ASIC data shows company insolvencies have hit record highs.
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 37 in our series for 2024 and today’s date is Friday October 11.
First, I’ll be talking to I’ll be talking to Chris Noone, CEO of ASX listed car subscription company Carly about the Australian Tax Office ruling on car subscriptions, what they mean for Carly and car users and why car owners are cautious about transitioning from gas guzzlers to EVs. The Carly car subscription service offers car users and companies access to an EV like Netflx. As simple as that.
And I’ll be talking to RMIT economist Sinclair Davidson about the relationship between the Government and the Reserve Bank of Australia.
But first, let’s talk to Chris Noone.
So what’s happening in the news?
Oil executives have emerged as an increasingly important source of funding for Donald Trump, as industry titans open their wallets to bolster the Republican nominee’s campaign for a second term in the White House. The billionaires backing Trump include Kelcy Warren, chief executive officer of pipeline operator Energy Transfer LP, Harold Hamm, the founder of Continental Resources and Jeff Hildebrand, CEO of Hilcorp Energy, Trump sought more support last week with fundraisers in Midland, Texas, the heart of the prolific Permian Basin, and Houston, the self-styled “energy capital of the world.” The latest swing builds on May events with donors in Dallas and Houston and a closed-door energy roundtable with executives at Trump’s Mar-a-Lago Club in Florida. Oil executives and employees have grown in significance for Trump as his fundraising base has narrowed. The industry is now his fourth-biggest source of cash, up six places from the 2020 election cycle, according to campaign data analyzed by OpenSecrets. Trump is promising to make it easier to “drill, baby, drill” and to repeal Biden-era pollution curbs on autos and power plants. He’s also promised to immediately end President Joe Biden’s pause on new natural gas-export licenses. “Kamala Harris is controlled by environmental extremists who are trying to implement the most radical energy agenda in history and force Americans to purchase electric vehicles they can’t afford,” said Karoline Leavitt, national press secretary for the Trump campaign. “President Trump is supported by people who share his vision of American energy dominance to protect our national security and bring down the cost of living for all Americans.”
Company insolvencies have hit record highs with more than 6600 firms faltering in the six-months to September, fuelling warnings small businesses are struggling to stay afloat amid high inflation and interest rates, increasingly complex regulations and cyber attacks. Australian insolvency statistics published by ASIC reveal company insolvencies capturing firms entering external administration for the first time hit 11,053 in 2023-24, swelling overall insolvencies since the 2022 election to 22,800. The corporate regulator listed 3305 insolvencies in the June quarter and 3331 in the September quarter, which the Coalition says represents the worst six month period on record and bakes-in the highest average of business insolvencies of any parliamentary term at “2481 insolvencies per quarter”. The hardest hit industries have been construction, accommodation and food services, retail trade, professional, scientific and technical services and manufacturing. Amid wafer-thin economic growth, flatlining productivity and investment concerns raised by big business. NSW, Victoria and Queensland recorded the highest number of insolvencies.
Half of Australians expect cost-of-living pressures to deteriorate over the coming two years as a rising number of households suffer extreme levels of financial stress despite federal and state governments rolling out generous subsidies and tax relief. Analysis by AMP shows 66% of Australians over the age of 18 feel financially stressed, either mildly, moderately or severely. Only one in three Australians were financially secure, which was down from half during the pandemic years. Financial stress was higher among those who live in Australia’s most expensive city for housing, Sydney, and also Tasmania. Sydney had 30% of residents in the most extreme bracket of financial stress compared to the national average of 27%. With rising financial pressures and people focused on meeting major short-term expenses, long-term planning is being compromised, with one in three saying they are never or are rarely planning for their financial futures Three in five Australians spent less on groceries this year, according to the AMP survey of 2475 Australians, while a third have cancelled streaming subscriptions and gym memberships and one in three spent less time engaging in regular hobbies and interests. The degree of financial stress is forecast to worsen, with 52% expecting the cost of living will rise significantly.
Grocery costs are the biggest pain point for Aussie consumers despite the recent pullback in official inflation figures, new research has found. And homeowners, rather than renters, are more likely to report that their savings have shrunk or stagnated in the past year, according to Compare the Market’s Household Budget Barometer 2024 report. Its analysis of more than 3000 consumers discovered that everyday expenses are “sending us spiralling”, with groceries the most worrisome bill, followed by mortgage repayments, energy bills and rent. “The median grocery spend was $200 in August 2024, compared with $150 in January 2024 … a 33% rise in just six months,” the report says. “The increase could be in part due to some Australians choosing to cook more at home and dine out less,” it says. Bureau of Statistics inflation data puts food and beverage growth at 3.4% year-on-year. The findings come as big supermarkets come under fire from regulators and the Albanese government over pricing practices. However, the fastest-rising component of Australian inflation over the past two years – insurance – does not appear to worry consumers as much. Compare the Market economic director David Koch said spending less money on eating out and takeaway meals meant “we spend more at the supermarket, and because most of us do a grocery shop once or more a week we’re confronted with bill shock every few days”. Mr Koch said people did not notice the insurance sting because it was not tangible, and many set up automatic direct debits. “We urge Australians to treat their insurance premiums like their groceries and compare them like products on the shelf,” Mr Koch said.
