This is episode number thirty-two in our series for 2020 and today’s date is Friday, September 11.
First I talk to technology vendor Riverbed’s the Asia Pacific and Japan network channel chief John Milionis, who will talk about his company’s survey showing how companies are finding remote work challenging and he’ll be giving advice on how to manage it.
And then I’ll be talking to CommSec chief economist Craig James about the market in the week ahead.
But now, let’s talk to John Milionis.
The chief executives of nine drug companies have pushed back against US President Donald Trump’s quest for a coronavirus vaccine before the country’s election day in November. The drug companies have publicly pledged not to seek regulatory approval for any vaccines before their safety and efficacy has been established in Phase 3 clinical trials.
The statement included a vow that the companies would “only submit for approval or emergency use authorisation after demonstrating safety and efficacy through a Phase 3 clinical study that is designed and conducted to meet requirements of expert regulatory authorities such as FDA [Food and Drug Administration]”. They also vowed to “always make the safety and well-being of vaccinated individuals our top priority”.
Business conditions, profitability, and expectations on employment have fallen in the first NAB Business Survey to include full stage 4 lockdown in Victoria. Business conditions fell six points in August when COVID-19 restrictions were tightened to minus six index points – reversing most of the gains made in July.
The deterioration in conditions was driven by an 11 point decline in the employment index, a three-point fall in trading, a four-point fall in profitability, and a 10 point plunge in forwarding orders. All states saw declines in conditions except NSW, which is regarded as the gold standard for COVID-19 contact tracing. Overall, conditions remain most favorable in retail, followed by wholesale.
Conditions are negative in all other industries, with mining, construction, and recreation and personal services the weakest. Across the states, weakness was evident not just in Victoria. What’s surprising was the relatively modest 5pt decline in Victorian conditions, considering the Stage 4 restrictions in Melbourne and business conditions actually deteriorated further in Queensland (down 13pts), South Australia (down 10pts), and Tasmania (down 14pts).
Australia’s labour market recovery has stagnated throughout August, largely due to Victoria, highlighting how much further our jobs recovery has to go. Australian payrolls are still down 4.2% compared with pre-crisis levels, with Victoria down 7.9% and the rest of Australia down 2.9%.
The impact of Victoria’s second lockdown has been similar, from a jobs perspective to the first lockdown. Payrolls are down 7.9%, compared with pre-crisis levels, in the second lockdown compared with an 8.8% decline in the first lockdown. It is important to note when assessing these figures that they are prone to upward revisions.
The weekly results are never quite as bad as they first appear. Nevertheless, policymakers would understandably be concerned by the recent slowdown in job creation, which suggests that the recovery from COVID-19 may take longer than first anticipated. At the industry level, the impact of COVID-19 continues to be concentrated in sectors such as hospitality and arts & recreation.
While both these sectors have improved considerably once restrictions were lifted, the overall decline in payrolls is still devastating for those employed in these sectors. Payrolls in accommodation & food services are down 21% against pre-crisis levels, has improved 21% from its low in April, while arts & recreation are down 14.3%. Some sectors have continued to deteriorate throughout the crisis, with the impact building over time.
Payrolls in agriculture established a new crisis low in late August, while payrolls in construction are only slightly above their pre-crisis low. It is a reminder that while the impact of COVID-19 for some industries was largely due to the restrictions, for other industries the impact has increased over time due to the broader recession. Some sectors continue to perform well from a jobs perspective. Four industries, led by utilities and public administration, have payrolls higher today than they were pre-crisis. Financial services and healthcare have also been reasonably strong performers given the circumstances.
The solid rebound in ANZ Job Ads in June and July – which saw more than half the pandemic losses recovered – did not continue into August, with just a 1.6% rise. With Victoria accounting for more than 26% of the nation’s pre-pandemic employment, the Stage 4 restrictions in Melbourne and Stage 3 in regional Victoria have undoubtedly put the brakes on.
Predictably, new SEEK jobs ads in Victoria have fallen; but SEEK also notes that the improvement in New South Wales ads has been sluggish compared with other parts of the country. This is consistent with weekly payroll data, which show Victorian jobs falling and New South Wales jobs coming to a standstill. Q4 is also looking worrying, given the amount of financial support to workers, businesses, and households scheduled to be withdrawn, particularly with Victoria only gradually emerging from lockdowns. Over the longer-term, the government’s key focus for economic recovery will be employment growth. This will require tens of billions of dollars of additional spending.
