The IMF points to a growing risk that the global economy will slide into recession next year as households and businesses face ‘stormy waters’ in most countries

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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 37 in our series for 2022 and today’s date is Friday October 14.

First, I’ll be talking to Oleg Vornik, CEO at DroneShield, a company that is creating local, high-tech jobs, creating a pathway for grads to get into complex engineering/AI/sensor fusion, and building advanced technologies in the form of counter-drone systems right out of Sydney – these protect everything from critical infrastructure, to sporting events, to airports, and more.

And I’ll be talking to CommSec chief economist Craig James about what’s ahead in the market next week.

But now, let’s talk to Oleg Vornik.

The International Monetary Fund predicts global growth will slow to 2.7% next year, 0.2 percentage points lower than its July forecast and anticipates 2023 will feel like a recession for millions around the world. Aside from the global financial crisis and the peak of the Covid-19 pandemic, this is “the weakest growth profile since 2001,” the IMF said in its World Economic Outlook published Tuesday. Its GDP estimate for this year remained steady at 3.2%, which was down from the 6% seen in 2021, echoing warnings from the United Nations, the World Bank, and many global CEOs. The IMF downgraded its expectations for Australia’s economy, tipping it to grow by 1.9% through 2023, with inflation to average 4.8% next year. In April, the IMF was forecasting the local economy to grow by 2.5% next year, with inflation around 2.7%.

The post-COVID recovery has rapidly run out of steam as many countries hit or near the brink of outright recession amid heightened uncertainty and rising risks, a new economic analysis has warned. The latest twice-yearly Brookings-Financial Times tracking index found that growth momentum, as well as financial market and confidence indicators, had deteriorated markedly in recent months as soaring prices and geopolitical uncertainty fuel lead economic pessimism cross the world’s major economies. Confidence indicators have fallen sharply and are at all-time lows since the index began over a decade ago in countries including the US, UK and China. In emerging economies, which are more exposed to rising food and energy prices, confidence has fallen even more sharply. The United Nations last week warned that developing nations, in particular those in Asia, could bear the brunt as monetary and fiscal policies in advanced economies – including continued interest rate hikes – push the world toward a global recession and stagnation. Eswar Prasad, senior fellow at the Brookings Institution, said the index’s findings reflected “a series of self-inflicted wounds” by businesses and governments, ranging from Britain’s financial turmoil after the announcement of major unfunded tax cuts and China’s zero-COVID policy. Prasad said energy supply disruptions were fuelling inflation and constraining growth in European economies, with prospects of energy shortages in the winter damaging private sector confidence.

Boris Johnson the politician went bust in July when his Conservative Party colleagues forced him to resign as prime minister. Boris Johnson the business, on the other hand, is about to make a small fortune. Political observers in England expect that Boris Inc. will follow the path of previous British leaders and become a one-man private corporation offering two products, a memoir and speeches. A born performer who offers a singular mix of gravitas and japery, he will market qualities that once charmed millions of voters, including a shambolic head of blond hair and an impish smile that says “I won’t take anything too seriously until I absolutely must.” What he won’t do, a biographer predicts, is immediately angle for a return to power — or criticize his successor, Liz Truss, who has managed to crater both her poll numbers and the British pound in just a few weeks in office. If he chooses to, he will join the lecture circuit at an ideal moment. The most lucrative live events, like corporate conferences and annual meetings, have come roaring back in recent months after a two-year hiatus caused by the pandemic. In late September, the Clinton Global Initiative held its first in-person conference since 2019, as did Fast Company’s Innovation Festival. Mr. Johnson is expected to fetch as much as $250,000 per speech, and even more for his first outing or two, say executives at speakers’ bureaus. Because he remains a member of Parliament, he will need to report that income publicly, through what is called the Register of Members’ Financial Interests. In 2019, after he quit the foreign secretary post, he reported earning £122,000 (about $132,000) from Living Media India for a three-hour speaking engagement — a payday he is likely to routinely exceed now. More than ever, he needs the money. A 58-year-old with two divorces, a third wife and six children, Mr. Johnson earned 157,000 pounds as prime minister, about $178,000. Along with those high overhead costs, the man has expensive tastes. When he and his third wife redecorated their official residence at No. 11 Downing Street, an invoice leaked to The Independent showed that the work cost £200,000 ($226,000), including a £3,675 drinks trolley and a pair of sofas that cost more than £15,000. Mr. Johnson was accused in news reports of using Conservative Party donations to cover some of the renovations, and he repaid the money. For the biggest paydays for speeches, he will need to leave the United Kingdom.

Former US Federal Reserve Chair Ben Bernanke has won the Nobel Prize in economic sciences along with two other US-based economists for their research into the fallout from bank failures. Mr Bernanke, Douglas Diamond and Philip Dybvig were given the nod for having “significantly improved our understanding of the role of banks in the economy, particularly during financial crises, as well as how to regulate financial markets”, the jury said. Mr Bernanke, 68, the chair of the US Federal Reserve between 2006 and 2014, was highlighted for his analysis of “the worst economic crisis in modern history” — the Great Depression in the 1930s.

