This is episode number twenty three in our series for 2020 and today’s date is Friday, July 10. 

First I talk to Rachel Callen and Katie Croft about their “Thriving Through COVID-19” initiative which they set up to help hundreds of small businesses stay connected, inspired – and thrive – no matter how they’ve been impacted.

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

But now, let’s talk to Rachel Callen and Katie Croft.

Listen to the full podcast here:

The closure of Victoria’s borders risks slowing the national recovery from the coronavirus crisis, with the return to lockdowns across Melbourne also sapping business confidence. The sharp spike in infections has prompted a clampdown by businesses that were preparing for a return to work and normalised working conditions in line with other states.

But Melbourne’s central business district remains a relative ghost town, with some landlords ready for tighter restrictions. Business leaders warned the initial limited impact on supply chains could be compounded by a hit to business confidence as the city is dotted with empty office buildings, with occupancy running as low as 10%. Companies may also push work into other states that are not caught by border restrictions, with Sydney and Brisbane positioning for work. Melbourne business leaders expressed concerns about the longer-term economic impact of the pandemic and associated lockdowns.

Prime Minister Scott Morrison concedes jobs are at risk while business reacted with alarm after NSW Premier Gladys Berejiklian ordered her state’s border with Victoria to stop the spread of a fresh coronavirus outbreak. South Australian Premier Steven Marshall, who until last week had been preparing to ease border controls on July 20, did not rule out following Ms. Berejiklian’s lead and shutting his state’s border to Victorians. The ACT will also deny entry to Victorians without an exemption. Business groups warn the move to effectively isolate Victoria – which is responsible for about 25% of the nation’s economic output – will further batter investment and consumer confidence.

Credit and debit card data spending across Australia is up 12% on the same time last year put reinstated COVID-19 restrictions in Victoria have kept its recovery lagging well behind the other states. The latest data from the Commonwealth Bank for the week to July 3 shows Tasmania and Western Australia are leading the spending recovery, up 20% and 19% respectively on the same week last year. But the CBA card data shows Victoria’s spending recovery is only up 5%, well behind all other states and territories, largely due to the reinstatement of restrictions and lockdowns imposed in some postcodes.

The Australian economy will bounce out of the coronavirus recession but it will be a jobless turnaround, new forecasts suggest with real wages likely to fall until the middle of the decade and government debt to breach $1 trillion. Victoria’s sharp rise in coronavirus cases over several weeks has but the entire Australian economic recovery at risk, a new report has warned.

A Deloitte Access Economics Business Outlook said the national economy would contract by 3% this year. Victoria is likely to be the worst-performing state economy during the COVID-19 crisis, suffering “prolonged misery” even as the national economy could recover more quickly than previously forecast. Written just as the outbreak in Victoria intensified, Deloitte Access Economics’ latest quarter business outlook warns “if you can’t beat back the virus, then you can’t open up”.

While the Deloitte report assumes that the intensifying lockdown in Melbourne suburbs will suppress the virus outbreak of the past fortnight, it still predicts that Victoria’s gross state product will contract 1.6% in real terms this financial year, the worst of all the states.

As other states have worked towards opening their economies in recent weeks, Victoria — which makes up a quarter of the nation’s GDP — has gone the opposite way by enforcing tough new lockdown measures. Deloitte Access Economics partner Chris Richardson said Victoria was more exposed to economic turmoil because of its “dependence on migration and on foreign students in an age of lockdowns and closed borders”. The firm expects unemployment to average of 8.2% in the current financial year. Even by 2024-25, Deloitte is forecasting the jobless rate to still be above its pre-virus low of 5.1%. Wage growth is tipped to lag inflation out to 2024-25, with full-time employment to grow slower than part-time jobs for several years. Over the entire period, interest rates are not expected to move.

ANZ Roy Morgan Consumer Confidence fell a further 1% last week, taking it to an eight-week low with new COVID-19 case numbers continuing to escalate in Melbourne. Economic conditions weakened further with ‘current economic conditions’ declining 2.2% and ‘future economic conditions’ falling 2.7%.

The Reserve Bank has kept the official interest rate anchored at 0.25% but warned that uncertainty among consumers was the big threat to driving the economic recovery. RBA governor Philip Lowe said the uncertainty has become a big new problem on the horizon for the economy. Less than an hour after his statement was released, Victorian Premier Daniel Andrews announced that stage three restrictions would be imposed for six weeks in Melbourne in an effort to control the rapid spread of the pandemic.

ANZ Job Ads rose by a record 42% in June, dwarfing the previous record monthly increase of 17.7% in February 2010. Week-to-week movements were positive as well, showing consistent improvement throughout the month. This is not overly surprising, given that COVID-19 restrictions continued to ease across most of Australia during June.  SEEK noted that the strongest growth in SEEK job ads has been in the hospitality and tourism sector. This is a good sign for at least some of the 381,000 workers in accommodation and food services and arts and recreation who lost employment between February and May. Despite the rebound in June, ANZ Job Ads were still 41% lower than they were in February before the pandemic began to impact the labour market.

