Australia’s most important economic institution is the RBA. The OECD says it’s time to look under bonnet to address the central bank’s failure to meet key economic targets in recent years and deal with long-term risks posed by the pandemic.
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 33 in our series for 2021 and today’s date is Friday September 17.
First, I’ll be talking to Joseph Vartuli, CreditorWatch’s CTO connecting over 50,000 Australian businesses with sophisticated credit risk management tools to navigate the economic turbulence of 2021, by assessing the ability of their creditors to pay what they owe. And I’ll be talking to IFM Investors economist Alex Joiner about the state of the economy.
But now, let’s talk to Joseph Vartuli.
September – the most dangerous month of the year on the sharemarket – is looking more dangerous than usual with a burst of warnings on an impending correction. Australian blue chips have stumbled from their record highs in August, threatening to end an 11-month run of gains despite fresh optimism on the country’s vaccine rollout, as investors prepare for a lull in profit growth. The S&P/ASX 200 has fallen nearly 2% since the start of the month and is down 3% from a peak a month ago, placing the benchmark on track for its first monthly loss since September last year. As independent economist Jonathan Pain says in his most recent report: “If the market is about to experience its first meaningful correction of 2021, now is a pretty good time for it to happen.” Why now? Analyst concerns range from the reappearance of inflation, to extended Covid-related interruptions, to suggestions the profit recovery has now peaked. More pressing is the prospect of a “taper tantrum” on global markets as central banks try to wind back their money-printing programs. As the concerns mount, the unbroken chain of good news for share investors looks ever more fragile.
The Reserve Bank would face its first independent review in 40 years under a proposal from the OECD, which says it is time to address the central bank’s failure to meet key economic targets in recent years and deal with long-term risks posed by the pandemic. In a broad-ranging report into the state of the Australian economy that also called for substantial tax reform and more explicit budget repair commitments from the federal government, the Paris-based Organisation for Economic Co-operation and Development said a review of the RBA should cover its charter and board make-up. The RBA sets official interest rates and attempts to keep inflation between 2 and 3% as part of its charter to deliver full employment while maximising the nation’s prosperity. It has missed its inflation target since 2015. Shadow treasurer Jim Chalmers said at the time the RBA was not beyond criticism, backing a review of the bank, monetary policy and its interaction with fiscal policy. The same series also showed concerns about the bank’s internal structures, including its board, which is appointed by the treasurer of the day. During a period when it consistently overestimated the strength of wages growth, there was no union representative on the board. Every 18 months, the OECD conducts a formal review of member countries, making recommendations across a range of economic policies. Its latest report is the first to propose a review of the RBA and its operation. Treasurer Josh Frydenberg is open to an independent review of the Reserve Bank of Australia, following calls from the OECD for a probe into why the bank has consistently failed to meet its economic targets. Such a review would include looking at the key lessons from the COVID-19 crisis, implications for interest rates being stuck at historic lows of 0.1%, the bank’s inflation target, and its board structure and transparency.
The Morrison government is being urged by the OECD to reduce its reliance on income taxes, overhaul the GST, lower tax concessions and develop a clear plan to reduce debt coming out of the coronavirus pandemic. The Australian economy faced challenges before COVID-19 and structural reform is needed to rein in the budget and boost business dynamism and productivity, according to the club of wealthy economies now headed by former Australian finance minister Mathias Cormann. The OECD recommended the government reduce its reliance on income taxes, increase the rate and broaden the base of the GST, lower retirement tax concessions and capital gains discounts, and develop a clear medium-term plan for the budget with targets based on timeframes or conditional on measurable outcomes. States and territories also needed to get on with major reform to scrap stamp duty and move to broad-based land taxes, overhaul land use regulations, and progress legislating mutual recognition of occupational licensing.