But the Westpac MI consumer sentiment index rebounded 18% in September to 93.8 after a 9.5% collapse to 79.5 in the previous month.
Business leaders accused the Andrews government of trying to eradicate COVID-19 in Victoria and refusing to listen to industries that have been operating safely after Premier Daniel Andrews revealed a reopening plan that will keep many businesses shut until late October.
Most Victorian businesses have been under tight restrictions since mid-March and with stage four restrictions to continue for at least another fortnight the state has been under one of the longest and hardest lockdowns of any region in the world. The staged reopening will allow for some business and people movement restrictions to be lifted on September 28, so long as Melbourne’s average daily case count falls to between 30 and 50 in the prior fortnight.
However, business executives pointed to the requirement that there be no new cases for 28 days – plus no active cases and no outbreaks of concern in other states – before workers can return to their CBD office towers, as evidence the state was pursuing an elimination strategy.
But billionaire businessman Anthony Pratt says both the Victorian and federal governments are doing a great job at managing the coronavirus pandemic overall, and the ultimate measure of the response is an Australian death toll much lower than overseas. The executive chairman of recycling and cardboard box manufacturing giant Visy also said he was comfortable with the road map released by the Victorian government on Sunday to guide the state out of the lockdown. “I think Daniel Andrews is doing a great job, I think that Scott Morrison’s doing a great job. I think everyone’s doing the best they can in a very difficult (environment). These are uncharted waters…And no-one knows if this is a six-inch puddle or a six-mile puddle,” he said. He said ongoing tensions in the Australia-China relationship, and greater awareness of the employment and economic benefits from manufacturing on Australian shores would help generate a renaissance in Australian manufacturing, particularly food manufacturing.
The Andrews government has engaged a US tech giant to lift its COVID-19 contact tracing system into the digital age, as the nation’s most senior health official urged Victoria to have greater confidence that it could move safely out of lockdown. Under a data management system being installed within Victoria’s Health Department by the Silicon Valley group Salesforce, automated text messages will alert health officials, infected people, and potentially their close contacts about positive tests, dramatically improving the speed of the process. The technology already supports contact tracing in Western Australia, South Australia, and New Zealand. Victoria rejected an approach by Salesforce earlier in the pandemic. The company also made an unsuccessful pitch to the federal government to roll out a national contact tracing management system.
ANZ Bank is putting some Melbourne postcodes under tougher scrutiny when it assesses mortgage applications as it prepares for a wave of property foreclosures next year when customers default on loans in the wake of the coronavirus crisis. Borrowers looking for more than $3 million to buy luxury properties in Melbourne are already being asked by ANZ to stump up at least a 30% deposit, and the bank is applying WA-style loan-to-value caps of 80% in some areas of the city, meaning a borrower would need at least 20% in equity before qualifying for a loan.
Australia’s top banks are understood to have launched new divisions to handle companies impacted by COVID-19, ahead of what some anticipate to be a major fallout when pandemic-related government subsidies in place end early next year.
Major Australian banks including ANZ, Commonwealth Bank, National Australia Bank, and Westpac have typically had ‘bad bank’ units where businesses are placed when they are distressed amid times of recession. However, while the ‘bad bank’ units still exist, additional units have been created for companies that would typically be solid performing businesses if they had not been brought to their knees from the COVID-19 pandemic.
Examples of such cases include groups such as the listed travel agencies Flight Centre and Webjet, the country’s national carrier Qantas and Sydney Airport. Other groups such as outdoor advertising companies like oOh!media also fit the bill, as do some retailers, shopping centres and office landlords, and hospitality groups. It comes as the Federal Government this month announced it will extend until the end of the year insolvency relief measures which were put in place from March 2020 as part of the response to the COVID-19 pandemic. The measures were due to expire on September 25 and offered temporary relief for directors from any personal liability for trading while insolvent.
