This is episode number thirty-seven in our series for 2020 and today’s date is Friday, October 16.
First I talk to Longtail Co-CEO Andreas Dzumla and we’ll be talking about the Longtail start-up which has an industry-first online marketing solution with its patented technology delivering a perfect match for every keyword searched by potential customers. Perfect for the websites of big clients like Dan Murphy. It has just received a big investment from Investec and is closely aligned with Woolworths.
And then I’ll be talking to economist Saul Eslake will give his assessment about the Budget and what the government could have done better.
But now, let’s talk to Andreas Dzumla.
The International Monetary Fund has warned countries not to withdraw economic support prematurely to prevent further setbacks in the fight against the coronavirus pandemic. In its latest World Economic Outlook, the IMF says the economic recovery is not assured while the pandemic continues to spread.
The International Monetary Fund foresees a steep fall in international growth this year as the global economy struggles to recover from the pandemic-induced recession, its worst collapse in nearly a century. The IMF estimated that the global economy will shrink 4.4% for 2020. That would be the worst annual plunge since the Great Depression of the 1930s. By comparison, the international economy contracted by a far smaller 0.1% after the devastating 2008 financial crisis.
The monetary fund’s forecast for 2020 in its latest World Economic Outlook does represent an upgrade of 0.8 percentage points from its previous forecast in June. The IMF attributed the slightly less dire forecast to faster-than-expected rebounds in some countries, notably China, and to government rescue aid that was enacted by the United States and other major industrial countries. But the 189-nation lending agency cautioned that many developing countries, notably India, are faring worse than expected, in large part because of a resurgent virus.
Many nations face the threat of economic reversals if government support is withdrawn too quickly, the IMF warned.
Fund manager IFM Investors has committed to reducing greenhouse gas emissions across its asset classes targeting net-zero by 2050. IFM has established a task force to support the commitment aligning with the Paris Agreement, spearheaded by its investment team. The task force will be responsible for setting frameworks and policies to mitigate the group’s climate risk exposure and meet the net-zero goal by 2050. The $140 billion IFM Investors, chaired by former ACTU head Greg Combet and co-owned by 27 of the biggest industry super funds, including AustralianSuper, Hostplus, and Cbus, also controls or has large stakes in assets such as the Port of Brisbane, Southern Cross Station in Melbourne and Northern Territory Airports.
Institutional investors with over $850 billion in Australian assets under management have come together to form a “Climate League” to back deeper emissions reductions for Australia. The private sector-focused league, launched by 16 institutional investors, have each pledged to actively pursue deeper emissions reductions over ten years in an effort to drive a further reduction in annual greenhouse gas emissions of at least 230 million tonnes on top of what is already projected for the end of the decade.
Each year these funds will commit to at least one action to reduce emissions, including integrating Paris-aligned goals into investment strategies, collaborating between clients and companies, or investing in clean energy. The Investor Group on Climate Change (IGCC) is coordinating the initiative.
Woodside Petroleum will cut 300 jobs as a result of the collapse in commodity prices in the wake of COVID-19. Chevron, Santos, and Oil Search have also reduced employment, while global major Shell last month advised it would cut between 7000 and 9000 jobs across its worldwide operations over the next two years.
This comes in the wake of forecasts by the International Energy Agency that solar power will play a starring role in the recovery of global energy demand after the COVID-19 pandemic. Solar power has been declared “the new king of electricity” by the International Energy Agency in its annual energy outlook report, which finds it is already cheaper than power generated by new coal and gas developments in most countries and is providing, “some of the lowest-cost electricity ever seen”.
For the first time since the industrial revolution, coal-fired power will constitute less than 20% of the world’s energy by 2040, according to one scenario in the report, which found the end of the coal era has been accelerated by the COVID-19 pandemic. It is predicting that growth in oil demand will end within a decade and has reined in expectations for gas usage.
Even without any change in policies and targets by governments, renewables will take centre stage in the world’s energy mix, the IEA declared in its closely watched World Energy Outlook, which comes after an extremely turbulent year in the sector due to the COVID-19 pandemic. Among the fossil fuels critical for Australia’s economy, the outlook is particularly bleak for coal, where demand never returns to pre-COVID levels under existing policies and coal’s share in the energy mix falls below 20% by 2040 for the first time since the industrial revolution. This year, consumption is expected to slump by 7%, part of a broader huge shock to energy demand in 2020 that has hit prices across the energy mix.
