Qantas announces that Alan Joyce has stood down as CEO of Qantas early. For the first time, Qantas is ahead of schedule.
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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 32 in our series for 2023 and today’s date is Friday September 8.
First, I’ll be talking to Angus Ferguson, the head of customer solutions at Domain.
And I’ll be talking to EY Oceania Chief Economist Cherrelle Murphy about the latest inflation figures and what they mean going forward.
But first, let’s talk to Angus Ferguson..
So what’s happening in the news?
China’s biggest banks are extending billions of dollars to Russia as sanctions pressure western lenders to exit the country. Since Moscow’s invasion of Ukraine in February 2022, western regulators have cracked down on Russia by imposing sanctions and urging banking institutions to pull back on operations in the country. Chinese lenders are now filling the gap. The four biggest banks in China have quadrupled their exposure to Russia’s banking sector since the war in Ukraine began, according to data analyzed for the FT by the Kyiv School of Economics. Bank of China Ltd., Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. had a combined exposure of $2.2 billion at the start of 2022. Russian central bank data shows this increased to almost $10 billion in the 14 months to the end of March this year.
Australia’s central bank kept its key interest rate unchanged and maintained a tightening bias as Governor Philip Lowe wrapped up his final meeting at the helm with inflation in retreat. The Reserve Bank held its cash rate at 4.1% for a third straight meeting on Tuesday in a decision widely anticipated by markets and economists. The consecutive pauses imply a higher hurdle for any further hikes and suggest a surprise shift in economic data will be needed to prompt additional tightening.
Qantas boss Alan Joyce will step down from his post after 15 years, two months earlier than originally scheduled, after a horror fortnight for the carrier. Incoming chief executive Vanessa Hudson will take the reins of the embattled carrier on Wednesday after Joyce advised the airline’s board he will bring forward his departure to help the company “move ahead”. “In the last few weeks, the focus on Qantas and events of the past make it clear to me that the company needs to move ahead with its renewal as a priority,” Joyce said. It follows a tumultuous week for Qantas. Last Monday, Joyce faced a fierce grilling from a Senate inquiry before the ACCC launched action in the Federal Court against the airline on Thursday, alleging the airline sold tickets for flights that had already been cancelled. Qantas shares have sunk more than 12% over the past month, as investors weigh the impact of a $15 billion upcoming capital expenditure bill that his successor, Vanessa Hudson, will inherit, as well as potential fines of as much as $250 million being pursued by the competition watchdog. Mr Joyce has been a divisive figure during his tenure, winning kudos from investors for his decisive management through turbulent times in global aviation over the past 15 years as CEO. Qantas also finds itself in the eye of a political storm over in lobbying the Labor government to block its key competitor on flights into Europe, Qatar Airways. It is estimated Joyce will walk away with up to $24 million in a final cash and share payout.
Qantas is under pressure from shareholders to recover some of Mr Joyce’s bonuses after a 15-year career during which the chief executive was paid $125m. Australian Shareholders’ Association chief executive Rachel Waterhouse said “potentially” more heads needed to roll at the flag carrier’s board over the handling of a string of crises, including Mr Joyce’s golden handshake of $24m. Ms Waterhouse said questions remained over board oversight of Mr Joyce’s remuneration package. She said the departure of Mr Joyce was a “good start”, but more action was needed by Qantas to improve transparency.