Tens of millions of annual visitors to Crown and every worker will have to be fully-vaccinated to access the mega-attraction, under a bold plan. The hospitality giant has written to all its 20,000 employees across Australia, informing them that discussions will begin immediately regarding the introduction of mandatory vaccinations for staff and visitors. The “no jab, no entry” policy would apply to all its facilities, including Crown Melbourne’s gaming floors, hotels, shops, restaurants, cinemas, nightclubs and amusement centres. Crown Resorts and Crown Melbourne chief executive Steve McCann said: “Our starting point will be, anyone who works at, or visits our facilities, will need to be vaccinated across the board.
More than 1 million people could be vaccinated at work after Australia’s businesses were given the green light to join in the rollout and turn offices, warehouses, construction sites, factory floors and mines into vaccination centres. Following a sustained push by the banks, airlines, supermarkets and others to join the vaccine push to reopen the economy and keep it open, business leaders were given the go-ahead during a briefing on Monday with rollout co-ordinator General John Frewen. The plan – made possible by a supply surge of 36 million Pfizer and Moderna MRNA vaccines over this and the next three months – will involve a business enlisting an accredited vaccine provider which would then send nurses or other medical personnel to the business to vaccinate staff, much in the same way businesses arrange annual flu shots for workers. The program is expected to be under way by the beginning of October because due process stipulates the providers must first seek accreditation to administer COVID-19 vaccines at workplaces through the Commonwealth tender process. The government will pay the provider a fixed price for each vaccine administered, meaning there will be no cost to the worker or the business. Businesses cannot charge workers for their jabs. The government estimates between 1 million and 1.7 million people could be vaccinated at the workplace through the business program, which will augment the doses being administered through state government vaccinations hubs, and the Commonwealth-controlled network of GPs and pharmacies. The Business Council of Australia, which has been working on the program for several months, said enlisting the nation’s largest employers was “a no-brainer”.
The US audit watchdog has fined KPMG Australia $US450,000 ($615,000) over “widespread” cheating on tests designed to ensure partners and staff act with integrity and have the relevant skills for their work. More than 1100 KPMG partners and staff “were involved in improper answer sharing when taking training tests” where they either received or shared answers between “at least 2016 to early 2020″, according to a decision published overnight by the Public Company Accounting Oversight Board (PCAOB). The firm has forced two partners to retire over the cheating, while another 16 partners received formal warnings and had their income docked by tens of thousands of dollars. Another 30 KPMG staff members received warnings and had their pay docked, while another 1131 staff members, or about 12% of the firm’s total personnel, received “verbal or written cautions” for either sharing or receiving exam answers.
Women’s progress to financial equality with men suffered a setback in the June quarter, as COVID shock factors put the brakes on the female-led recovery at the start of 2021, the latest Financy Women’s Index (FWX) June quarter report shows. While the FWX rose by 0.9% to 72.2 points in the June quarter, the pace of progress is slower than the 1.06% recorded in the March quarter 2021. The June quarter result was helped by a fresh record high in the number of women occupying ASX 200 board positions to 33.5% and a narrowing of the gender gap in the underemployment rate. However, digging deeper into the closing of the gender gap in the underemployment rate, it appears less affected by actual progress for women and instead reflects more women opting out of work. In the March quarter of 2021, the Australian economy was picking up, helped by a female-led employment recovery in sectors most hit by the pandemic such as Retail Trade and Food and Accommodation Services. However, the recovery started to come off the boil in June and the number of monthly hours worked by females fell by 2.3%, almost five times that seen among males and contrasting to a 4.6% gain for women in the March quarter The gender pay gap also widened to 14.2% from 13.4%, reflecting the biggest dollar difference ($261) between men and women’s full-time weekly wages since 2016. It will take at least 21 years for parity to be achieved in the gender pay gap, at least 31 in employment, 16 years in the underemployment rate and 7 years for 50/50 gender diversity to be achieved on ASX 200 boards. Overall, the most significant obstacle relates to unpaid work. It will take 101 years before equality is achieved in this area and before we can say equality has been achieved across all areas of financial inequality measured in the FWX.
