British Pm Liz Truss says cutting the tax burden on the richest would increase the underlying growth rate of the UK.
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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 2022 and today’s date is Friday September 9.
First, I’ll be talking to Peter Dassos, the general manager at franklin.ai and we’ll be talking about the role that artificial intelligence plays in the health sector.
And I’ll be talking to CommSec chief economist Craig James about what’s ahead in the market.
But now, let’s talk to Peter Dassos
Liz Truss has said she will press ahead with plans for the UK to be a low-tax economy with less focus on wealth redistribution under her premiership, despite calls for caution from Tory grandees. Britain faces a cluster of daunting problems: surging inflation, a slowing economy, rocketing energy bills, foundering public services and lacklustre productivity. Ms Truss declared that “now is the time to tackle the issues that are holding Britain back”, and said her priorities were cutting taxes, curbing increa ses in energy bills, and overhauling the health care system.. Asked about her national insurance policies, she said it was fair that her planned tax cut would benefit the highest earners 250 times more than the poorest, arguing it was wrong to view all economic policy through the “lens of redistribution”. As analysts warned that relying on boosting economic growth to reduce income inequalities could increase disparities, Tory grandees sounded the alarm over what they said risked being a doctrinaire approach. In her only in-depth media interview of the two-month Tory leadership campaign, which took place after voting had closed, Truss told BBC One’s Sunday With Laura Kuenssberg show she would provide immediate help with energy bills if elected, but declined to say how. Pledging to ensure secure long-term energy supplies, Truss said she did back some aspects of renewable sources but stressed her plans to push ahead with more North Sea drilling and fracking for shale gas. Reports on Sunday night said that her team were discussing freezing gas and electricity bills with industry leaders. The level of the price cap has not been set but, according to the Times, the cost of the package is understood to be at the level of the Covid furlough scheme. On the economy, she emphasised her prioritisation of tax cuts, saying it was more important to grow the economy than to try to reduce economic inequalities. She said cutting the tax burden on the richest would increase the underlying growth rate of the UK.
Chinese authorities have extended Covid-19 lockdowns of Chengdu and Shenzhen, backtracking on promises of freedom for tens of millions of people in the southern megacities following mass testing campaigns. At least 68 cities are in partial or full lockdown, according to data from the country’s National Health Commission, fuelling anxieties that restrictions initially planned for days could extend into weeks or longer as occurred in Shanghai this year. The sweeping restrictions that upend lives and businesses stand in stark contrast with the return to normal life in much of the world, where societies have mostly pivoted to living with the virus. But China insists that zero-Covid is saving lives. Health officials have cited the relatively low elderly vaccination rate and inadequate rural healthcare as hurdles to relaxing restrictions, but Chinese public health experts say political factors have played an outsized role, too. Xi Jinping, a staunch advocate for the country’s uncompromising zero-Covid strategy, is poised to be anointed as the country’s top leader for another five years at the 20th Party Congress, scheduled to start on October 16. The highly choreographed affair is meant to be a moment of celebration and vindication of the achievements of the Party — and of Xi personally over his decade in power. And a severe outbreak risks undermining that triumphant image, experts say. China’s manufacturing and technology hub, said on Monday that restrictions would continue for three days in parts of the city where cases had been reported after a weekend lockdown of some of its 17.5mn residents. On Sunday, the city reported 71 new coronavirus cases. “The city’s Covid situation is severe and complex. The number of new infections remains relatively high and community transmission risk still exists,” warned Lin Hancheng, a local official. Chengdu, a city of 21mn and the capital of Sichuan province, announced a four-day lockdown last week. But authorities reported 140 cases on Sunday and said the restrictions would persist until at least Wednesday. The measures sparked panic buying across the city, with videos spreading online of people piling up their cars with pork and vegetables. Reflecting the sweeping impact of President Xi Jinping’s zero-Covid policy, authorities have urged citizens to stay home for the upcoming Mid-Autumn Festival. The decision has dealt a blow to hundreds of millions of workers, who often make a rare trip to their hometowns for family gatherings for the annual event, which starts on Saturday. The latest restrictions also added to pressure on the world’s second-biggest economy, which has been grappling with a liquidity crisis in the property sector. The economy expanded 0.4% year on year in the three months to the end of June, below the 1.2% forecast by economists. “Uncertainty over China’s growth prospects and concerns about project incompletion will largely drive weak homebuyer demand over the next six to twelve months. Covid-19 disruptions to business activity and sales execution will also dampen consumer sentiment,” said Daniel Zhou, an analyst at Moody’s, the rating agency.
At their September board meeting, the RBA once again decided to hike rates by 50 basis points, increasing the cash rate to 2.35%. It marks the fifth consecutive rate rise this year and returns the cash rate to its highest level since December 2014 and is poised to increase further as the central bank seeks to tame soaring inflation, which is tipped to hit 7.8% by the end of the year.