Treasurer Jim Chalmers has warned that a “big and widening” gap between the Reserve Bank of Australia’s cash rate and other global central banks risks driving down the Australian dollar, pushing inflation higher and forcing interest rates to rise more than expected. Speaking ahead of flying to Washington for the G20 Finance Ministers meeting and annual meetings of the International Monetary Fund and World Bank, Dr Chalmers said “blunt, brutal but in some ways necessary” global rate rises would push many advanced economies into recession. “We are headed for a substantial global downturn, and we won’t be immune from that,” he said, though it was not his expectation Australia would suffer a similar fate, and a recession would not be forecast in the October budget. Chalmers said while it was clear the global economy was deteriorating, he believed Australia was in a strong position to defy a local recession. He said the downgrade to global growth had “implications” for Australia’s GDP and unemployment forecasts.

The Australian dollar is being steamrolled by world recession fears. Mounting global recession risks and rising coronavirus cases in China sent the Australian dollar to its lowest level in 2½ years on Monday, as the US dollar resumed its domination of the foreign exchange market and traders sought safe haven. The Australian dollar could fall below US62¢ this week, according to Commonwealth Bank, as financial markets brace for the latest snapshot of US inflation due Thursday. The currency slumped to US63.04¢ at Monday’s session low, which is the weakest cross-rate since April 2020. The US dollar rose against major currencies and held its lead after positive jobs data in the US on Friday reinforced the case for the Federal Reserve to stick to its aggressive interest rate path.

Underlying inflation is set to surge above 6% in the September quarter, the fastest pace since December 1990, according to the latest National Australia Bank business survey. NAB group chief economist Alan Oster said a result of that magnitude would indicate a considerable acceleration and broadening of inflation in Australia that would ultimately put pressure on interest rates.

Alinta has warned that Australia faces a new cost-of-­living shock, with power prices forecast to soar by at least 35% in 2023 as the early closure of coal-fired electricity generators creates a rocky energy transition. With households already reeling from six consecutive interest rate hikes and double-digit food inflation, the nation’s fourth largest electricity retailer has predicted a steep hike in electricity tariffs amid a global supply crunch. The huge jump in electricity and gas costs echoes soaring prices in the UK, which prompted protests and consumers to burn their energy bills. Households have already been slugged this winter with an increase in their power bills of hundreds of dollars as tight supply pushes up wholesale electricity prices and Russia’s invasion of Ukraine inflates international commodity markets. AMP chief economist Shane Oliver said if Alinta’s predictions were realised, it would add an extra 0.6% to inflation and put pressure on the Reserve Bank to be more aggressive in raising interest rates. Australian Industry Group chief executive Innes Willox said business leaders would not be surprised by Alinta’s forecast. “We are just at the start of the price rises, and more pain is to come,” Mr Willox said. “The market thinks energy prices will be lower beyond 2023 and that renewables will keep displacing coal and gas, but that doesn’t look as though it will happen fast or as quickly as it should.” Australian Chamber of Commerce and Industry chief executive Andrew McKellar said “higher power prices threaten the viability of industry and will hurt households”.

Solomon Lew is on a collision course with Myer after rejecting a direct request from the retailer’s chairwoman, Joanne Stephenson, to stop increasing his shareholding unless he makes a takeover bid for the entire company. Mr Lew, already the company’s largest investor, has also refused to commit to a majority independent Myer board as requested by the department store chair. The dispute was outlined in an annual meeting notice released by Myer on Monday, in which Premier Investments, a retailer controlled by Mr Lew, has nominated former Myer Grace Bros boss Terence McCartney for the board. Mr McCartney is a director of Premier Investments, and the Myer board has declined to make a recommendation to shareholders on whether to support – or reject – his election. Myer annual meetings have in the past descended into public disputes, including in 2020 when the company’s then chairman, Garry Hounsell, was forced to quit only hours before the start of the meeting after it became clear Mr Lew and other investors would not support his re-election. Premier Investments, with a 23% stake in Myer, could now push for Ms Stephenson to step aside.

