KPMG Australia chief executive John Sams wants $100 million in funding from global network to combat audit scandal fallout
Welcome to Talking Business, a podcast produced in Melbourne Australia, built on the traditional lands of the Kulin Nation. 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 https://www.businessacumen.biz/.
I am Leon Gettler. My job is review and monitor the week’s news in business finance and economics. I bring it all to you every 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 or whatever your favourite podcast platform is.
This is episode number 36 in our series for 2026 and today’s date is Friday October 9.
First, I’ll be talking to leadership coach Kylie Paatsch who helps leaders build trust and accountability at senior levels without over-managing. We’ll talk about how they can build engagement with their teams and one-to-one conversations
And I’ll be talking to EY regional chief economist Cherelle Murphy on why the RBA had to raise rates, Australia’s latest CPI figures, and the likelihood of more rate hikes.
But first, let’s talk to Kylie Paatsch
So what’s happening in the news?
Let’s start with a warning from the Education Department. In a submission to a parliamentary inquiry on AI, it says chatbots may be hurting kids’ ability to think for themselves. It points to the latest international PISA results, which found 15-year-olds who used AI for things like summarising texts scored lower in science than those who didn’t. The department says the risk is sharpest for disadvantaged students, who are less likely to be taught to question what AI tells them. Screens are part of the problem too. Australian teens spend about 2.6 hours a day on digital devices for class or homework, versus an OECD average of 1.7. In response, NSW will require an hour a day of handwriting and bookwork from next year, and Victoria is banning smartwatches and headphones in schools. The department isn’t all doom and gloom, though. It says AI could help spot struggling students earlier and give teachers a hand with multilingual learners and students with disability. Meanwhile, Assistant Minister Andrew Charlton says AI is central to Australia’s productivity recovery. And the inquiry is calling Google, Anthropic, OpenAI and Microsoft to a hearing on Tuesday, where OpenAI will be asked about a June incident in which its AI accidentally got into non-public data held by Medicare and four other agencies.
Speaking of organisations under pressure… KPMG Australia is asking its global network for help. It wants up to $100 million in emergency loans, plus a waiver of its annual brand fee, which is worth more than $100 million. CEO John Sams is pitching this as a way to fund client pursuit, keep top talent and protect partner payouts. But other regions aren’t keen on bailing out Australia for its own mistakes, and the new global chairman, Gary Wingrove, is wary of the precedent. The backdrop is a scandal that began in March over alleged misuse of confidential client data. Since then, ANZ, Lendlease, IAG and Macquarie have all pulled audit work, and about 100 partners have left. Revenue is only down 1%, but partner pay fell 13% and could drop another 25 to 30% this year. Partners were even told this month’s payment would arrive a week late.
A Federal Court judge, Nye Perram, has called former ANZ trader Etienne Alexiou a “hypocrite”, but still found he was right on one key point: that he’d raised a genuine concern about trading malpractice involving a key interest rate benchmark. Alexiou wasn’t treated as a true whistleblower, though. He’d used crude, aggressive language with colleagues at rival banks, then claimed in court he was talking about whaling. The judgment paints ANZ’s global markets division in the early 2010s as a “nasty and brutish” place: huge bonuses, heavy drinking, pervasive swearing and open sexism, including a 2013 incident where the then-head of global markets, Steve Bellotti, was found to have sexually harassed a young woman at a conference dinner. Perram said the “fish rots from the head”. Alexiou lost his whistleblower claim (and the $100 million he wanted) but won a breach of contract claim worth about $5 million. ANZ, which settled over the rate-setting allegations for $50 million in 2017, says the conduct involved people no longer at the bank and that it has strengthened its culture since.
Economists are saying the odds of an Australian recession are creeping up, but you wouldn’t know it from the bond market. Normally when people fear a US$200 billion spent this year to build data centres, and that demand is keeping long-term borrowing costs high. Add the US-Iran conflict pushing oil above US$100 a barrel, plus heavy US government spending, and the curve stays in check. None of that is helping Australia much, though. Our economy grew just 0.4% last quarter, and the Reserve Bank has just lifted the cash rate for the fourth time this year, to 4.6%, a 15-year high. HSBC’s Paul Bloxham puts the recession risk at close to 50:50. Other economists, like Westpac’s Luci Ellis, think household incomes and business investment will hold things together. But EQ Economics’ Warren Hogan points out that our potential growth rate is so low that it’s much easier to slip into a technical recession than it used to be.
Speaking of the rate rise, consumers did not take it well. The Westpac-Melbourne Institute sentiment index fell 4.7% in October to 80.4 points. But the people surveyed after the RBA’s decision were far gloomier: their confidence plunged 20% to 67.2, the worst reading this century. Westpac’s Matthew Hassan called it “alarmingly weak.” Interestingly, the worries are mostly about cost of living, interest rates and fuel prices, not job losses or insolvencies, the things you’d expect in a full recession. Still, it’s the longest stretch of weak sentiment since the early 90s recession. It’s been a rough week for the Albanese government, too, with new figures suggesting Jim Chalmers is on track to be the highest-taxing treasurer on record. Chalmers blames the war in the Middle East and a long-standing productivity problem. As for what’s next, AMP’s My Bui says another rate rise on November 2-3 is possible, but a hold is more likely given weak confidence and spending.