Gross domestic product rose 0.9% in the June quarter, following a revised 0.7% in March, data from the Australian Bureau of Statistics showed. On an annual basis, GDP added 3.6%, following a 3.3% gain in the previous year. The figures were broadly in line with economists’ expectations, with the median forecaster pencilling in quarterly growth of 1%.
Australia has recorded its 13th consecutive current account surplus after booming coal prices drove a record $43 billion trade surplus. Australia’s current account surplus jumped from $2.8 billion to $18.3 billion in June, on the back of a $16 billion boost in the trade surplus, which now stands at $43.1 billion. The value of the country’s exports increased by 14.7% in June, while the value of imports increased by just 4.6%, according to data released by the Australian Bureau of Statistics on Tuesday. The driver of the record trade surplus was a 15.6% increase in resources exports. Coal exports increased by 40.4%, while other mineral fuel exports increased by 20.2% in June. Australian Bureau of Statistics acting head of international statistics Grace Kim said annual exports of coal exceeded $100 billion for the first time. Coal prices have soared since Russia’s invasion of Ukraine as the world seeks alternative sources of energy. Benchmark Newcastle coal futures are trading at $US460 a tonne, more than doubling since the start of the year.
Super funds are wary of the risk of investing in social and affordable housing and say the return is limited. A shortfall in social and affordable housing is predicted to cost the economy more than $1 billion a year by 2036. Assistant Treasurer and Minister for Financial Services Stephen Jones held a round table with peak industry group Association of Superannuation Funds of Australia (ASFA) this week in a bid to secure their investment. The meeting followed the Prime Minister and Treasurer last week announcing the government would make up to $575 million from the National Housing Infrastructure Facility available to encourage private investment, particularly from superannuation. That move was aimed at improving the risk-reward ratio for super funds. The superannuation sector has not opposed the move but is yet to be convinced,
EY’s global leaders are expected to provide 13,000 partners this week with the details of a plan to split the firm into an audit and a consulting business. But a vote on the proposal will not happen until January at the latest, a move that could lead to the biggest shake-up in the global professional services and auditing market in more than two decades. A meeting of the small group of global leaders was held about the plan overnight, and the firm’s partners will receive a detailed package of information about the split, including details of their payout, on Thursday. There will be a vote in January on whether to split the firm.
Australians facing a cost-of-living crunch will cop higher prices at the bowser and steeper mortgage repayments, with Jim Chalmers reinstating the full fuel excise to boost the budget bottom line but pledging to monitor attempts at gouging. Amid interest rate hikes and soaring inflation, the Treasurer ordered the competition watchdog to ramp up surveillance of petrol prices and crack down on profiteering when the 44.2c-a-litre fuel excise returns on September 29. In a bid to neutralise attacks from the Coalition over cost-of-living pressures in the final two parliamentary sitting weeks before the October 25 budget, the federal government on Monday announced the largest indexation increase to welfare payments in more than 30 years. Social security payment increases for more than 4.7 million Australians, including dole recipients, pensioners and single parents, follows pressure from the Greens and community groups to lift the JobSeeker rate. As motorists brace for higher petrol prices in the December quarter, when inflation is tipped to rise to 7.75%, the Reserve Bank of Australia board heaps more pressure on households and lifts the cash rate to 2.35%. The RBA has flagged it will likely authorise further interest rate hikes in coming months.
The architects of enterprise bargaining, Bill Kelty and Paul Keating, have blamed the “silly” no-worse-off tests of the Fair Work Commission and Julia Gillard’s industrial relations laws for undermining productivity and overall wages growth. Kelty said he himself had negotiated deals that left some people worse off but meant productivity improvements were fairly shared via a sustained increase in real wages. The former ACTU secretary describes the current system as “crazy”, insisting that bargaining should be simple, with any agreement between unions and employers not subject to approval or rejection by the commission. Following the jobs and skills summit, the Albanese government will start negotiating with unions and employers this week to try to come up with a simpler, fairer and more flexible system of enterprise bargaining. Some employer groups are highly sceptical the changes will go far enough in overcoming the roadblocks – particularly those introduced by Julia Gillard over a decade ago as former industrial relations minister and then prime minister. Unions and the Albanese government are already arguing that “no worker can be worse off” as a result of the changes. This threatens a repeat of the policy dead end produced by the Gillard “reforms”. At the behest of a new generation of union leadership, Gillard replaced Keating’s broad “no disadvantage” test with a complicated new “better off overall test” assessed by the commission. In the 1980s and 1990s, Kelty and Keating, the two giants of the ACTU and Labor, co-operated to implement a series of economic and social reforms that underpinned real wages growth and productivity increase
The soaring profits unveiled by Australian miners this week were a beacon of light amid the gloom dominating economic headlines. Yet the coming months look more challenging, particularly for companies without exposure to clean energy. Miners that dig up materials vital to decarbonization led the way in the first half, with Pilbara Minerals and Allkem Ltd. reporting record earnings as prices for lithium soared. Traditional miners didn’t miss out on the bonanza though, with diversified base metals producer South 32 and pure-play fossil-fuel miner Whitehaven Coal reporting strong results. That followed behemoth BHP Group’s unprecedented earnings haul. The eye-popping profits in Australia were reaped on the back of surging commodity prices and Coal prices soaring since Russia’s invasion of Ukraine But with problems such as battered supply chains, a slowing global economy and waning demand in top customers and China now looking hard to budge, the good times for many Australian miners may be over.