AGL Energy‘s largest investor, Mike Cannon-Brookes, has launched a campaign to convince shareholders to vote for board renewal after the power giant batted away its proposals for a string of new director appointments. The energy company’s board said on Friday it would support the nomination of only one of the four directors nominated by Mr Cannon-Brookes – Mark Twidell – setting AGL up for a showdown with the Atlassian billionaire at its November 15 annual meeting. Mr Cannon-Brookes wrote to investors on Tuesday saying it would soon mail out instructions on how to vote for its favoured directors at or before the meeting. “Grok believes each independent candidate will bring unrivalled experience and capability to AGL’s Board. For this reason, we are encouraging all AGL shareholders to vote in favour of Christine Holman, Professor John Pollaers OAM, Dr Kerry Schott AO and Mark Twidell,” Mr Cannon-Brookes said as part of his private vehicle’s campaign. “We believe the existing AGL board needs help – particularly with executing on strategy and fresh ideas. Today, AGL only has five directors on its board. We consider this unacceptable for a company of AGL’s scale, let alone a company that has failed to keep up in a rapidly transforming industry,” the letter reads. Grok said the candidates will not be its representatives if elected and would both consider decisions and vote independently. It accused AGL‘s strategic review released in late September as failing to align the company with a 1.5 degree Paris climate outlo

The prudential regulator says it is only a matter of time before one of the nation’s financial institutions is hit with a cyber-attack. Australian Prudential Regulation Authority chairman Wayne Byres, speaking at a parliamentary committee hearing on Tuesday, said the financial sector had made “huge amounts of investment” into cyber defence, as he singled out cyber and climate risks as among the biggest challenges facing financial system. But a cyber-attack on one of Australia’s financial institutions “will happen” at some point in the future, he warned. “Financial institutions, at least in a broader context, are quite advanced (in cybersecurity) but what we also know is that, at some point, some sort of event will happen. It doesn’t matter what sort of defences you’ve put in place,” he said.

Prime Minister Anthony Albanese shelved plans to amend the stage three tax cuts in the October 25 budget on the basis it was too politically risky to break a promise so close to the last election. Although the government has yet to rule out paring back the tax cuts before they begin in July 2024, the weight of opinion inside Labor against breaking a key promise and the political backlash put an end to a possible move in the October budget, led by Treasurer Jim Chalmers. Despite the backlash, Mr Albanese and his minsters again refused to rule out definitively paring back the tax cuts at subsequent budgets before the tax cuts begin. Instead, they repeated the talking point distributed to all MPs last week instructing them to say only that the government’s position had not changed.

Optus will undergo a new regulatory probe into whether it took “reasonable steps” to protect the personal data of 9.8 million Australians which a hacker stole last month and briefly posted for sale online. The Office of the Australian Information Commissioner said on Tuesday it has begun its investigation,  “The OAIC’s investigation will focus on whether the Optus companies took reasonable steps to protect the personal information they held from misuse, interference, loss, unauthorised access, modification or disclosure,” the OAIC said. “And whether the information collected and retained was necessary to carry out their business,” the regulator said. It comes amid intense debate over whether the Optus breach was simple, as argued by the government, with an unprotected Application Programming Interface leaving it vulnerable to attack, or if the hack was more sophisticated as Optus says. The telco has engaged Deloitte to review the breach, but will not publish the findings. The OAIC said its investigation would be co-ordinated with telco regulator the Australian Communications and Media Authority, which is also investigating the breach. The inquiry will be coordinated with one conducted by the Australian Communications and Media Authority, which will investigate Optus’ obligations regarding customer information as a telecommunications provider. Chair of the Australian Competition and Consumer Commission Gina Cass-Gottlieb said scammers were taking advantage of the large-scale data breach and posing as the telecommunications giant or Equifax Protect, the credit reporting agency tasked with supporting victims of the breach, to swindle consumers. She told a parliamentary committee people were confused about the legitimacy of the communications.
 So far, Ms Cass-Gottlieb said there had only been a few instances of fraudsters successfully scamming victims out of money by pretending to be from Optus. The consumer watchdog has been flooded with Optus-related scam complaints following the data breach.

Australia’s national science agency, CSIRO, has announced it is helping to tackle the growing threat of cyber-attacks facing Australia by providing free research and development support to businesses working in the cyber security sector The CSIRO said today that small and medium sized enterprises (SMEs) working on new cyber security solutions can join the free, 10-week online Innovate to Grow program, being offered to support their idea with research and development expertise. The CSIRO said today that small and medium sized enterprises (SMEs) working on new cyber security solutions can join the free, 10-week online Innovate to Grow program, being offered to support their idea with research and development expertise. And on completion of the program, participants may be able to access support, through CSIRO, to connect to research expertise nationally, along with dollar-matched R&D funding. Under the program business will also tap into CSIRO’s own cyber security expertise through Data61, CSIRO’s data and digital specialist arm, and be exposed to industry knowledge, hear from innovation and industry experts, and work with an R&D mentor.

And that’s it for this week. And next week, I’ll be talking to Renee Thornton, General Manager of Rehab Management, a leading corporate health provider. According to Safe Work Australia, more than half a million Australians sustain a work-related injury or illness each year at an estimated cost of $61.8 billion[i]. This impacts the health system, economy, and society in a multitude of ways including loss of productivity, income and quality of life. Workplace rehabilitation is the process of providing guidance and support to an injured worker to enable safe and timely return to work after an injury or illness. It is about finding the best ways for a worker to remain at work and engaged with the workplace while keeping their valuable skills. And I’ll be talking to economist Nicholas Gruen.

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    

Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.