Senator Lambie echoed the concerns of Senator Pocock that centre around a revamped system of multi-employer bargaining, changed rostering arrangements and adjustments to enterprise bargaining. Senator Lambie was particularly worried about unintended consequences for small business, many of which were still recovering from COVID-19. The Senate crossbenchers have the growing support of some lower house independents who, although their votes don’t count, have indicated they will bring their guns to bear to try to force a delay. Senator Pocock suggested the government split the bill, so it could pass non-contentious elements before Christmas such as making gender equity an objective of the Fair Work Act, establishing two new expert panels for the Fair Work Commission, and banning pay secrecy clauses. But Mr Albanese also showed little inclination for delay.
Small business retailers, including independent supermarkets like IGA and SPAR stores, are unlikely to return to collective agreements under the Albanese government’s laws to simplify enterprise bargaining, according to employer groups. While big business has largely welcomed the government’s proposed simplification of the so-called better off overall test for enterprise agreements and scrapping of bargaining red tape, some small businesses say the reforms are still too onerous. The concerns cast doubt that the reforms will be enough to kick-start the bargaining system, where agreement coverage has fallen to just 10% of the private sector workforce. Master Grocers Association chief executive Joe de Bruin said the government’s Secure Jobs, Better Pay Bill did not go far enough to simplify the BOOT and argued there was no incentive for small retailers to enter a deal. IGA, SPAR and Foodland stores, had hoped for a return to the Keating government’s no-disadvantage test where the overall workforce had to be better off than the award minimum, rather than every worker.
10% of Optus mobile customers have left the company in the wake of its massive data breach, a survey has found, as the nation’s second-largest telecommunications provider fights to claw back trust from its millions of customers who had their personal data stolen. The annual EFTM Mobile Phone Survey, of more than 2000 telecommunications customers, found that 56% of current Optus customers agreed they were “considering changing telcos as a direct result of the Optus cyber attack”, while 10% had already done so. The survey found market leader Telstra commands a 30% share of the market, a figure that climbs to 45% including Telstra’s mobile virtual network operator brands including Aldi, Boost Mobile and Belong. Optus accounts for 24% of the market and TPG/Vodafone has 15% share.
Optus chief executive Kelly Bayer Rosmarin faces a major investor backlash against her election to the board of ASX-listed real estate business REA Group, as influential proxy voting firms warn that her focus should be on the 9.8 million Optus customers affected by the data breach. Medibank chairman Mike Wilkins also faces an investor revolt at its annual shareholder meeting on November 16, after revelations the personal data of the insurer’s 4 million customers was accessed. Ms Bayer Rosmarin has said she was “deeply, deeply sorry” for the data breach but her position remains tenuous after being scolded by the federal government for failing to stop a “basic” hack and a response described as “not adequate”. Key proxy firms ISS and CGI Glass Lewis have taken exception to Ms Bayer Rosmarin’s roles outside the Singtel-controlled telecommunications company. She was appointed to the REA board from January this year, which sets up a fiery clash with investors before the online real estate company’s AGM on November 10. The proxy firms – which advise institutional investors how to vote – also question Ms Bayer Rosmarin’s role as a director at London Stock Exchange-listed Airtel Africa, saying that her focus is likely to be or at least should be on her day job after the cyberattack.
The Australian Federal Police has warned Medibank and Australian citizens against paying ransoms to cyber criminals, after it emerged that Medibank has been taking legal advice on whether to buy off the thieves threatening to leak the private medical information of millions of Australians. The increasing prevalence of cyber ransom shakedown strategies was highlighted on Monday as the AFP said it had participated in the disruption of an international ransomware gang that had targeted private Australian citizens and small businesses. Medibank customers remained in the dark on Monday about the likelihood of the private health insurer’s dealings with the criminals, who are known to have stolen sensitive data of up to 4 million people.
A new study by Nordlocker analysing ransomware incidents that affected 74 Australian companies that collectively produce more than $24 billion in annual revenue found that Australia is 9th in the world for ransomware attacks, small businesses at the highest risk, accounting for more than two-thirds of all attacks (69.5%), in Australia, Business Services is the top industry hit by ransomware (12.5% of all attacks). This was ollowed by the Transportation and Logistics industry (9.7%). LockBit and Conti are the most active ransomware gangs in Australia, responsible for 16.5% and 11.4% of attacks, respectively. Also, 4.2% of ransomware attacks targeted Australia’s public sector institutions and 14.8% of ransomware attacks in Australia target companies with more than $1.48 billion in revenue.
The Victorian government has sensationally stepped in to fill the Australian Diamonds’ funding void left when billionaire Gina Rinehart pulled her sponsorship for the national women’s netball team. Premier Daniel Andrews said the deal would be worth $15m over four years and the Diamonds would wear the Visit Victoria logo. Hancock Prospecting, which was founded by Ms Rinehart’s father Lang Hancock, walked away from their sponsorship agreement with Netball Australia earlier this month after a player objection, led by Aboriginal woman and Diamonds player Donnell Wallam. Ms Wallam, supported by her teammates, had expressed concern over racist statements made by Mr Hancock in 1984. In those comments, Mr Hancock had advocated the sterilisation of Indigenous Australians who failed to assimilate to white Australian society. Mr Andrews said the funding deal was a “really big win” for the state. Mr Andrews said five tests would be played in Melbourne under the deal, as well as the 2023 Super Netball grand final. Players and coaches would also be involved in promoting the state under the agreement. Netball Australia chief executive Kelly Ryan said the Victorian government was one of multiple potential sponsors to reach out in the wake of Hancock Prospecting’s withdrawal.
And that’s it for this week. And next week, I’ll be talking to Andy Cunningham, Senior Regional Director for Australia/NZ at Autodesk. We will talk about automating industries like manufacturing and construction. And I’ll be talking to KPMG economist Sarah Hunter about the RBA’s latest rate hike.
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.