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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 forty-two in our series for 2020 and today’s date is Friday November 20.
First, I’ll be talking to Bruce Tulgan, over the in the US. The founder and CEO of Rainmaker Thinking, coach and management thinker Tulgan will tell us how companies can rebrand themselves with smart recruiting. And I’ll be talking to RMIT economist Jonathan Boymal about signs that the Australian property market might be picking up post-COVID.
But now, let’s talk to Bruce Tulgan
Global stocks have rallied after biotech group Moderna revealed that its coronavirus vaccine had been found to be highly effective. Moderna Inc’s experimental vaccine is 94.5% effective in preventing COVID-19 based on interim data from a late-stage trial, the company said on Monday, becoming the second U.S. drugmaker to report results that far exceed expectations. The announcement followed a similar breakthrough from Pfizer and BioNTech a week ago. Together with Pfizer Inc’s vaccine, which is also more than 90% effective, and pending more safety data and regulatory review, the United States could have two vaccines authorized for emergency use in December with as many as 60 million doses of vaccine available this year. The vaccines, both developed with new technology known as messenger RNA (mRNA), represent powerful tools to fight a pandemic that has infected 54 million people worldwide and killed 1.3 million. Unlike Pfizer’s vaccine, Moderna’s shot can be stored at normal fridge temperatures, which should make it easier to distribute, a critical factor as COVID-19 cases are soaring, hitting new records in the United States and pushing some European countries back into lockdowns.
ANZ Roy Morgan consumer confidence has just marked the eleventh consecutive week of gains in consumer confidence. Building on the previous week’s 6.1% gain, ‘current financial conditions’ rose by 1.6%. ‘Future financial conditions’ lifted by 3.5%.ANZ said confidence in economic conditions improved sharply with ‘current economic conditions’ rising 8.2% and ‘future economic conditions’ gaining 4.8%.
But Australian wage growth has fallen to its lowest level on record during the third quarter, slipping to 1.4% year-on-year, from the previous record low of 1.8% during the second quarter. Quarterly growth for the wage price index was just 0.1%. Economists had been expecting 0.2%.
Monday’s major ASX outage was a timely reminder of the fragility of the infrastructure underpinning some of our most important assets — and that upgrades don’t always go according to plan. The technical glitch, which hit on Monday morning and froze trading for the rest of the day, came after what ASX boss Dominic Stevens said was more than a year of testing, including four dress rehearsals. But as every IT executive is acutely aware, no number of dress rehearsals can adequately prepare for the real thing. Some Twitter users assumed the outage was due to a cyber attack or malicious hack, but the truth was much more mundane. It was due to an upgrade of the ASX’s trading technology developed by US exchange Nasdaq. Similar upgrades have knocked out services from the likes of Microsoft Outlook, Google and Telstra this year alone. Just a week ago a massive outage hit Microsoft’s 365 suite of products, including Outlook, with the company blaming a botched network driver update. A similar issue plagued Google in September, with customers left unable to access their emails due to a “routing server crash”. The ASX compounded its failure to keep the country’s primary equity capital market open by failing to ensure a seamless transition to the alternative market, Chi-X. What makes this failure by the ASX even worse is that the market operator appears to have snubbed its nose at the recommendations made by the Australian Securities and Investments Commission following the last major outage in 2016. The ASX’s comeback from the longest outage in four years did not go as smoothly as hoped on Tuesday and was impeded by delays, eventually resolved, with the ageing CHESS system of clearing and settlement late in the session. ASIC’s intervention invites new questions about the standard of the market’s critical infrastructure and the ASX’s stewardship, but the ASX is confident in its position.
The average cyber-ransom paid by Australian companies is $1.25 million, according to a global survey conducted by cyber security firm Crowdstrike. The amount is slightly lower than the world-wide average of $1.55 million, and is based on responses from 200 Australian IT security professionals. According to the survey, more than two-thirds of Australian companies were targeted by ransomware attacks over the past 12 months, with about one-third of those paying the ransom.