Woolworths and Coles have backflipped over purchase restrictions on toilet paper and other groceries, reintroducing buying limits removed less than two days ago amid a new outbreak of panic buying in Victoria. After lifting nationwide buying restrictions on all products except toilet paper on Wednesday morning Woolworths imposed a two-pack limit on 27 categories including pasta, eggs, fresh milk, sliced bread, frozen food, flour, mince, and bacon in Victoria in stores and online. Coles customers shopping in stores and online will be restricted to buying two packs of 20 products including fresh chicken, mince, sugar, rice, fresh and long-life milk, and paper towels, and one pack of toilet paper.

Australia’s major banks have pledged to offer an additional four-month extension of loan repayment relief scheduled to end in September, although some institutions will try to encourage people back onto regular payments. The pledge of support will have banks shoulder the economic burden of the crisis through Christmas and well into 2021, as the six-month period for the first of the 800,000 customers who deferred more than $260 billion worth of loans back in March concludes.

The extension will deliver some much-needed relief for Victorian businesses ordered back into lockdown after the coronavirus spike forced Premier Daniel Andrews to return metropolitan Melbourne to stage 3 restrictions from midnight on Wednesday. It comes as federal Education Minister Dan Tehan said families with children kept at home in lockdown suburbs would be eligible for the waiver of parent gap fees for childcare, to replace national measures that end on Sunday. Victorian Premier Daniel Andrews will offer businesses a $5000 support package and has sought welfare support extensions from Prime Minister Scott Morrison.

Australians are gambling hard during the lockdown, with two key sets of data revealing a 64 to 105% uplift in those taking a punt The latest Illion Alphabeta data, from the week beginning June 21, has shown a 64% rise in online gaming, while NAB Economics Data Insights reveal a 105% increase in gambling. Gaming activities recorded the highest increase in spending, according to NAB, in front of residential care services and internet publishing and broadcasting, which rose 38% and 26.1% respectively.

Meanwhile, online gaming recorded the third-biggest surge in spending, behind food delivery and furniture and office equipment, which has risen 247 and 92% respectively, according to the Illion data. But wagering companies say while online gaming has soared, overall expenditure has declined after government-enforced restrictions shut down the big casinos, major sports codes, and poker machine venues. Listed gaming giant Tabcorp — which has stood down about 700 staff, mostly from betting booths it has been forced to close — said the wagering spend had shifted from physical outlets to digital channels.

Qantas has upped the ante on struggling rival Virgin Australia, announcing its second massive fare sale in two weeks. From Monday to Friday, Qantas will offer 350,000 discounted fares from $109 one way, with 40 routes available from under $150. It comes after an end-of-financial year sale with low fares partner Jetstar that offered 200,000 heavily discounted fares and triple frequent flyer points on Qantas bookings.

The timing of the latest sale will coincide with Virgin Australia’s own ramping up of flights in August and over the September-October school holidays. The rival carrier announced its push back into the domestic market last Thursday and a “comeback sale” after an injection of desperately needed funds from new owner Bain Capital. Virgin Australia went into administration on April 21 with debts of $6.8bn.      

Qantas and Virgin Australia have been warned that they can be called out at any time for abuses of market power as the competition watchdog starts tracking airline routes. How exactly airlines choose and manage their aviation routes as borders reopen and more flights take off is being scrutinised by the Australian Competition and Consumer Commission.

The ACCC was given special powers by Treasurer Josh Frydenberg in June to monitor the prices, costs and profits of domestic air passenger transport services, and related goods and services, for three years and told to report at least quarterly. But it is understood that the watchdog has the authority to call out bad behaviour at any time – not only in quarterly reports – and that it will not hesitate to act if it sees abuses of competition.

The ACCC will not monitor individual airfares but it will watch how airlines adjust capacity on routes they fly, looking for signs of whether they add extra flights to hurt competitors or force them off, which could lead to higher airfares. The competition watchdog is also continuing to investigate Qantas’s purchase of a 19.9%      stake in Alliance Aviation last year, making it the single biggest shareholder in the regional airline.

Alliance competes with Qantas in regional markets and on fly-in fly-out routes to mining centres. The real test for the airlines will come when the government’s financial supports and waivers on airport charges and fuel taxes cease. In June, the Commonwealth extended support for airlines until the end of September to help cover the cost of keeping key routes open. It will cover cost shortfalls on regional routes until the end of December.