Surgeons and other medical specialists are worried about unprecedented pressure on the nation’s hospital system and say the federal government needs to inject more funds into the private sector to stop facilities closing and tackle soaring insurance costs. With no sign of movement on Health Minister Mark Butler’s review of the $22 billion private hospital system launched in June, specialists warn that dilapidated facilities, ageing medical equipment and staff shortages are threatening patient care. “Private hospitals will increasingly pose a patient safety risk if they are not funded appropriately,” Australian Society of Ophthalmologists president Peter Sumich said. Dr Sumich blamed “chronic underfunding” by the health insurance sector and said he was supportive of a public advertising campaign by Healthscope, the country’s second-biggest private hospital operator, accusing some insurers of underfunding the system. “The more that insurers withhold funding, the greater their profits, cash reserves and hospital building projects grow. It’s ironic that insurers are both underfunding private hospitals while building their own hospitals in direct competition,” Dr Sumich said. “The politicians are not going to help. The Labor Party is unmotivated, the Liberals are intimidated, the independents are disorganised and the Greens are just happy to watch Rome burn as they dance around the bonfire.” Mr Butler ordered the review in June after a string of private hospital closures raised fears of more closures, putting more strain on an already overstretched public system. The government has told industry participants it will not bail out the private sector despite the threat of hospital closures, which Canberra is concerned could hurt services in rural and regional areas. Preliminary findings of a Health Department review said the sector was “uninvestable”. While hospitals have been pressuring health insurers to tip in more funding, there has been no indication the government will dramatically overhaul the current funding models as part of the review. Royal Australasian College of Surgeons president Kerin Fielding said some private hospitals were suspending unprofitable surgeries due to rising cost pressures. She hoped the government’s review would address the cost of insurance and lead to a bailout of struggling facilities. “We would really be hoping that the government would be looking at some assistance, particularly for the regional and rural private sector, certainly looking at the remuneration from the private health funds,” Dr Fielding said. “Private health insurance has been going up and up and up because the cost of healthcare is going up, and the private hospitals are requiring bigger payments for cases, and people are dropping out of the funds.” Dr Fielding, an orthopaedic surgeon, said some private hospitals were cutting theatre lists for some less-profitable surgeries and there were cases where some surgeons were doing fewer major procedures in a day. “If we lose the private sector, we’re in big trouble. We’ve got to support it. We do need to ask the government to help us with that support.”
It’s the $1.10 tin of diced tomatoes that says everything about the challenge facing SPC, the century-old agribusiness powerhouse that last week laid out a plan to return to the ASX by merging with listed juice manufacturer Original Juice Co. That’s the price of a 400g can that is sold online by Coles under its own brand. It’s produced in Italy and imported into the country by the supermarket giant. SPC’s product, under the Ardmona brand, is made here. But it sells for $2.10 per can. Both SPC chairman Hussein Rifai and Original Juice’s Jeff Kennett, the former Victorian premier, pointed to size as one reason for the merger. The deal will put SPC back onto the ASX for the first time since 2005, when it was purchased by Coca-Cola Amatil. It fell into private equity ownership in 2019 – after Coca-Cola had dusted $700 million. The merger will also bring in Nature One Dairy’s infant formula and powdered milk business, and create a group with annual revenues of $400 million. Still, brokers and investors are pessimistic that SPC, even as a bigger company, will be able to face down the market power of the big supermarket chains Woolworths and Coles in the same way that global food powerhouses like Nestle can. In particular, it will be difficult for the company to compete against the cheap home brands, according to Geoff Wilson of Wilson Asset Management. “It’s good for the consumer but bad for Australian food producers,” he says. “It’s very difficult for Australian food producers to compete when you’ve got generic products.” Craig Woolford, an analyst at MST Marquee, says shoppers would prefer to buy local products, but only if it was a similar price to other options.“They’ll buy Australian if the price is still competitive compared with other products,” Woolford says. “It’s very hard to compete against that import competition.” Imported fruit was cheaper because there were often substantial subsidies for farmers from the European Union, and lower wage rates in South Africa. SPC started out as a co-operative in Victoria’s Goulburn Valley in 1917 known as the Shepparton Preserving Company. It merged with arch-rival Ardmona in 2002, and was purchased by Coca-Cola in 2005 for $750 million. Coca-Cola wanted to diversify and expand into healthier products. That did not work, and SPC was sold for $40 million.
