Uber’s surge plan to bring 10,000 electric vehicles into Australia.
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 39 in our series for 2023 and today’s date is Friday October 27.
First, I’ll be talking to Sonia Shwabsky, the CEO of KwikKopy focusing on the franchise company’s growth strategy.
And I’ll be talking to RMIT economist Sinclair Davidson about the impact of technology, big data and blockchain on the economy and how it will change our lives.
But first, let’s talk to Sonia Shwabsky
So what’s happening in the news.
The yield on the 10-year Treasury has reached 5% for the first time since 2007. That matters for everyone, not just Wall Street. Treasury yields have been climbing rapidly, with the 10-year yield rallying from less than 3.50% during the spring and from just 0.50% early in the pandemic. Monday morning, the yield on the 10-year Treasury was at 4.96% after hitting 5.02% earlier. The jump means the U.S. government must pay more to borrow money from investors to cover its spending. It also directly affects people around the world, because the 10-year Treasury yield is the centerpiece of the global financial system and helps set prices for all kinds of other loans and investments. Besides making it more expensive for U.S. homebuyers to buy a house with a mortgage, higher yields also put downward pressure on prices for everything from stocks to cryptocurrencies. Eventually, they could help cause companies to lay off more workers. Higher yields mark a sharp turnaround for a generation of consumers and investors who have known pretty much just low yields, as central banks kept benchmark interest rates pinned at nearly zero. Such low rates let people borrow money more easily, which helped economies to strengthen following the 2008 financial crisis, the European debt crisis and other maladies including, most recently, the COVID-19 pandemic.
Australia’s inflation rate quickened in the September quarter, boosted by higher petrol prices, adding to pressure on the Reserve Bank to hike interest rates again. The headline consumer price index rose 1.2% in July-September, up from 0.8% in the June quarter, the Australian Bureau of Statistics reported on Wednesday. Economists had expected the quarterly rate to come in 1.1%. At an annual rate, headline CPI was 5.4% compared with 6.0% in the June quarter. Economists had predicted the annual rate to come in at 5.3%, extending the decrease from a peak in the December quarter of 7.8%.
Secret tapes have revealed Australian billionaire Anthony Pratt’s extraordinary private dealings with Donald Trump, a $1 million promised payment to Trump’s lawyer, Rudy Giuliani, and financial dealings with then-Prince Charles in the hope he would become king. After recent allegations Trump had leaked classified US submarine fleet details to Pratt, the covert recordings reveal the billionaire claimed the former president also disclosed non-public details about US military action in Iraq and a private conversation with Iraq’s leader. Pratt gained access to Trump by spending hundreds of thousands of dollars on membership and event fees at the ex-president’s private Florida club, Mar-a-Lago. Pratt is heard on the tapes simultaneously admiring and besmirching Trump and comparing him to a mafia figure “with balls” who uses henchmen to do his dirty work. In claiming he had paid a fee of “about a million bucks” to Giuliani in return for the Trump lawyer attending Pratt’s birthday party, the Visy boss explained that “Rudy is someone I hope will be useful one day”. King Charles is another powerful figure Pratt has cultivated — while he was a prince — with documents listing a “final payment” to “HRH” [His Royal Highness] of $182,000 in 2021. “My superpower is that I am rich. So I am useful to him [Prince Charles], right?” Pratt said of Charles on the tape. Pratt has also privately claimed on covert recordings that he had donated $1 million to the Voice referendum’s Yes campaign because he had fielded a request to do so from a senior adviser to Prime Minister Anthony Albanese. Leaked documents show how Pratt has also pursued local political influence, revealing consulting payments to two former prime ministers, Tony Abbott and Paul Keating. Abbott was hired, the files show, weeks after losing his parliamentary seat in 2019, on a retainer of $8000 a month, while Keating’s monthly retainer is $25,000.
Uber is importing 10,000 electric vehicles from China that it intends to issue to drivers under an ownership scheme as it accelerates its green ride-share plans. The vehicles are being imported under a partnership between Uber and EVDirect, the Australian distributor for Chinese electric carmaker BYD. Drivers can now access BYD Atto 3 vehicles, which retail from $48,000, from EVDirect. Financing offers start at $269 a week, leading to outright ownership after four years. The influx of new electric vehicles, some of which will be sold on to private buyers within as soon as 12 months, is expected to deliver a boost to the second-hand electric vehicle market. Uber Australia has committed to eliminating emissions from its operations by 2040, banking on business appetite for its guaranteed clean transport offering, badged as Comfort Electric, to kickstart its drivers’ switch from petrol vehicles. The company’s Uber Green platform allows customers to select a ride from either an electric or a hybrid electric vehicle. Uber Australia general manager Dom Taylor said the company would provide businesses with data on reduced pollution from using electric vehicles so that they could include it in emissions reporting and calculate the contribution to corporate climate targets. The price of electric vehicles had fallen sufficiently for them to now be the lowest-cost option for drivers, which would maximise their take-home pay, Taylor said.