Gig economy executives have been told to expect legislation in the first half of next year that will expand the powers of the Fair Work Commission to set minimum pay and conditions for their workers. Deliveroo Australia chief executive Ed McManus said the government had told participants of a roundtable discussion with the Department of Employment and Workplace Relations last month that consultation would occur for the remainder of the year. The government’s election promise to give the Fair Work Commission powers to set minimum pay and working conditions for “employee-like” workers was never intended to be on the agenda of last week’s Jobs and Skills Summit. Employment and Workplace Relations Minister Tony Burke said.that different segments of the gig economy would likely be treated differently.
The Australian Federal Police has set up a new cryptocurrency unit to target money laundering as more criminals seek to bypass the financial system and funnel money offshore. The increased focus on illicit money transfer via crypto comes as the AFP eclipsed a $600 million revenue-raising target, after the taskforce set up to ensure crime does not pay for criminals reached its goal two years ahead of schedule. The national manager of the AFP’s criminal asset confiscation taskforce, Stefan Jerga, said the use of crypto in criminal activity had increased significantly since the AFP’s first seizure in early 2018, warranting the establishment of its first dedicated cryptocurrencies capabilities team in August. AFP Commissioner Reece Kershaw established the criminal asset confiscation taskforce in February 2020 with the goal of restraining $600 million in proceeds of crime by the end of financial year 2024. Since February 2020, the AFP has seized $380 million in residential and commercial property, $200 million in cash and bank accounts, and $35 million in cars, boats, aircraft, artworks, luxury items and cryptocurrencies.
Battery electric vehicle sales have hit a new record, accounting for almost one in 20 new cars sold in August, new figures from the Federal Chamber of Automotive Industries show. FCAI chief executive Tony Weber said sales of “pure” electric vehicles came in at 4.4% in August, well above the run rate for the year-to-date of about 2%. Once hybrid and plug-in electric vehicles were added in, vehicles with some electric component in the drive train accounted for more than 10% of vehicle sales in Australia for the calendar year so far. Tesla remains the dominant force in the EV market, with its market share still sitting at more than 80%..
Dan Murphy’s is the latest national retailer to unveil a hiring spree as the Australian economy begins to suffer from a major shortage of workers, with the beer, wine and spirits giant offering ‘on the spot’ job interviews to recruit 2200 new team members. From Monday until Sunday September 11th, anyone can get a 10-minute interview on the spot by simply expressing their interest to a team member at one of the 258 Dan Murphy’s stores around the country. The drinks retailer, owned by Endeavour Group which also owns convenience bottle shop chain BWS, is looking to hire more than 2200 casual customer assistants as it gears up for summer and the busy Christmas trading period. The majority of roles are a minimum of 20 hours per week, many offer immediate starts and all come with heaps of benefits. Dan Murphy’s hiring spree comes as Australian companies, from major national corporates to small corner stores like cafes, restaurants and hairdressers, are desperately short of staff. Many have been forced to close their doors for some days or operate on reduced hours through the week as roles go empty and businesses can’t serve customers. At last week’s jobs and skills summit in Canberra, businesses highlighted the worker shortage as a key handbrake on the economy, with the federal government later announcing a policy to increase the migration cap to a record 195,000 from 160,000 in an effort to fill roles begging for workers across the country and across many sectors from healthcare to IT and hospitality.
Profit margins at Australian oil refineries increased by more than 200% in the June quarter amid global supply disruptions and soaring demand. In its quarterly report on the Australian petroleum market, the Australian Competition and Consumer Commission (ACCC) said the average refiner margin – or the difference between the price of refined petrol and the price of crude oil – increased from 7.8 cents per litre in March to 24.1 cents per litre in the June quarter. The competition regulator said strong global demand for refined products, tightening supply because of refinery closures, Russian sanctions and reduced exports of refined products from China all contributed to fatter profit margins.
A survey by Chief Executive Women showed that just 14 ASX200 companies were helmed by women in 2022, only four more than six years ago. The proportion of key operational roles occupied by women at ASX200 companies rose just 3 percentage points to 15% between 2017 and 2022. By contrast, the proportion of functional roles held by women jumped by a third to 40% over the same period. However, the survey found that across the broader ASX300, the number of companies with no women in executive leadership teams rose to 47 in 2022 from 44 last year.
And that’s it for this week. And next week, I’ll be talking to Jane Livesey, Cognizant’s CEO for Australia and New Zealand (ANZ) and a Director at Contino and Servian. I’ll also be talking to economist Saul Eslake.
In the meantime you can catch me on Facebook, Twitter, Instagram, LinkedIn and YouTube. And if you want leave a comment. For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business on the Apple podcast store or on my website leongettler.com.
Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.