The Australian coal industry is bracing for another hit to Australian exports to China after state-owned energy providers and steel mills reportedly received verbal notice to stop importing Australian coal. The Australian government has not been notified of any formal Chinese direction to restrict coal imports and is preparing to respond to the report from S&P Platts, the global commodities information platform.
The move has sparked fears that Australia could be on the cusp of another trade hit as relations with China deteriorate over multiple diplomatic disputes this year. The restrictions on Australian coal would crimp $14 billion in coal exports each year and boost local miners in China, as the Chinese Communist Party pumps stimulus into the economy and simultaneously increases its investment in renewable energy.
S&P Global Platts and Argus Media first reported news of a coal ban this week, sending shares in some Australian coal exporters down. Whitehaven Coal stock dropped 5.7% on Monday. As with China’s previous unofficial restrictions on Australian coal, it is difficult to assess the direct impact on Australian coal exports as no written notice has been issued because the Chinese government does not want to leave evidence of proposed restrictions which could be a breach of World Trade Organisation (WTO) rules.
A network of business leaders from Bunnings to Microsoft have joined forces to form an alliance to help nut out how to best address mental health at work. Corporate Mental Health Alliance Australia (CMHAA) is part of the global City Mental Health Alliance network, founded in the UK in 2012. The local arm is launching October 13 and is a business-led, expert-guided member organisation dedicated to improving mental health in the workplace.
The 15 founding members – many of the competitors – realised that working together will give them the best chance of delivering a real impact on the mental wellbeing of staff. Members include AIA Australia, Allianz Australia, Clayton Utz, Coles Group, Commonwealth Bank, Deloitte, DLA Piper, Johnson & Johnson Family of Companies, King & Wood Mallesons, KPMG, MinterEllison, Woolworths Group and PwC Australia.
The establishment of the non-profit group comes at a time when mental health issues in the workplace are increasing. According to Safe Work Australia, more than 92% of work-related mental health condition claims can be attributed to work-related mental stress including work pressure, harassment or bullying, exposure to workplace violence, and sexual or racial harassment. The cost to the Australian economy of mental ill-health and suicide is in the order of $43 to $51 billion per annum.
Business reopenings in Melbourne will be delayed and phased in over the next month and Victorian Premier Daniel Andrews has confirmed the state is unlikely to meet its key case indicators to enable the next round of relaxations from October 19.
Premier Daniel Andrews appears to have dashed hopes that thousands of Melbourne businesses will be able to reopen next week, suggesting the next restrictions to be eased would focus on increased social interaction, rather than economic measures. Retail, hairdressers, beauty therapists, and outdoor dining were flagged to reopen with strict hygiene protocols under the third step in easing restrictions from October 19, if Victoria hit a rolling 14-day case average of five or lower, and fewer than five “mystery” cases in a fortnight.
On Sunday, the Premier gave his strongest hint yet about which restrictions could be eased from next Monday, saying the five-kilometre travel limit was among measures the government would consider lifting for metropolitan Melbourne. Mr. Andrews suggested that economic measures would not be among those lifted in Melbourne, while in regional Victoria, where case numbers were lower, restrictions on businesses could be further eased.
The retail, hospitality, real estate, office, distribution, wholesale, manufacturing, and construction sectors were all slated to reopen next Sunday provided the 14-day case average was below five and there had not been more than five mystery cases in the previous period.
The new coronavirus may remain infectious for weeks on banknotes, glass, and other common surfaces, according to research by Australia’s top biosecurity laboratory that highlights risks from paper currency, mobile phones, grab handles, and rails. Scientists at the Australian Centre for Disease Preparedness showed SARS-CoV-2 is “extremely robust,” surviving for 28 days on smooth surfaces such as glass found on mobile phone screens and plastic banknotes at room temperature, or 20 degrees Celsius (68 degrees Fahrenheit).
That compares with 17 days survival for the flu virus. Virus survival declined to less than a day at 40 degrees on some surfaces, according to the study, published in Virology Journal. The findings add to evidence that the COVID-19-causing coronavirus survives for longer in cooler weather, making it potentially harder to control in winter than summer.
A week after the federal budget allocated it a $231.6 million war chest for 2020-21, Tourism Australia has launched its biggest domestic marketing push since COVID-19 hit, releasing a $7 million, 60-second commercial under its “Holiday Here This Year” campaign. It’s aimed at getting more Australians to spend up on local holidays, and follows an unlucky run for the nation’s peak tourism body over the past 10 months, starting with the cancellation of Kylie Minogue’s popular Matesong campaign in Great Britain in January due to bushfires followed by the coronavirus.
