OECD downgrades its outlook for Australian living standards over the next 40 year, forecasting per capita GDP of just 0.9% between 2018 and 2030.

Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, 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.

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 38 in our series for 2021 and today’s date is Friday October 22.

First, I‘ll be talk to Ashik Ahmed, the CEO and co-founder of the global workforce management platform for employee scheduling, timesheets and communication company, Deputy about the impact of the lockdowns on gig workers. And l will be talking to economist Sinclair Davidson about how much we can recover economically.

But now’ let’s talk to Ashik Ahmed

China’s economy slowed in the third quarter as multiple headwinds from a property slump to an energy crisis weighed on growth. Gross domestic product expanded 4.9% from a year earlier, the National Bureau of Statistics said Monday, down from a previously reported 7.9% in the preceding quarter and compared with a median forecast of 5% in a Bloomberg survey of economists. Beijing’s tighter restrictions on the property market have curbed construction activity and squeezed financing to the sector. Meantime, a worsening debt crisis at China Evergrande Group is now spilling over to other developers and contributing to a slump in land sales.  On top of that, electricity shortages in September forced factories to curb output or shut completely, while strict measures to contain sporadic coronavirus outbreaks continued to weigh on consumer spending. While China is expected to fix its energy problems, the property sector cannot sustain the insane levels of activity and debt that have defined it for decades. According to analysts, this is bad news for Australia, which still takes for granted China’s insatiable appetite for its commodities. While Australia exports billions of dollars of high-end food and healthcare products to China’s middle classes, a slowdown in construction and activities like steel-making is where it will really hurt. The argument here is that the way China’s economy is now heading makes Australia’s trading relationship, which is high in dollar terms but concentrated in iron ore, coal and gas, extremely vulnerable.

The OECD has downgraded its outlook for Australian living standards over the next 40 years, and says structural reforms will be needed to arrest the decline and deal with budget pressures from an ageing population. In its latest fiscal outlook to 2060, the club of wealthy nations downgraded its forecasts for Australia’s per capita gross domestic product, which is the preferred measure for living standards around the world. In 2018, the group forecast per capita GDP to be 1.4% per year between 2018 and 2030. In its latest outlook released on Tuesday night (AEDT), it downgraded that expectation to 0.9%..The 2018 forecast for the period from 2030-2060 was for growth of 2% per year, which has been downgraded to 1.2%..

Companies will be able to skip “in-person” annual meetings with shareholders and instead host online gatherings, under emergency COVID-19 corporate relief that the federal government will make permanent. Rather than holding physical annual general meetings (AGMs), companies will be able to hold “hybrid” gatherings – a mix between in-person and online meetings of company directors and shareholders.If expressly permitted by an entity’s constitution, AGMs will be able to be exclusively held online, provided that shareholders are given reasonable opportunity to participate. Some 75% of shareholders must agree to a change to a company’s constitution to hold a virtual-only meeting.

Australian Retailers’ Association chief Paul Zahra said Victorian retailers lost $1 billion in trade per week during the lockdown and 25 to 50% of Melbourne small CBD retailers may have closed. He said it could take a decade for the CBD in Melbourne to recover because of the 200-plus days of lockdown.

New analysis by the Australian Banking Association (ABA) has shown a further shift by customers towards banking online and an increase in people paying with technology instead of physical cards or cash. The data reveals;

  • More than 80% of Australians say they prefer to check account balances, pay bills, or transfer money online. 
  • More than one in three Australians with smartphones use a digital wallet.
  • One in ten Australians regularly leave home without their wallet instead using their phone to pay for items, up from just 4% in 2019.
  • Less than 20% of Australians say they prefer to do any banking activities in branches.

The trends confirm that customers continue to choose technology options over traditional banking methods.

Recent RBA data also shows the continued steady decline of cash and credit cards.

  • ATM withdrawals decreased by 20% in the year to August 2021, after falling 16% the year before.

More than 40% of the country’s large employers have introduced or are planning to introduce mandatory Covid-19 vaccinations for employees, according to a survey conducted by national law firm Piper Alderman. The survey of 550 ASX-listed, private, not-for-profit and government organisations found 26% were not planning to introduce mandatory vaccinations across their workforce, while a third remained undecided. The survey was conducted as part of the law firm’s national employment relations webinar, where several participating employers expressed uncertainty around the legal implications and risks associated with mandating vaccinations in the workplace.