ANZ chief executive Shayne Elliott doesn’t expect to remain in the top job to see through a multi-year integration of Suncorp’s bank, as he hinted at a potential changeover in 2025 while the board actively considers the issue of succession. Mr Elliott said the integration of the $4.9bn Suncorp bank acquisition was a “huge opportunity” for ANZ, but he was unlikely to remain at the helm to complete it. “That’ll take years, I don’t think I’ll see it through,” he said. “They can invite me back for it.” In some of Mr Elliott’s more specific comments on the timing of his departure as CEO, a role he has held since early 2016, he also said: “The timing will be up to them (the ANZ board) and the discussions we have together over the next year or so.” ANZ overcame a series of hurdles to complete its purchase of Suncorp’s bank in late July, shifting the focus to how Mr Elliott will bring the entities together without triggering too much customer leakage. The controversial transaction was announced about two years ago and was opposed by the competition regulator in 2023, before that decision was overruled by the Australian Competition Tribunal in February. ANZ board member Christine O’Reilly – a member of the risk, people and culture and nomination committees –said succession planning was a key responsibility for the bank’s non-executive directors. Asked whether ANZ’s board was actively assessing CEO succession planning, she said: “It’s on the agenda, and so it should be.” While in Singapore to mark the bank’s 50th anniversary of operating there, Mr Elliott was also asked about succession planning and when he may step down. “I’ve been there (in the CEO role) for over eight years. And as time goes by, obviously we talk about it as a board,” he said.
Wesfarmers says its fast-growing health division is expected to clock up $6 billion in revenues this year as it expands its digital and pharmacy operations to meet the growing demand from Australians, who it says are sicker than they were before the pandemic. The conglomerate this week released the results of data from more than 3 million health checks taken on portable devices in its network of chemists which show an alarming increase in obesity, diabetes, high blood pressure, smoking and the risk of heart disease. It released the results of its first Health Index, which looked at the data from 3 million digital checks on more than 2 million people between 2018 and 2024. The free tests at its health stations located in pharmacies measure key health risk factors like blood pressure, heart rate, body mass index and diabetes risk. The index found nearly one in two Australians had an elevated risk of heart disease, 29% had high blood pressure, 26% were obese, 13% were daily smokers, 6% had diabetes, and nearly 1 million were at extreme risk of a heart attack or stroke. It also broke down the data by states and electorates, which highlighted the inequity between regional and metropolitan areas. A scoring system using the data found the odds of Australians having two or more health risk factors were 8% higher than they were in 2018, with people’s health declining during the pandemic but slowly picking up in the years that followed. Wesfarmers Health boss Emily Amos said the results showed Australians had let their health deteriorate during COVID-19 with measures of cardiometabolic risk higher than in 2018. The scale of the collection of data on Australians’ health highlights the growing role retail giants and insurers are playing in the $220 billion healthcare system, something that does not sit conformably with some GPs. Ms Amos said the company had identified growth opportunities in digital, pharmacies and beauty. She declined to comment on potential acquisition targets but said revenues from the division, set up in 2022, would be close to $6 billion this year. Wesfarmers Health grew revenues 6% to $5.6 billion in the year to June. “I think it data is a really key part of health service delivery going forward so we do see it as a significant opportunity, and … as a way of making health services more accessible where there are massive gaps in the network,” she said in an interview ahead of the launch of the Wesfarmers Health Index on Tuesday. “Every part of the business has growth opportunities. So we do see further growth in digital health, particularly MediAesthetics [beauty care] and through retail pharmacy as well.” Perth-based Wesfarmers has targeted health as one of its strongest growth businesses, following the path of US supermarket giants buying up GP, dental and radiology clinics. It acquired Australian Pharmaceutical Industries for $1 billion in 2022 and expanded its healthcare offering in 2023 with the #135 million acquisition of InstantScripts, which offers telehealth consultations, online scripts, medical certificates and blood tests. It also owns beauty chains Clear Skincare and Silk Laser Clinics, and a 60% stake in digital medical diagnostics business SiSU.
And that’s it for this week. And next week, I’ll be talking to Graham Cooke, the head of consumer research at Finder about the growing uptake of by now, pay later services by Gen Z and Y and the risks,
And I’ll be talking to Craig James, independent economist, formerly chief Economist at CommSec, about what we can expect in the market next week.
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.