Federal agencies must set targets to reduce reliance on contractors and consultants under changes that formally ban the use of external hires for core work and leadership. In a major tightening of labour outsourcing, agency heads are being made accountable for prioritising direct employment and ensuring any use of external expertise enhances the work and knowledge of the Australian Public Service (APS). “Agency heads must set targets to reduce their agency’s reliance on inappropriate outsourcing,” the framework says. “These targets must be in place by June 2024, and should outline which parts of the agency’s operations will be brought back in-house, how many roles will be affected and the anticipated reduction in expenditure. “The core work of the APS must be done by our core workforce – APS employees. The APS default employment move follows a Finance Department audit that found an external workforce the equivalent of 53,911 public servants had been engaged using contract and consulting engagements. Almost 90% of the total external labour use was concentrated in Defence, Social Services, the Tax Office, Agriculture, Water and the Environment and Home Affairs. The audit found 75% of Defence’s outsourced spending – the equivalent of 26,199 workers – was on third-party providers such as garrison security, cooking and base cleaning. Nearly $3 billion in savings has already been made converting contractors to employees. But the blunt new rules mean agencies are under heavy scrutiny for any new external contractors. Core work is defined as essential to delivering the enduring functions of an agency, required on a regular and ongoing basis. The core functions that must now be done by the APS include:
• developing cabinet submissions, once they are in a classified environment.
• drafting cabinet submission recommendations.
• drafting legislation and regulation.
• leading policy formulation.
• roles that are on an agency’s executive team.
The framework also requires other core APS functions to be brought back in-house as a priority, but with the rules noting arrangements may take time to adjust. These include procurement and managing contracts, standard cost benefit analysis (excluding major capital, infrastructure, complex IT and secure assets such as defence) and delivering programs and managing grants. The framework notes many of the integrity controls do not apply to contractors.
Barriers to women fully participating in the workforce are costing the Australian economy $128 billion as a federal government-appointed taskforce calls for wholesale changes to the tax system, how public contracts are awarded and introduction of year-long paid parental leave. Declaring that women were tired of waiting to feel safe and economically valued, the report from the women’s economic equality taskforce released on Monday calls for more investment in early childcare and education, ensuring the minimum wage is high enough to be considered a living wage and finding new ways to encourage older women back into the workforce. The taskforce was created last year to provide independent advice to the government on how to boost women’s involvement in the economy and build on recommendations out of the September 2022 jobs summit. Headed by prominent businesswoman Sam Mostyn, the taskforce also included former Business Council chief executive Jennifer Westacott, incoming chair of the Productivity Commission Danielle Wood, ACTU president Michele O’Neil and former Rudd government minister Jenny Macklin. Mostyn said it would take a decade to implement changes proposed by the taskforce, which had been told by women of all ages that their role in the economy had been under-valued and belittled for too long at a huge cost to the country.
The amount of electricity generated from solar hit a record high in the third quarter, as a rapid increase in installed capacity coincided with favourable weather to drive a fall of almost 70% in average wholesale electricity prices. The findings are a boost to Australian households and businesses that are desperate for some bill relief. Wholesale prices are the primary driving force behind how much electricity bills will rise in 2024. The Australian Energy Market Operator said the wholesale spot electricity prices across the National Electricity Market averaged $63/MWh this quarter, 71% lower than at the same time last year. The fall was largely driven by warmer than average weather, which reduced demand for electricity and increased the output of solar generators. Australian households have been installing solar at a rapid rate as they seek shelter from two years of consecutive price rises in excess of 20%. The increase in solar generation is a fillip for the federal Labor government which is struggling to wean the country’s $2.5 trillion economy off its dependency on coal. The increase in solar installations will intensify pressure on coal power plants and heighten the need to move quickly to install so-called firming capacity Higher rooftop solar penetration will intensify losses for coal generators – and AEMO expects two-thirds of Australia’s traditional electricity providers to close within the next 10 years. The decline in coal means Australia’s coal output is steadily falling, and AEMO said quarterly generation from black coal hit a record low in the third quarter after AGL Energy shuttered its Liddell coal power station.