Virgin Australia’s takeover by a US private equity giant could be derailed as the airline’s key bondholders lodge a case with the Australian Takeovers Panel, challenging the deal. Those bondholders are Broad Peak Investment Advisers, a hedge fund backed by Singapore’s sovereign wealth fund Temasek, and Hong Kong-based Tor Investment Management. They will argue that the “circumstances regarding the process conducted by the administrators [Deloitte] are unacceptable and have the effect of precluding an alternative” deal being presented to Virgin’s creditors at their next meeting in mid-August.

Virgin went into voluntary administration in April as the coronavirus pandemic and worldwide travel restrictions destroyed its ability to earn revenue. The airline owes almost $7 billion worth of debt to around 12,000 creditors. On June 26, Bain Capital emerged as the victorious bidder for Virgin and entered into a sale agreement with its administrator, pledging to preserve as many jobs as possible. However, key details about the takeover are shrouded in secrecy — for example, the purchase price. Broad Peak and Tor have applied for interim orders from the panel, seeking access to information about the Bain takeover, in particular the terms of the deal.

Plasma giant CSL has begun enrolling patients in a phase two study for a potential treatment for people with COVID-19 suffering severe respiratory distress. On Monday evening the company’s Philadelphia, Pennsylvania office confirmed approximately 124 adult patients who have tested positive for coronavirus would take part in a randomised trial where they would receive either CSL’s monoclonal antibody CSL312 or a placebo.

CSL312 is also called Garadacimab and is an antibody treatment that inhibits the plasma protein, FXIIa. It is hoped the treatment will be useful in preventing the progression of coronavirus once patients experience respiratory distress and could be another tool for doctors to use in the fight against the virus. The $132 billion ASX-listed company has unveiled a range of research projects for the fight against COVID-19 in recent weeks. These include pledging to produce the first runs of a vaccine in development by the University of Queensland if successful, as well as taking part in a global alliance with other blood plasma treatment competitors to develop a treatment using antibodies from recovered patients.

Network Ten lost $227 million in 2019 after big write-downs on its television licences, onerous programming contracts and rights, and heavy investments in its prime-time schedule and its advertising sales department. The ViacomCBS-owned network booked a $226.6 million bottom-line loss for calendar 2019, according to filings with the Australian Securities and Investment Commission.

If one-off items are taken out, Ten had an underlying loss after tax of $45.3 million. Ten’s annual report notes significant investment in prime-time shows Dancing with the Stars, The Masked Singer, and The Amazing Race. Last year also marked the first year of Ten’s $20 million a year Melbourne Cup deal after it outbid rival Seven West Media. The five-year $100 million contract is a mix of cash and contra or free advertising. The year also marked Ten having to set up its own advertising sales team again, after it exited Foxtel’s Multi-Channel Network venture, which had been selling its ads since 2015. The set-up, hiring, and building of its own unit required significant investment.

Maurice Blackburn Lawyers will push ahead with a lawsuit seeking damages from the Commonwealth Bank for allegedly delaying the transfer of $3.2 billion in customer balances to lower-fee products. The law firm is undeterred by a finding that the bank did not break the law. The Australian Prudential Regulation Authority last Thursday slapped licence conditions on CBA subsidiary Colonial First State Investments, ordering it to keep better records of how it considered “members’ best interests” when making decisions.

An investigation by the watchdog found concerns about the “adequacy of internal processes” at the bank, but did not conclude it had breached superannuation laws. The probe was sparked by a formal referral from the Hayne royal commission, which noted the bank-owned trustee was “bound to transfer accrued default amounts promptly [and] did not”. Maurice Blackburn managing principal lawyer Ben Slade, who is leading the class action litigation suit against CBA’s wealth arm Colonial First State that was filed in October 2019, said he was unfazed by the findings.

A record 1.4 million Australians are relying on food relief organisation Foodbank. Foodbank said the numbers of those needing food relief increased 78% since the pandemic began with international students, seniors, single parents, and temporary visa holders making up the bulk of new users. The Red Cross, meanwhile, said it was assisting more than 14,000 temporary visa holders compared to about 620 this time last year. Experts warn the numbers of people needing assistance will increase when government assistance is rolled back in September.

Westpac will pay $8 million to 8,000 employees whose long-service leave was underpaid. Australia’s second-largest lender says the error was uncovered as part of a review into payroll and long service leave arrangements, which found there were issues with both overpayment and underpayment of staff. Those who were overpaid will not be made to repay any money. It’s the latest case of underpayment by a large Australian company, following problems at Woolworths, Commonwealth Bank, and National Australia Bank.

And that’s it for this week. And next week, I’ll be talking to Troy Roennfeldt from digital agency Increaseo which has set up a website Stimulus Package to help to arm all Australians with information regarding the recently implemented Stimulus Packages. Individuals and businesses will be able to locate and easily sort through all applicable support packages offered by the Federal and State Governments to help ease financial pressures and better navigate the tough times ahead. And I’ll be talking to economist Nicholas Gruen who always has interesting insights.        

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.