Qantas shareholders have demanded chairman Richard Goyder’s resignation and placed the rest of the airline’s board on notice.

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 or at Banking Day.

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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 35 in our series for 2023 and today’s date is Friday September 29.     

First, I’ll be talking to Jon Pilcher, the CEO of Neuren Pharmaceuticals, the $1.5bn ASX-listed biotech company.

And AMP chief economist Shane Oliver will give his views about the profit reporting season.

But first, let’s talk to Jon Pilcher.

So what’s happening in the news.

Inflation has accelerated for the first time in four months, largely due to higher fuel costs and rents pushing up annual consumer prices by 5.2% in August. The jump in the monthly consumer price indicator from 4.9% in July comes as investors fret about sticky inflation and bet that borrowing costs will stay higher for longer. Inflation has moderated from a peak of 8.4% in December, but the acceleration last month suggests a hoped return to the Reserve Bank of Australia’s target of 2% to 3%, by late 2025 as it forecasts, could be volatile and not a straight line. The RBA is likely to wait for the September quarter consumer price index due in late October before deciding whether to raise the current 4.1% cash rate. A 9.1% monthly increase in petrol prices was a significant driver of the rise in August inflation.

Average pay rises in new collective agreements have risen to a high of 4.7% entrenching a benchmark for wages that could put pressure on the Reserve Bank’s efforts to control inflation. Applications to approve enterprise agreements across banking, education, construction and retail reveal wage deals lodged over July and August, including for National Australia Bank, recorded average increases of  4% or above for six weeks in a row for the first time this yea

Soaring petrol prices pushed local inflation higher in August with the increase showing little sign of abating.  The average price of regular petrol has continued to rise this month and was up 14.1¢ to 220.4¢ per litre in Sydney for the week to Thursday. But AMP chief economist Shane Oliver said the RBA was likely to brush off inflation’s rebound as an anomaly related to a months-long campaign by Saudi Arabia and Russia to cut oil’s global supply and force energy prices higher. Still, the worries over higher energy prices and more interest rate pain sent Wall Street to its fourth straight day of losses on Friday, with its flagship S&P 500 Index down 2.9% for the week and the interest-rate-sensitive Nasdaq Index losing 3.6% for the period. In the United States, according to Labour Department figures, energy prices charged by suppliers rose 11% in August. That included a 20% increase in prices at the bowser, while diesel fuel was up 41%. Earlier this month, Saudi Arabia extended cuts to its oil output until the end of the year – leading to warnings of a significant supply shortfall.

Much ink has been spilled about the impending retirement of Rupert Murdoch as chairman of the global news empire he founded and his family still controls. But what’s been overlooked so far is that Murdoch, as has so often been the case in a seemingly endless career, engineered quite the golden handshake for himself.  The man who made the news will be entitled to pension benefits worth nearly $219 million from his US operation Fox Corp when he steps down as chairman of the company in November, according to the latest filings to the American corporate regulator. Closer to home, Murdoch senior – who will take up the role of emeritus chairman and be succeeded in the top job by his number one boy Lachlan Murdoch – was entitled to a touch over $6.4 million from the News Corp Australian operation, plus his bonus $2 million in the financial year 2022. Rupert’s updated entitlements have yet to be published.

Super fund HESTA has warned the largest listed companies it intends to vote against male directors of boards with low female representation.  In letters sent last week to the chairs and chief executives of the largest 292 ASX-listed companies it invests in, the $76bn fund said it would seek to engage on four “active ownership themes” ahead of the upcoming annual general meeting season. This includes influencing corporate policies on climate, “decent work” and biodiversity loss.  The fund, which largely manages the superannuation of health and community services employees, in its fourth annual letter warned 129 companies that it would automatically vote against male directors if the companies met certain criteria.  HESTA told the companies it intended to vote against male directors in elections if the boards had less than 30% emale representation, and against the chair if their executive teams are male-dominated.  HESTA did not mention any companies, but according to the Chief Executive Women (CEW) 2022 Census, there were 46 companies with all-male executive teams among the ASX 300.  Those included retailers JB Hi-Fi, Breville, Lovisa, bathroom supplier Reece, and miner Silver Lake Resources.

Qantas says it will spend at least an additional $80 million to fix service issues even while fuel costs have risen $200 million. It’s the first hit to profits as the airline attempts to repair its deteriorating relationship with customers. The airline said in an ASX statement that the spending on new initiatives would reach $230 million this financial year. The details of the spending come after Qantas chief executive Vanessa Hudson flagged the company would consider bringing call centres back to Australia, open up more frequent flyer seats and make other changes to rebuild its reputation. Investors have benefited from a surge in airline profits as demand for travel increased following the COVID-19 pandemic, but disquiet is growing at how much Qantas will have to spend to retain customers and deal with a series of regulatory and legal issues that accumulated under former chief executive Alan Joyce. The airline said the funding would be directed toward “better contact centre resourcing and training, an increase in the number of seats that can be redeemed with Frequent Flyer points, more generous recovery support when operational issues arise, a review of longstanding policies for fairness, and improvements to the quality of in-flight catering.”  However, the airline warned that high fuel costs, which are up 30% since May, including a 10% increase since August, could lead to higher airfares.