Sales teams at Taylor’s Wines, which grows and makes wine in South Australia’s Clare Valley, are racing to re-establish connections with their Chinese buyers, following a decision to review China’s wine tariffs on Australian producers. Mitchell Taylor, chief executive of Taylor’s Wines, said Prime Minister Anthony Albanese’s announcement on Sunday that the two countries had reached a deal to review the punitive wine tariffs had “delighted every winemaker in the country”. “The industry is basically on its knees,” he said. “Not only was our largest and most profitable market taken away from us, but many of our customers have moved on to build relationships with French and Chilean winemakers. We need to get those relationships back.” After months of negotiations, the government announced that Chinese officials would begin a five-month review of the tariffs. The 218% tax imposed on most Australian wine was part of a suite of restrictions that China introduced after Australia called for an inquiry into the origins of COVID-19 in 2020. The decision prompted wine trade to collapse, and marked the start of a tough few years for Australia’s winemakers. Three years without its largest import partner were exacerbated by floods across major wine growing regions in New South Wales and Victoria. ASX-listed Treasury Wine, which houses brands such as Penfolds, Pepperjack and Wolf Blass, have suffered a 33% fall in share price since tariffs were announced.
Fortescue wants its mining operation emissions-free by 2030. Bigger iron ore rivals Rio Tinto and BHP are advancing, but not going as fast or spending as much money. Rio is aiming for a 15% reduction by 2025 and a 50% reduction by 2030. BHP is targeting a 30% reduction by 2030. Fortescue will spend $US6.2 billion ($A9.8 billion) decarbonising its iron ore operations; Rio has estimated it will cost about $US3 billion to halve emissions from its Pilbara mines by the end of the decade. BHP has flagged $US1.6 billion spending between 2023-24 and fiscal 2030 to hit its iron ore decarbonisation target. All three are relying on renewable energy to replace the gas and diesel that currently power their mining, rail and port operations, but making slow progress on the vast solar and wind farms that will be required. Fortescue chief executive Dino Otranto says the electric haul trucks being developed by Fortescue are something like a super-sized version of a Toyota Prius. Haul trucks are the biggest users of diesel in Australia. BHP uses 1.5 billion litres a year to run machinery and other equipment in its Australian iron ore and coal mines. Fortescue uses 700 million litres a year, while in rail operations alone Rio chews through 700,000 litres a day. The big miners see immense savings in diesel bills and any potential carbon price, and hope for lower maintenance bills in electric trucks.
Five major proxy advisers recommend investors reject Qantas’ executive pay scheme and have demanded more details over why the board has not sanctioned the airline’s management financially over an adverse High Court ruling and its flight credits saga. The Australian Council of Superannuation Investors joined Glass Lewis, Ownership Matters, Institutional Shareholder Services and the Australian Shareholders Association in recommending investors vote against the adoption of Qantas’ remuneration report. Proxy advice raises the prospect of Qantas facing the biggest backlash by an ASX blue chip since National Australia Bank suffered an 88.1% vote against its remuneration report in 2018. ISS and the ASA further recommend investors vote down a motion proposing that Qantas chief executive Vanessa Hudson be granted long-term incentive payments for financial year 2024. “Given recent reputational issues, shareholders may see this as a core responsibility of the leadership of the CEO, to whom substantial remuneration is already on offer,” ISS said of Ms Hudson’s participation in the bonus plan.
Carbon emissions caused by employees commuting to work or on business trips will need to be disclosed under mandatory new accounting standards, as activists and investors target firms over the detail of their net-zero carbon targets. The Australian Securities and Investments Commission will be enforcing the climate disclosures that will initially apply to the country’s biggest companies from next year before being expanded to smaller firms. Executives and board members are being warned they could be held responsible for a larger range of emissions than are now considered, including across 15 categories of so-called scope 3 emissions. These will include emissions related to waste generated by operations; employees commuting; business travel; the use of sold products and their end-of-life treatment. So-called fly-in-and-fly-out trips would be captured as would business-class travel.ASIC chairman Joe Longo has put companies on notice that the coming regime will be the “biggest change to corporate reporting in a generation”. The mandatory rules initially apply from next year to companies with more than $1 billion in assets, $500 million in revenue or 500 employees, but will then be phased in over three years down to companies with $25 million in assets, $50 million in revenue or 100 employees by 2027-2028.
And that’s it for this week. And next week, I’ll be talking to Scott McKinnel, the country manager for Australia and New Zealand of Tenable. We’ll talk about cybersecurity.
And I’ll be talking to EY economist Cherelle Murphy about the latest inflation figures.
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