The Forrest empire has lost another two top executives, adding to the growing list of departures. It has parted ways with the chief executive of its hospitality and lifestyle arm Z1Z, and Mincor Resources boss Gabrielle Iwanow is also packing her bags. The departure of international hotelier Joost Heymeijer at Z1Z adds to a growing list of top executives to have left both Forrest-controlled Fortescue Metals Group and the family’s private-owned businesses controlled by Tattarang. Ms Iwanow is leaving Tattarang-owned Wyloo Metals later this month after opting not to stay on long-term in the wake of Wyloo’s $760 million acquisition of nickel miner Mincor. In a note to staff, Wyloo boss Luca Giacovazzi said Ms Iwanow was leaving to “pursue other opportunities” and praised her efforts in the transition to Wyloo ownership. Ms Iwanow has been running nickel mines near Kambalda in WA acquired as part of the takeover of Mincor earlier this year. Mr Giacovazzi said last month that the mines had been running at capacity since June and major customer BHP had accepted all deliveries in a sign that product quality issues are now under control. Wyloo has hired Steve Price, the former general manager of underground mining at Rio Tinto’s You Tolgoi copper mine, to run the Kambalda operations. Ms Iwanow, who took over at Mincor last November after a stint at OZ Minerals, declined to comment on Tuesday but is understood to be leaving on good terms. Mr Heymeijer was hired in June 2022 as the inaugural chief executive of Z1Z to grow and run a portfolio that includes Byron Bay’s Gaia Retreat and Spa, formerly owned by Olivia Newton-John, Cape Lodge in Yallingup in WA and Lizard Island in northern Queensland. In a social media post, Mr Heymeijer suggested he had departed the Tattarang group “due to a change of direction by the owners” and was now looking for work. “Sometimes things don’t always work out … and then it is time to move on!” he posted. Dutch-born Heymeijer made his name in Australian hospitality as general manager of the award-winning Wolgan Valley Resort & Spa in the Blue Mountains. Tattarang is merging Z1Z with its Fiveight property arm led by former Mirvac executive Paige Walker, who when hired was tasked with the delivery of Australia’s first Waldorf Astoria hotel at One Circular Quay in Sydney and other major projects. Alan Ford remains general manager of Z1Z. Tattarang parted ways with Paul Slaughter, the chief executive of its agriculture business Harvest Road, last week. The leadership shake-up within the privately owned businesses has coincided with Andrew and Nicola Forrest confirming their separation after 31 years of marriage. The former couple, both now multi-billionaires, have said they remain strategically aligned on the future of Fortescue, Tattarang and the family’s philanthropic Minderoo Foundation. Fortescue Metals was rocked last week by the departure of chief executive Fiona Hick and chief financial officer Christine Morris after short-lived stints at the iron ore miner. They became the 10th and 11th top executives to leave Fortescue within three years.
The Albanese government has introduced its closing loopholes industrial relations bill, estimated to provide labour hire workers up to $511m a year more pay. Unions welcomed the bill but oppose concessions watering down its promise of same job same pay in the labour hire industry, including the blanket exemption for small businesses. With employer backlash brewing over those provisions, the workplace relations minister, Tony Burke opened up a new front by revealing truck owner-drivers could be awarded minimum rates of pay by the industrial umpire. Big business labelled that a repeat of the “disaster” of the Road Safety Remuneration Tribunal, an industrial umpire that was controversially abolished by the Coalition in 2016. On Monday Burke introduced the closing loopholes bill to the House of Representatives, confirming Labor would seek to revive minimum conditions in the road transport industry. Burke said the bill was needed “to close loopholes that have undercut secure jobs, better pay and safe workplaces”. If passed, the Fair Work Commission would gain the power to set minimum standards for the road transport industry and hear disputes about unfair contract terminations. The commission would have discretion on what those minimum standards would cover,but must be satisfied that its orders would not adversely affect the viability or competitiveness of road transport contractor drivers. The power to set conditions in the road transport industry is one plank of a bill that includes provisions to criminalise wage theft, improve the right to secure jobs for permanent causals, provide equal pay for labour hire workers and give minimum conditions to gig economy workers. The requirement to pay labour hire workers the same rates of pay as those who are directly employed on enterprise agreements could add $511m to businesses costs, transferred to workers in the form of higher pay. The bill’s most controversial section will ensure labour hire workers are paid at least the same full rate of pay – including base rates, penalty rates, bonuses, overtime and allowances – as a host company’s direct workforce gets in their enterprise agreement. However, the government has limited its initial proposal, so unions will have to first apply for a labour hire pay order and have introduced a fair and reasonable test. The bill has already provoked a fierce reaction from employer groups which have warned it will increase complexity and costs for consumers. The Australian Chamber of Commerce and Industry chief executive, Andrew McKellar, said “the only winners in this are union chiefs”.
Income tax cuts in return for lifting the goods and services tax rate to 15% would deliver high-income households an average extra $2140 a year at the expense of lower income and older people, according to economic modelling by Australian National University. The analysis suggests that a tax mix switch from personal income tax to the GST, as suggested by some independent MPs and tax reform advocates following the Intergenerational Report (IGR), could not be done in a revenue neutral way for the federal government. A large amount of extra financial compensation would need to be paid to lower income people, including asset-rich retirees, to avoid people being worse off, ANU economist Ben Phillips said. He said the 10% GST currently raising about $86 billion a year would probably need to increase in the future to collect more revenue for services as part of a broader tax reform package, but the inequities of a higher GST would make such a change politically very difficult.