The COVID-19 pandemic has left households and businesses more risk averse, Reserve Bank governor Philip Lowe said, fearing that without an acceleration in activity it could take longer for Australia to recover from its recession. Speaking at the CEDA Annual Dinner in Sydney, Dr Lowe said for some time “people will be more cautious in their borrowing and spending decisions”. Lowe said Australia’s economic recovery requires more risk taking. But he said Australia was “on the road to recovery”, and there was the potential to bounce back quickly should the health situation continue to improve. He said the way both governments and central banks set fiscal and monetary policy has shifted, with the priority on creating jobs. The one positive of the pandemic is it has accelerated digitalisation of Australia’s economy, which he says helps boost productivity
Efforts to diversify Australia’s trade relationship away from China have received a major boost with the signing of the world’s largest free trade agreement between 15 Asia-Pacific nations. Australia is entering into the biggest trade agreement ever, a 15-nation partnership that accounts for nearly a third of global output. Prime Minister Scott Morrison and his Trade Minister Simon Birmingham signed the regional comprehensive economic partnership on Sunday, an agreement that covers around 30% of the world’s population. The countries involved are Australia, China, Japan, South Korea, New Zealand and the ten members of ASEAN, including Indonesia and Vietnam. They will be part of the deal. Leaders agreed to terms on the Regional Comprehensive Economic Partnership (RCEP) at the Association of South-East Nations (ASEAN) summit in Bangkok last year. The RCEP pact, which has taken eight years to negotiate, surpasses the Trans-Pacific Partnership (TPP) in scale after the United States pulled out of that agreement under the Trump Administration.
The Morrison government will spend $1 billion over a decade to underwrite the construction of a new vaccine production facility to guarantee the nation continues to have its own supply of flu shots, antivenins and, if another pandemic occurs, the sovereign capability to look after its own citizens first. Under the deal, CSL subsidiary Seqirus will spend $800 million to build a new state-of-the-art facility at Melbourne’s Tullamarine airport. In return, the federal government will agree to buy, over 10 years the influenza vaccines it will produce, along with the antivenins to treat the bites from the nation’s deadliest spiders and snakes. Should another pandemic like the coronavirus sweep the world in the future, the plant could also be repurposed to develop a vaccine without Australia having to bid for one from overseas. Seqirus currently produces influenza vaccines and antivenins at a facility in Parkville, Victoria, but the plant is old and unable to cope with new cell-based technology and production demands. Its current deal with the government expires in 2024-25 and without the new arrangement, the government says the facility would have closed, 1300 jobs would have been lost and Australia would have had to source the vaccines and antivenins from abroad. Under the new deal with the federal government, construction of the new plant will begin next year and it is scheduled to be up and running by 2026. The government will buy the products from 2026 until 2036. Ironically, the government already had this facility when it was known as Commonwealth Serum Laboratories. In 1994, the Commonwealth facility was privatised as CSL Ltd
Victoria aims to offset the hit to the state’s economy from the expected loss of up to 61,000 dwellings by building 12,000 public and community housing homes over the next four years in a $5.3 billion spending blitz. Premier Daniel Andrews said the project was the biggest boost to social and affordable housing in Australia’s history. The package, which will boost Victoria’s social housing supply by 10% in four years, comes as the number of households on the Victorian Housing Register exceeded 48,000 in September. It follows figures last year that showed Victoria was already suffering from a social housing shortfall of 100,000 dwellings which was forecast to hit more than 160,000 by 2036 without intervention. The package will generate an estimated $6.7 billion in economic activity and comes at a crucial time for the state, with Melbourne and Sydney most exposed to the population slowdown stemming from the country’s closed international and domestic borders.
The Australian mobile services market experienced a decline for the first time in the past decade as the number of SIOs (Services in Operation) reduced by 62,000 to 36.2 million connections in the measured six months (end June 2020), according to new research from Australian emerging technology analyst firm, Telsyte. The Telsyte Australian Mobile Services Market Study FY2020 tracks mobile SIO measurement including handsets, mobile broadband and mobile IoT for business applications. The decline in connections was primarily due to the reduction in prepaid handset SIOs (down 5% from December 2019), which was impacted by lower levels of international visitors and net migration during the period. The study found the mobile IoT category remained the primary growth driver for the mobile services market as more businesses adopted IoT solutions as part of their digital strategy. Telsyte estimates there were around 4.4 million mobile IoT SIOs at the end of June 2020, up 8% from December 2019. While mobile services will remain an essential service, Telsyte believes the market will be under increased pressure in the next two years. Telsyte expects the total number of handset SIOs will likely remain at similar levels during the next 12 to 18 months with further consolidation of secondary services and limited population growth key factors.