The federal government has been upfront that with Australia’s international borders closed for the foreseeable future, they need Australians to plug the economic gap by traveling to regions like Uluru and the Blue Mountains that used to be teeming with international tourists. More than 10 million Australians usually spend $65 billion on overseas holidays each year; the government is hoping that about $12 billion of this can be substituted into the domestic market.
Commonwealth Bank’s ubiquitous diamond logo is getting its first makeover since privatisation almost 30 years ago, as the bank seeks to portray the country’s “measured optimism” about recovery from COVID-19 and a devastating bushfire season. Group executive marketing and corporate affairs Priscilla Brown said the minimal redesign, which retains the dominant yellow diamond but replaces the black wedge with a deeper shade of yellow, also reflected lessons learned from the financial services royal commission.
The brighter yellow was also more appropriate for digital use — an important factor given the surging popularity of digital channels, which has been fanned by the pandemic as customers avoid the human contact in branches.
In its 2020 annual result, CBA said digital accounted for 66% of the value of the bank’s transactions, up from 59% in 2018 and 52 percent in 2016. Users of the CommBank app surged to 6.1 million, up from five million in June 2018 and 3.7 million in 2016. Despite the huge changes in the business environment since CBA first opened its doors in 1911, this will only be the fourth time that the logo has been refreshed. The yellow diamond and black wedge, representing the points of the Southern Cross star constellation, emerged from the last makeover in 1991, before the advent of digital.
Commonwealth Bank has narrowly avoided the first strike over plans to change how it pays its top bankers and a $1.6 million no-strings-attached gift to CEO Matt Comyn. As its virtual annual meeting on Tuesday, it also said it is keen on restoring its dividend after the prudential regulator insisted it is curtailed to help mop up bad debts from the crisis.
The voting on remuneration, items three and four on the agenda, went down to the wire. The bank revealed substantial protest votes of 21% were lodged against the executive remuneration proposal and the resolution to grant Mr. Comyn $1.6 million in ‘restricted share units. Several staff members suggested it was not fair that they were being offered a 1.5% pay increase when other banks were offering 3%.
Bank of Queensland profits have dropped heavily amid the coronavirus pandemic, but the lender has finally cracked open its dividend payouts. The bank’s full-year statutory profits slumped 61 percent to $115 million, with the lender taking a massive $175 million impairment expense for problem loans.
That includes a $133 million buffer for potential repayment disasters among customers caused by COVID-19. But the bank also opened up its dividends, offering a payout of 12¢ for the year. That is split over two halves with BoQ having deferred a dividend payout from its earlier result. That is still down heavily on the 65¢ payout a year earlier. Fellow regional lender Bendigo and Adelaide Bank in its results in August deferred a final payout.
Australia’s business bankruptcies have jumped for the first time since June, with new data showing a 23% increase in defaults in September, and Victoria and Queensland worst hit. Monthly data from the CreditorWatch Business Risk Review found the number of businesses entering administration also rose, by 11% in the month, despite continued efforts from the federal government to stave off insolvency administrators.
The recent increase in defaults and insolvencies suggested that some “zombie businesses” that were only able to continue trading thanks to the changes we’re now making the choice to shut up shop, the CreditorWatch report said. However, the increase in defaults and insolvencies as recorded by CreditorWatch, based on Australian Securities & Investments Commission data, showed a patchy and uneven rate of failure across the country. Queensland recorded the largest jump in businesses entering administration, up 24.1% in September, following a fall of 25.4% the month before. Victoria saw a 23.8% increase, after a drop of 49.3% in August.
Around 160,000 of Australia’s 2 million small businesses could ultimately be felled by the coronavirus crisis, says Judo Bank which also estimates $40 billion in unproductive debt will be left on SME balance sheets when the pandemic clears, demanding careful management to avoid it dragging on the economic recovery. Judo’s internal analysis has found almost 8% of the 2 million SMEs, mostly at the smaller end of the market, may not recover from the crisis. Judo says they are carrying $40 billion of “unproductive debt” that will be sitting as a deadweight cost on balance sheets come March next year, including deferred taxes, loans and rent, and other creditor payments.
And that’s it for this week. And next week, I’ll be talking to InMoment’s Managing Director, David Blakers, who will explore the state of Australia’s business pivots to digital. And I’ll be talking to IFM Investors economist Alex Joiner about the state of the Australian economy in recession.
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.