The coronavirus vaccine Australia has invested in has been dealt a major setback after researchers uncovered a suspected serious adverse reaction in a trial participant. The vaccine, being developed by pharmaceutical giant AstraZeneca and the University of Oxford, is being tested at dozens of sites around the world. The stage 3 trial – the final stage before safety and efficacy data can be submitted to regulators for approval – have tens of thousands of participants. But the adverse reaction, which AstraZeneca says is an unexplained illness, is believed to have affected a single participant in the UK. A suspected “serious adverse reaction” means the participant may require hospitalisation. It could result in a life-threatening illness or even death. Australia has ordered 30 million doses of the AstraZeneca vaccine to be rolled out next year. The Federal Government has signed off on a $1.7 billion supply and production agreement for the vaccine.
Australia’s goods exports to China fell by more than 26% in August, taking total exports down by 7.5% over the year to $US75.7bn ($103.9bn), according to figures from the Customs General Administration in Beijing. The latest monthly figures from China show that imports from Australia were down by more than any other country in August.
The figures, reported by Bloomberg and based on the latest Chinese customs data out on Monday, can vary from the Australian Bureau of Statistics numbers. Chinese imports from Australia in August were down by 26.2% to $US8.81bn year on year in a month where total imports by China were down by 0.5%. The numbers from Beijing come after data from the ABS showed that Australian goods exports to China in July were down by 16% in July on a year-on-year basis with a fall in exports of iron ore and coal. This was a turnaround from four months of strong export sales to China from March to June.
David Jones and the Country Road Group are the latest Australian retailers to reveal that they have underpaid their staff, with the South African parent company of the two brands announcing its 7,000-plus workers were underpaid to the tune of $3.7 million. The error was discovered following an audit undertaken “after identifying payment errors” last year. The disclosure follows the publishing of an alarming Fair Work Ombudsman report that audited cafe, restaurant, and retail sectors. It exposed the vast majority of businesses in Melbourne and Brisbane dining precincts as chronic underpayers. Some 84% of Melbourne’s laneway eateries and 88% from Brisbane’s West End breached workplace laws, from 93 businesses audited, the report said. Most were either stiffing staff in penalty rates or underpaying minimum hourly rates.
Global rating agency S&P Global Ratings has downgraded a slew of AMP credit ratings, questioning the company’s governance standards and betting that “an upside scenario is unlikely in the next two years”. S&P cut its long-term credit ratings on AMP Ltd and AMP Group Holdings Ltd (AGHL) from “BBB” to “BBB-”, and the short-term ratings on AGHL from “A-2” to “A-3.” AMP Bank’s long-term ratings also dropped from “BBB+” to “BBB”,and its short-term ratings dropped to “A-2. AMP has been bruised by revelations that it had promoted Boe Pahari to head AMP Capital despite him copping a $500,000 penalty in 2018 after settling a sexual harassment claim. Last month, AMP chairman David Murray resigned following sustained shareholder pressure, along with AMP Capital chairman John Fraser, while Mr. Pahari was sent back to his previous job. S&P questioned the company’s governance standards and bet that “an upside scenario is unlikely in the next two years”
Australian Associated Press (AAP) has launched a $500,000 crowdfunding campaign in an attempt to “diversify our revenue base” and remain ahead of former owner News Corp’s newly-created newswire. Now a not-for-profit owned by a consortium of investors after News Corp and Nine pulled their funding from the newswire, AAP said News Corp’s newly-launched competitor, the NCA newswire, is a “well-funded move [that] threatens AAP’s unique role, supplying independent content”.
The Go Fund Me page has so far raised $3,270 from 23 donors, and AAP’s new chief executive, Emma Cowdroy said both reader and government support in “these early weeks and months” of the resuscitated AAP are crucial to reach the much loftier goal of $500,000. The consortium of impact investors, fronted by former News Corp executive Peter Tonagh, officially took over last month, ending 85 years of big media companies owning the Keith Murdoch-founded newswire.
AGL Energy will offer customers a Netflix-like subscription for an electric car in the first initiative launched by its new AGL Next innovation arm, which will also increasingly expand into telco products. The business would bring together AGL’s work to collaborate on and experiment with new ideas in line with the rapidly transforming energy market, said John Chambers, the power and gas supplier’s new executive general manager, future business & technology. The details of the electric vehicle subscription offer are to be released later this week but are understood to involve an all-in, flat subscription offer for a range of cars.
And that’s for this week. And next week. I’ll be talking to New York marketing specialist Josh Meah and he’ll talk about the crisis facing many small businesses and give tips for helping your business stay afloat through marketing. And I’ll be talking to Indeed economist Callam Pickering about the latest unemployment figures.
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.