Nine Entertainment’s board faces serious questions in the wake of Hugh Marks’s resignation after asking investors to back a $2m long-term bonus for the departing chief executive — two days before he resigned after his workplace relationship became public. Mr Marks will walk away from a potential $5m payday, approved at the company’s annual general meeting on Thursday. Mr Marks resigned on Saturday after a special meeting of the Nine board discussed his relationship with a former colleague who reported directly to him. His departure was not mentioned at the Thursday meeting, but came a day after he confirmed to the Nine-published Sydney Morning Herald that he was in a relationship with the company’s former commercial managing director Alexi Baker, who departed in October. Mr Marks’s confirmation to his own masthead came before the Sunday Telegraph was due to expose the relationship. But Mr Marks, who took the top job at Nine in 2015 and stayed at its helm after the broadcaster merged with Fairfax Media, could risk millions of dollars in remuneration if he is found to have breached his obligations or if the board finds the awards granted in recent years were not justified. Marks has admitted he did not tell the board about his new relationship with former senior executive Alexi Baker until last week, but insists that any conflicts of interest have been handled appropriately. The 54-year old said he is leaving to give a successor a clear path to take the well-performing business forward after more than five-years at the helm, but conceded the intense gossip about his personal life pushed him to move now.
United Malt is bracing for the impact of second and third waves of COVID-19 as the pandemic continues to hit global beer and alcohol sales. The international maltster’s full-year earnings slumped as the virus forced pubs and clubs in its key markets to close and big sporting and other entertainment events were cancelled. United Malt’s revenue for the year to September 30 fell 2% to $1.3 billion as sales declined on the back of lockdowns.
About two dozen individuals and companies face potential criminal charges under a plan by the corporate regulator to refer cases to the Commonwealth Director of Public Prosecutions by the end of the year. Of the 13 royal commission referrals made to ASIC to pursue, just two remain under investigation. Five have been thrown out with no further action, while five are civil matters in the courts, while one matter resulted in a $57 million fine against National Australia Bank. ASIC is also pursuing 16 case studies from the royal commission, of which six are before the courts. Three are being weighed up for possible criminal prosecution and seven are still under investigation. The regulator has already wrapped up five cases, resulting in civil penalties of more than $20 million. Before the end of December, ASIC is aiming to file about 15 civil cases and transfer about 20 matters to the Commonwealth Director of Public Prosecutions where about two dozen individuals and companies face potential criminal charges. ASIC is also aiming to refer 10 people or firms for administrative actio
Australia’s corporate watchdog says some consumers are having to cut back on essentials such as meals because of debt they have racked up from using buy now, pay later, warning one in five consumers are missing payments. ASIC’s review into six buy now, pay later players found that some were causing consumers harm. ASIC has stopped short of recommending that buy now, pay later players be regulated in the same way as credit card companies But the Australian Securities and Investments Commission (ASIC) has stopped short of recommending that the sector be regulated in the same way as credit card companies, despite concerns from consumer advocates that it is just another form of credit that allows people to take on too much debt. ASIC’s long-awaited report into the industry said the total amount of credit extended in the buy now, pay later industry has almost doubled in 12 months. The number of buy now, pay later transactions increased from 16.8 million in the 2017-18 financial year to 32 million in the financial year 2018-19, representing an increase of 90%. Missed payment fee revenue for all buy now, pay later providers that ASIC looked at grew 38% to $43 million. Revenue sources varied between different platforms, with late fees making up 20% of Afterpay’s revenue in FY18-19, with the balance coming from merchant fees, whereas Zip got most of its revenue from other fees charged to customers.
General insurer Suncorp set aside an additional $125 million for coronavirus-related business interruption claims. The move brings Suncorp’s total pandemic-related business interruption provisions to $195 million. Suncorp said it had made the extra provision after examining the economic impact of the second lockdown in Victoria, which saw many businesses forced to shut for more than three months.
The Commonwealth has agreed to a settlement worth $1.2 billion over its unlawful Robodebt recovery program, which raised automated debts against welfare recipients which raised millions of dollars in unlawful debts. The trial was due to begin in the Federal Court on Monday, and the amount of the settlement is not yet known. The Robodebt system has been widely criticised for using computer algorithms to raise debts against hundreds of thousands of welfare recipients, with little to no human oversight. In May, the Federal Government agreed to oay back $721 million to more than 370,000 people who were wrongly pursued. Prime Minister Scott Morrison later apologised in Parliament for “hurt or harm” caused by the process. The class action, launched on behalf of people who received notices through the automated debt recovery process, was launched last year. The settlement includes $112 million in compensation to be paid by the Commonwealth, as well as the cancellation of a further $398 million in debts that were wrongly claimed by the government using the automated income-averaging methodology, which the Federal Court last year ruled was illegal. Added to the $720 million in robodebts that the Commonwealth agreed to repay earlier this year, the total compensation to victims now tops $1.2 billion. It is a condition of the settlement, however, that the Commonwealth does not admit legal liability.
And that’s it for this week. And next week I’ll be talking to Mervyn Chang about what industries are affected by robotics. And I’ll be talking to Callam Pickering from Indeed about the latest wages growth and unemployment figures
In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on 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.