The Australian arm of one of the world’s biggest hotel businesses and most recognisable brands, Hilton Worldwide, is locked in a battle with the tax office over allegedly unpaid taxes amid accusations it set up a scheme to deliberately minimise its tax in Australia. Hilton, the company founded by magnate Conrad Hilton – the great-grandfather of socialite and reality TV star Paris Hilton– in July launched legal action against the Australian Taxation Office in the Federal Court to dispute an assessment that found it owed $80.7 million in unpaid taxes as well as penalties and interest. The 2022 accounts for Hilton’s Australian business, filed with the corporate regulator, show the ATO believes the company owes $51 million in taxes over the sale of its flagship Hilton Sydney property in 2015. According to the accounts, the ATO has also sought $13 million in penalties and $15.7 million in interest from the company. Hilton has agreed, according to its accounts, to pay an instalment of $26 million to the ATO in response to the claim. Hilton, which opened its first hotel in Australia in 1960 and operates 18 hotels across the country today, offloaded its 595-room Sydney Hilton property to Chinese investment house Bright Ruby in May 2015 for $442 million. Hilton’s notice of appeal against the tax assessment filed in the Federal Court confirms that the dispute relates to a capital gain allegedly not recorded by Hilton in 2015. The court has redacted the amount still in dispute from the documents. Hilton’s notice of appeal of its tax assessment shows that under the ATO’s anti-avoidance powers, authorities have accused the company of using a business structure and scheme designed to avoid tax. Hilton said in its court filing that the ATO was wrong to make this assumption and that it had not sought to avoid tax by setting up a scheme to manage its Australian income.
The corporate regulator will launch legal action against Westpac on Tuesday alleging it failed to respond to requests from hundreds of its customers struggling with loan repayments over a seven-year period, who wanted to enter hardship arrangements with the bank. The Australian Securities and Investments Commission will allege that, between 2015 and 2022, 229 customers told the bank they were experiencing financial hardship, including due to an inability to work, the impact of medical conditions or carer responsibilities. But a deficiency with its online hardship notice process resulted in them not receiving a response to their requests within the required time of 21 days. ASIC will allege this breached the National Credit Code, which stipulates lenders have three weeks to notify customers if they do not agree to change the lending contract or need additional information to decide. It will also argue Westpac failed to act “efficiently, honestly and fairly” by not responding to the reasonable requests from customers. Westpac apologised for the situation. The bank said it had identified the incident, self-reported it to ASIC and had co-operated with its investigation. “This error meant we didn’t provide some of our customers with the help they needed. For this, we are deeply sorry,” Westpac chief information officer Scott Collary said. “While we have assisted some of these customers in subsequent contact, it is not good enough that we missed their initial attempt to get in touch.” Westpac said it received a total of 630,000 hardship requests over the same seven-year period and the 229 non-responses were due to a “technology failure” that meant the notices were not passed through to the bank’s customer support teams. The civil penalty proceeding in the Federal Court is the latest in a series of disputes between ASIC and Westpac, after the bank was previously targeted for alleged breaches of responsible lending laws. Responding to the latest legal dispute, Westpac said it had remediated the affected customers, including refunding some fees and interest or, in some cases, waiving debts and making compensation payments for non-financial losses totalling $900,000. The action comes a week after ASIC wrote to 30 large lenders – including the four major banks – calling on them to support customers experiencing financial hardship as cost-of-living pressures rise. Financial hardship will be an area of “increased focus” for the corporate regulator over the next 12 months, it said, sharp interest rate rises stretch borrowers. “ASIC is aware of increasing evidence suggesting that some consumer cohorts are experiencing financial distress and hardship due to increasing cost of living pressures,” ASIC commissioner Danielle Press wrote. There had been a 28% in call to the National Debt Hotline this year, compared to the same period last year.
Hotter, drier days caused by a looming El Nino weather pattern are forecast to wipe $12 billion off the value of agricultural production this financial year. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects less rain and a projected drop in global commodity prices to cause the value of agricultural output to fall 14% to $80 billion this financial year. A 20% decline in crop production is forecast to drive the decline in farm output, ABARES executive director Jared Greenville said. Falling production volumes and lower global commodity prices will contribute to a forecast 17% fall in agricultural exports to $65 billion. The Bureau of Meteorology (BoM) has issued an El Nino alert, which has historically been followed by the development of an actual El Nino 70% of the time. The possibility of an El Nino follows record-breaking winter weather, with the country enduring the warmest June, July and August since records began in 1910, according to the BoM.
And that’s it for this week. And next week, I’ll be talking to Belinda Sinclair from Domain. And RMIT professor Sinclair Davidson will give his view about the generational report.
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