Releasing Qantas emails about Qatar Airways’ bid to double weekly flights into Australia could cause the local carrier “embarrassment, ridicule or public criticism” and damage Australia’s diplomatic relations, including with Qatar, Transport Minister Catherine King’s department says. Qantas emailed Ms King’s department on September 5 last year, providing comments on Australia’s “forward negotiating program” for bilateral air services agreements, and again on October 22 about “Australia-Qatar air services arrangements”. In contrast, Perth Airport last week told a Senate inquiry the first it knew of Qatar Airways’ application to fly an additional seven flights a week into Western Australia – which was rejected in July – was the day before. The department blocked access to both emails, along with a briefing to Ms King titled “Qatar air services agreement – negotiating mandate” dated January 4, 2023, and a third email from Qantas dated July 7, 2023, about Australia’s air services arrangements with Vietnam and Turkey. The Senate inquiry is this week expected to hear from a Qatar Airways representative. Former Qantas chief executive Alan Joyce, his successor Vanessa Hudson and chairman Richard Goyder have also been invited, although sources suggested Mr Joyce was unlikely to appear. Qatar Airways’ push to add 28 weekly flights into Sydney, Melbourne, Perth and Brisbane has caused a political headache for the Albanese government, which has struggled to explain why the bid was blocked amid allegations it wanted to shield Qantas from competition on the important Europe route. Ms King’s chief bureaucrat in charge of the International Aviation Branch, assistant secretary Jim Wolfe said making Qantas’ emails public could constitute a breach of confidence because it could, among other factors, cause detriment, which “in this instance would involve financial loss, embarrassment, exposure to ridicule or public criticism to the affected third party”. He went on to say there was “a reasonable expectation of damage to the international relations of the Commonwealth”. “If this information were made publicly available, it would have the capacity to prejudice or undermine the department’s relations with other countries,” he said.

Qantas shareholders have demanded chairman Richard Goyder’s resignation and placed the rest of the airline’s board on notice as concerns grow among furious investors over the mounting cost of legal battles and reputational damage. Mr Goyder and CEO Vanessa Hudson will face a grilling at a Senate inquiry over the Qatar Airways’ rejection in Canberra on Wednesday  The Australian Shareholders’ Association (ASA) said Mr Goyder’s time as Qantas chairman needed to end in the wake of the ACCC’s legal action over ghost flights, a High Court ruling over illegally sacked workers, and the fallout from the airline’s final multi-million dollar payout to former CEO Alan Joyce. The group has also placed the Qantas board on notice ahead of its Annual General Meeting in November. Australian Shareholders Association chief executive Rachel Waterhouse said the remaining members of the Qantas board should consider themselves as being on notice to improve the airline’s culture. Qantas’ board is comprised of 10 members. In addition to Mr Goyder and CEO Vanessa Hudson are Maxine Brenner, Jacqueline Hey, Belinda Hutchinson, Michael L’Estrange, Doug Parker, Todd Sampson, Heather Smith and Antony Tyler. Ms Waterhouse said Mr Goyder should resign after appearing at the airline’s annual general meeting in November when there is a “clear succession plan in place”.  Ms Waterhouse said the position of Qantas’ current CEO, Ms Hudson, had not become “untenable at this stage”, but warned it depended on the legal challenges facing the airline. The ASA is the first major shareholder group to have publicly called for the resignation of Mr Goyder as Qantas chair. It represents retail shareholders, which altogether make up about 10% of Qantas’ total shareholdings, according to the airline’s latest annual report. The Australian Council of Superannuation Investors (ACSI), which represents major superannuation funds that hold Qantas shares, has not yet taken a public stance against the board.