American juggernaut delivery service DoorDash has launched its first local advertising campaign as it seeks to topple the local dominance of MenuLog and Uber Eats.  The new advertising campaign introduces the slogan “We DoorDash” and aims to build consumer awareness that Australians can use the platform to have all sorts of products home delivered from groceries to coffee to pharmaceuticals, pet products and of course, takeout food. DoorDash, which is America’s biggest food delivery service, launched in Australia in September 2019 and since then, has expanded its range of verticals delivering food, groceries, pharmaceuticals, pet products, haircare and more. The slogan, ‘We DoorDash’, aims to highlight how the platform is part of the community and aims to highlight what the brand stands for in the “reimagined convenience” space.

Three global investor groups worth more than $US46 trillion ($62 trillion) have labelled Australia one of the least attractive destinations for green investment, alongside Saudi Arabia and Russia. The Investor Group on Climate Change (IGCC), which counts AustralianSuper, AMP and Perpetual as members, has partnered with Asian Investor Group on Climate Change and Ceres to release a report analysing the impact of climate policies across G20 countries on attracting institutional investment. While the United Kingdom and European Union are among the most attractive, Australia’s failure to set a net zero emissions target by 2050 and lack of credible policies to decarbonise the economy have placed it among the least attractive destinations for green investment. Less than 2% of Australia’s COVID-19 stimulus was spent on green initiatives, compared to Canada, which spent 74.5%, according to the report.

Australians hoping they will get fatter pay packets due to a post-COVID skill shortages face disappointment after the Reserve Bank declared there are no signs of a take off in wages in comments that dampen expectations of a sooner-than-expected lift in official interest rates. Minutes of the bank’s October meeting, at which it left the cash rate at 0.1%, show the bank board almost confounded by the lack of growth in wages despite cries from some businesses about a shortage of staff. The bank, which is spending $4 billion a week on government bonds as part of its quantitative easing program, has said it will not start lifting rates until inflation is sustainably within its 2-3% target band.

 To get inflation to that level the bank believes wages growth, currently at 1.7%, needs to get above 3%. It is arguing the cash rate is unlikely to be increased until 2024.

Economists and markets strongly disagree with the Reserve Bank of Australia’s firm stance that the cash rate won’t rise before 2024, believing surging prices in housing and energy will bring sustainable inflation back to its targeted band well before then. For the first time in many years, central bankers and global investors are witnessing a material pick-up in inflation. Despite the evidence, which shows inflation lifting to levels well above target, the reaction of central bankers and investors has so far been muted. Some central banks have started to hike interest rates in reaction to the inflation pressures. Near to home, the Reserve Bank of New Zealand lifted its rates earlier this month to 0.5%. Some others in South America and Eastern Europe have hiked interest rates in reaction to the acceleration in inflation. Markets are now openly canvassing the prospect of higher interest rates in the US, Eurozone, the UK and Canada, among many others, perhaps within the next few months. Bond markets, which inevitably move well before central bankers, have seen yields jump in anticipation of the inflation/interest rate hike dynamics. The moves are relatively contained at this stage, but clever investors are looking for a further sell-off in bond yields once the penny drops more widely that inflation is accelerating. In Australia, the RBA has largely dismissed these pressures signalling that, on its assessment, inflation will remain low and it will not be required to hike interest rates until 2024, at the earliest. Markets are ignoring this guidance, with the start of the interest rate hiking cycle starting to be priced in to the later part of 2022, just 12 months from now, and around two years before the RBA reckons it will need to move. The current official cash rate is 0.1%. The market is pricing in 1% by the end of 2023 and with further increases through 2024.  

Australian casino giant Star Entertainment is facing the threat of a class action lawsuit after revelations of its alleged failures to confront money-laundering and terrorism-financing risks wiped out nearly $1 billion in shareholder value. Law firm Maurice Blackburn has begun preparing a class action on behalf of Star’s investors following revelations in The AgeThe Sydney Morning Herald and 60 Minutes last week that the ASX-listed Star has been enabling suspected money laundering and organised crime in its Sydney, Brisbane and Gold Coast casinos for years. It was revealed last week that two confidential reports were provided in 2018 to Star’s board, which included chief executive Matt Bekier and chairman John O’Neill, warning the company’s anti-money-laundering risk-assessment system “does not consider terrorism financing as required by the AML-CTF [anti-money-laundering and counter-terrorism financing] Act.” Star’s assessments of some gamblers “appear to understate the level of money-laundering risk”, the reports added, and Star had “no documented money-laundering risk assessment, or risk-assessment methodology” for Chinese high-roller tour groups known as junkets. On October 11, the day after the revelations were published, Star’s share price plunged more than 20%, wiping out nearly $1 billion from its market value. Its shares have since recovered slightly but are still trading about 17% lower than the start of the month. The class action would allege Star engaged in misleading and deceptive conduct, breached its continuous disclosure obligations and conducted its affairs contrary to the interests of members as a whole in the period.