Reserve Bank of Australia Governor Philip Lowe has dismissed suggestions interest rates could rise next year, insisting the cash rate will be on hold until 2024. In a keynote address to the Anika Foundation on Tuesday, Dr Lowe said interest rates will be on hold on the record low of 0.1% for at least the next three years.
A measure of Australian business conditions showed a welcome improvement in August as sales and profits weather coronavirus lockdowns in parts of the country, offering hope of a speedy recovery once restrictions ease. Tuesday’s survey from National Australia Bank showed its index of business conditions rose 4 points to +14 in August, recovering part of July’s sharp 14-point drop. The survey’s measure of confidence edged up 2 points to -5, after diving in July as lockdowns spread from Sydney to Melbourne and Canberra. Importantly, the conditions index remained well above the long-run average and businesses were faring much better than during the first round of lockdowns last year.
Multiple US television networks have approached national broadcaster the ABC about buying the rights to broadcast two Four Corners episodes that looked at Fox News and its role in the 2020 general election. The ABC has spoken to several news outlets about a licence to exclusively air the program in the US. CNN – which recently interviewed reporter Sarah Ferguson – was one of the networks interested in acquiring the program, but that no deal was finalised. A program detailing Fox News’ coverage of the general election is likely to be of interest to US television viewers, who until now have been unable to watch the program. Fox News is America’s most popular cable news network, known for its conservative commentators including Tucker Carlson and Sean Hannity. The licensing of the program by any US television network is likely to frustrate Fox News Media and escalate tensions between it and the ABC. Fox News had formalised a complaint about the two-part program and had written to ABC chair Ita Buttrose and managing director David Anderson demanding an external inquiry be conducted. Fox Corporation, which runs the cable TV channel Fox News, is facing several lawsuits in the US over its coverage of the election.
Some of Australia’s most well-known digital publications are using funding from tech giants Google and Facebook to form their first industry body. Crikey publisher Private Media, Mamamia, The Squiz and Junkee Media are among 20 publishers that are coming together to form what will be known as the Digital Publishers’ Alliance. The body will be led by Junkee’s co-founder Tim Duggan and will aim to boost visibility with advertisers, and give the publications a stronger voice on key industry issues. Other members of the DPA include Future Women, Broadsheet Media, LADbible Group and Solstice Media, publisher of The New Daily, who will pay annual membership fees. Google’s News Initiative has already provided funding, while The Facebook Journalism Project is finalising its contribution. Mr Duggan assured the tech giants will have no say over the directive of the industry body and its priorities.
Sydney Airport will open its books to a group of suitors after they sweetened their takeover offer to A$23.6 billion Bidders led by IFM Investors increased their offer to A$8.75 a share from A$8.45, the airport said Monday. It plans to recommend shareholders accept the bid if, following due diligence, the consortium turns it into a binding offer and the conditions are acceptable After being hammered by coronavirus restrictions that decimated travel, Sydney Airport is finally relenting after rejecting two previous bids from the consortium. The airport had previously argued that vaccination rollouts around the world would allow travel to resume. But the outlook has darkened since the suitors’ first approach in July, and Sydney Airport’s largest shareholder last month publicly agitated for negotiations for a sale to start. While Qantas Airways Ltd. is preparing to restart international services in mid-December, much of Australia has been stuck in lockdown for weeks as authorities struggle to contain a breakout of the delta variant. That’s delaying an aviation recovery and increasing the pressure on Australia’s biggest travel hub.
A report from the Australia Institute’s Centre for Future Work shows 40,000 tertiary education jobs — one in five positions — have been lost in the 12 months to May 2021. The report estimates 35,000 of the job losses were at public universities with a significant number of TAFE staff also losing work.
And that’s it for this week. And next week, I’ll be talking to Dhruv Kholi, Vice President of Growth and Strategy at Geezy Go, Australia’s first digital supermarket. And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment 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