  Record high September temperatures and an early bushfire season along the east coast of Australia have confirmed it’s going to be a long, hot and dry summer this year. After Europe sweltered through its hottest summer on record, weather forecasters and climate experts have warned Australia will also experience a stinker of a summer which has major implications for our cities, energy grid and natural environment. The Bureau of Meteorology declared last Tuesday an El Nino and positive Indian Ocean Dipole event this summer. El Nino is a weather system that results in what Australians would consider a traditional hot and dry summer. It comes after three summers shaped by the La Nina system, which is characterised by milder temperatures and wetter conditions. The BOM’s climate manager, Karl Braganza, says both El Nino and a positive Indian Ocean Dipole are the opposite of La Nina and tend to draw rain away from Australia. The BOM warns that El Nino combined with a positive Indian Ocean Dipole – which have only been declared in the same year seven times since 1960 – significantly increase fire danger in south-eastern Australia across spring and summer. The last time Australia experienced both events in the same year was in 2015. The Insurance Council of Australia warns El Nino leads to more severe heatwaves, heightened bushfire risks and worsening droughts which also bring a hefty price tag. The council says the total damage bill from the 2019-20 Black Summer event was $2.32 billion and almost 39,000 claims were lodged. Since the 2019-20 fires, insurers have paid out more than $16.8 billion in natural disaster claims from 13 declared catastrophes and five significant events. Apart from the stretched resources of rural fire brigades and skyrocketing insurance premiums, energy regulators will be having a stressful summer as they attempt to cope with the extra demand. The Australian Energy Market Operator is responsible for ensuring there is enough supply in the grid, especially for those heat waves when households and businesses crank up their air-conditioners. AEMO has to ensure there is not only enough supply in the grid to deal with peak demand, usually in February after a fortnight of high temperatures, but also be prepared for any unexpected outages of coal-fired power stations. Coal-fired power stations have been the backbone of the National Electricity Market for decades but have become more unreliable as they get older. Most power station owners usually undertake planned maintenance in the winter months when demand is lower, but any unexpected outages over summer could be a major headache for grid operators. AEMO will line up its emergency deals, known as Reliability and Emergency Reserve Trader contracts, for energy users to either cut their usage in times of peak demand or for energy producers to deliver more power into the grid if needed. They are paid for their services. AEMO’s latest 10-year electricity update, known as the electricity statement of opportunities, was released last month before El Nino was declared.  

Advanced degree-like apprenticeships will be offered in a push to double the number of young Australians skilled in areas such as clean energy and the care economy.  Under the plan, the bachelor-equivalent apprenticeships will be established independent of universities in a bid to stop the decline of people signing up for trades.  Releasing the white paper on Monday, Treasurer Jim Chalmers announced a handful of measures to help start tackling the nation’s skills and labour challenges, including allowing age pensioners to permanently be able to earn up to $300 a fortnight through work without affecting their payment.  Others on income support, such as the unemployed, who enter the workforce and lose their welfare payment, will be allowed to keep welfare-related concessions for 24 weeks, up from the current 12 weeks, in a bid to lure them into the workforce.  Other policy decisions announced as part of the white paper include exploring the concept of a national skills passport, and spending $40 million to increase the share of Australians working in areas of high need by expanding TAFE training  in emissions reductions, the care sector and digitisation.   The jobs blueprint, the first of its kind since 1994, is set to include initiatives and policy directions across a range of areas, including reforms to the migration system, investment in skills and changes to enhance workforce participation. Dr Chalmers said the white papers, a commitment from Labor’s jobs and skills summit last year, seeks “common ground” between employers and workers.

The Council of Financial Regulators has warned about the fallout of any sharp Chinese slowdown, saying uncertainty around the outlook for Australia’s largest trading partner has increased.  A cocktail of stresses in China’s property sector interacting with “longer-term financial vulnerabilities” has elevated the council’s focus on contagion risks, it cautioned on Monday.  The warning comes after Beijing last week flagged the possibility of interest rate cuts to stimulate its economy, which is grappling with a deflating property bubble.  On Monday, the council – which is chaired by Reserve Bank governor Michele Bullock and includes Treasury secretary Steven Kennedy and top officials from APRA and ASIC – said any sharp slowdown would spread to the Australian economy.  It “would principally transmit to Australia through trade channels and through an increase in risk aversion in global financial markets,” said the statement, published after the council’s quarterly meeting.  China’s economy has been in retreat for much of the year after a brief sugar rush following the removal of Covid-19 restrictions and lockdowns in January. GDP was up 0.8% in the June quarter compared to 2.2% in the March quarter, while it was also experiencing deflation for the first time in two years with CPI down 0.3% in the year to July. Youth unemployment has also risen significantly to be above 20%.  Sentiment about China’s economy has worsened in recent months amid the state of its housing market and authorities taking a conservative approach to more stimulus, much to the disappointment of financial markets which for months have been hoping for plans that will boost the demand for iron ore.  The RBA noted this month that China’s property sector “faced significant challenges” from stress among developers, and further defaults posed a risk to economic activity. “A sharper deterioration in China’s economic growth posed a downside risk to the outlook for services exports and would also be expected to reduce the prices received for Australia’s commodity exports,” the RBA board said in its September minutes. “Lower output growth in China would also affect global output growth, which might in turn affect a range of Australian exports as well as the prices of Australia’s imports. However, if this downside risk were to eventuate, these effects would likely be partly offset by a depreciation of the Australian dollar.”

And that’s it for this week. And next week, I’ll be talking to X2M CEO Mohan Jesudason. X2M has partnered with RESI Ventures to embark on a bold 1000 home project in Echuca, Victoria, that redefines smart community and energy design. X2M will also work with RACV for clean energy solutions.

And I’ll be talking to CommSec chief economist Craig James about what’s ahead in the market the next week.

For the most exclusive access to leading economists and business leaders from around the world, subscribe      to Talking Business from my website

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