Senior figures from listed gaming giant Star Entertainment will be grilled at public hearings into allegations the company failed to prevent organised criminals and money launderers infiltrating its Australian casinos. Senior barrister Adam Bell, SC, whose exhaustive public examinatiion last year of Star’s main rival, Crown Resorts, led to Crown being declared an unfit company to hold a gaming licence in NSW, will examine Star’s operations at public hearings next March.

Poker machine maker Aristocrat Leisure has lobbed a $5 billion bet on acquiring UK online gambling software and content supplier Playtech  to supercharge its strategy of following punters wherever they go, from casinos to mobile phones. Playtech boasts that it can “only” allow gamblers to “play any game, on any platform and on any device, using a single wallet and single account, anywhere and at any time”. It comes after a tumultuous 18 months for gaming operators, with pokie venues and casinos forced to shut their doors during the COVID-19 pandemic, even powering down Las Vegas’s famed strip early in the global outbreak. At the same time, online gaming has surged. Aristocrat chief executive Trevor Croker said acquiring Playtech would provide Aristocrat with “material scale” in the $US70bn ($94.4bn) online real money gaming industry. It comes as Aristocrat says it expects net profit after tax and amortisation to be $864m for 2021.

Rio Tinto was “at best” incompetent and at worst deliberately deceived traditional owners over plans to blast Juukan Gorge, according to the parliamentary inquiry into the debacle, with key government members of the committee calling for a formal judicial review into Rio’s actions. The parliamentary inquiry into Rio Tinto’s destruction of the Juukan Gorge rock shelters delivered its final report on Monday, recommending sweeping legislative changes across the country to prevent a repeat of the event. The report puts the mining industry on notice about their dealings with traditional owners, setting out a road map for a higher standard when it comes to sensitive sites. The committee’s final report put the blame for the decision to destroy the 46,000 heritage sites firmly on Rio’s quest to make quick bucks, savaging the company’s lack of regard for its social responsibilities in the lead up to the reputational disaster. The committee also recommended new Commonwealth legislation for stricter protection of sacred sites, and improvements to the Native Title Act. New legislation should be underpinned by the United Nations Declaration on the Rights of Indigenous Peoples, the committee said.

Australian Mercedes-Benz dealers have launched a $650 million legal action against Mercedes-Benz Germany, claiming the powerful parent company is forcing an abrupt change in the business model that undermines millions of dollars in dealer investment. More than 80% of independent Mercedes dealers have combined forces to fight a decision by Mercedes Germany, and parent company Daimler, to change from a “dealership model” to an “agency model” with limited compensation, no negotiation and no ability to recoup sunk costs or future earnings. The Mercedes-Benz case was lodged on Monday evening in the Victorian Federal Court and seeks $650 million in damages under the Competition and Consumer Act and Australian Consumer Law, arguing Mercedes-Benz has strong-armed dealers into non-renewable agreements, decimated the value of their dealerships and in no way operated “in good faith”. Mercedes-Benz Germany alerted Australian dealers to the change in business model in February 2020. It said dealers would stop operating as independent retail businesses and become agents of Mercedes-Benz, receiving a fixed commission for car sales at fixed prices, with all customer relationships to be owned and controlled by the parent company. According to their statement, Mercedes-Benz informed the Australian dealers it would provide a “limited safety net” for loss of profits for two years, but all dealers were required to sign new four-year agreements with no right of renewal. The dealers had until September 2021 to sign the new agreements, or they wouldn’t be provided with Mercedes-Benz vehicles.

And that’s it for this week. And next week, I’ll be talking to Bob Sharpless, the deputy chairman of the Springfield City Group which is Australia’s first private company to create a Smart City. And I’ll be talking to Indeed economist Callam Pickering about the latest jobs figures.

In the meantime you can catch me on Facebook, Twitter and LinkedIn. And if you want leave a comment.

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