Now to something closer to home: your morning flat white. Since the RBA’s ban on card surcharge kicked in on the first of the month, one in six cafes has put up the price of a small flat white. A coffee price tracker called Small Flat White used an AI agent to phone more than 1,500 cafes before and after the change. It found 17% raised prices, 79% held steady, and 4% actually cut them, apparently to win customers from competitors who were raising theirs. The most common increase was 50 cents. The tracker’s creator, Christopher Drake, says this isn’t simple price gouging. Cafes have been absorbing rising costs for months and were waiting for a tipping point. Arabica beans now cost around $8 a kilo, up from about $3 five years ago, and rents are climbing too. KPMG’s Terry Rawnsley calls the ban “another termite eating away at business margins.” The ban has also had some surprising side effects, like people no longer being able to pay tax bills by credit card. Economists don’t expect a lasting inflation shock, but it will likely nudge up the October quarter CPI, and the RBA will be watching whether businesses keep using these costs to justify more price rises.
Since the RBA’s surcharge ban took effect this month, businesses can’t pass card fees on to customers, so some are dropping cards altogether. Riverview College (about a quarter of families pay by card) will stop accepting them next year to avoid roughly $400,000 in annual fees, and Brighton Grammar has done the same. The ATO will stop accepting credit cards after November 30, which has angered business groups because about $15 billion was paid this way, at least $5 billion by small businesses, who use cards to manage cash flow. Macquarie’s DEFT platform has stopped card rent payments too, so renters lose a source of reward points, though a service called Pay and Earn offers a workaround for a fee.
After the RBA raised the cash rate by 0.25 points to 4.6% (up a full point in 10 months), the big four banks lifted fixed mortgage rates by much more, roughly 45 to 48 basis points at NAB, CBA and Westpac, and up to 20 at ANZ. Meanwhile, deposit rates haven’t kept pace, Macquarie is eating into the majors’ “lazy” deposit base, and deposits and investor loan demand are both falling. Analysts at Morgan Stanley warn more hikes raise the odds of a loan loss cycle next year, the first homegrown one in 35 years, and some advisers are telling clients to avoid bank shares. Markets see a one-in-four chance of another hike in November and expect more by May.
Real federal spending grew 4.3% last financial year, more than double the 1.8% forecast. Economists say this is making the RBA’s inflation fight harder and that the budget will stay in deficit for the foreseeable future, even with tax revenue at its highest share of GDP since 1986-87. Treasurer Jim Chalmers says more savings are coming in the mid-year update, but economists are sceptical the budget’s assumed slowdown in spending (to 1.3%) is achievable. Rising bond yields could add up to $6.7 billion to the deficit over four years. Some economists say the RBA may need to push rates to 5% or higher if governments don’t rein in spending.
Treasury Secretary Jenny Wilkinson sent staff a memo urging them to report colleagues who mishandle sensitive information, citing ASIO warnings. It lands as Treasury faces heavy criticism over the rushed budget tax changes (CGT, trusts, negative gearing). Business groups call the consultation “inadequate” and “a shambles”, pointing to windows as short as a fortnight for hundreds of pages of legislation, and design errors like the so-called “death” and “baby” taxes. There have been 52 senior personnel changes since April, some staff privately worry about political appointments, and former officials have questioned Treasury’s “rosy” modelling that the changes will cut house price growth by only 2%. Business groups say officials are doing their best with a poor hand dealt by the government.
Now to regional media. News Corp has reportedly started early due diligence on The Land and several other agricultural mastheads owned by Australian Community Media, which is controlled by Antony Catalano and Alex Waislitz. It’s very preliminary, and ACM’s owners say nothing has been agreed. ACM has had a rough year. Catalano was charged in March over an alleged attack on his wife, and he’s since stepped back from the business, with Nick Chan taking over as chairman. His next court date is October 16.
Finally, Treasurer Jim Chalmers is promising a “pretty tight ship” in the mid-year budget update. He’s warning that surging bond yields will add billions to borrowing costs, so big new cost-of-living relief looks unlikely. This comes after the RBA lifted rates to 4.6%, a 15-year high, with underlying inflation at 3.6%. Chalmers says government spending isn’t the main driver of inflation, but economists point to the high level of public spending as a share of the economy. The Coalition’s Tim Wilson wants him sacked, while Charlton backs Chalmers and says productivity is the key to bringing inflation down.
And that’s it for this week.
And next week, I’ll be talking to Jarrod Adam, Head of Product for Production and Distribution at Unleashed, who can unpack what a dramatic drop in inventory means for Australian manufacturers and why getting stock levels right has never been more important.
And I’ll be talking to Rabobank economist and China expert Teeuwe Mevissen on what the latest summit meeting between Donald Trump and Xi Jinping meant. Was it a stalemate? And who was the winner?
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com or whatever your favourite podcast platform is.
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