This is episode number forty in our series for 2020 and today’s date is Friday, November 6.
First I talk to Rob Wilson, CEO of Incent, a loyalty reward company using blockchain to provide a different consumer-centric reward offering. Consumers are rewarded for their entire expenditure including bills, rent, shopping, and utilities which can be redeemed to cryptocurrency or cash.
And then I’ll be talking to CommSec chief economist Craig James about what’s ahead in the market for the week.
But now, let’s talk to Rob Wilson.
The world’s demand for oil may now peak in 2028, two years earlier than previously thought, and at a much lower level, according to consultancy Rystad Energy, which has dramatically shifted its long-term forecast because of the COVID-19 crisis and the acceleration of the transition to clean energy. The firm expects the pandemic to significantly alter the peak oil demand “reckoning moment”, both in terms of timing and volume, helped along by more forceful moves by the government to target lower emissions.
Global consumption of crude oil is now seen reaching its peak at 102 million barrels per day in 2028, instead of more than 106 million barrels per day in 2030, according to Rystad’s latest forecast, released overnight. In 2020, the persistence of the pandemic is seen driving oil demand down to 89.3 million barrels a day, from 99.6 million b/d last year. While demand picks up next year it is still hampered by regional lockdowns and a slow recovery in international aviation and only returns to pre-COVID-19 levels in 2023 when it is expected to reach 100.1 million b/d.
Australia’s second-most populous state, Victoria, is only just emerging from a 112-day lockdown. But central bankers reckon that the national economy beat it out of a covid-induced slumber, eking out some growth in the third quarter.
That does not mean that Australia’s travails are over. Unemployment is rising and inflation is well below the Reserve Bank’s target of 2-3%. So the Reserve Bank of Australia has cut the official cash rate to a new historic low of 0.1%. The bank also cut its yield target on the Australian three-year bond to 0.1% and announced a slew of other measures to help Australia recover from the coronavirus-driven recession.
In a major new policy initiative, RBA governor Philip Lowe also announced the start of a $100 billion bond-buying program aimed at lowering longer-term rates. Known as quantitative easing, or QE, the commitment to buy over the next 6 months is aimed at weakening the Australian dollar, which would boost exporters and further assist the economy rebound from the COVID-19 downturn.
10 years ago was the last time the RBA increased the cash rate. It shows how far Australia has deteriorated. The RBA’s announcement is actually an indictment of the government’s weak fiscal policy. Much of the Government’s announced stimulus has not been spent so the RBA has been forced to do what it didn’t want to do. It now has to do the heavy lifting And it’s quite clear from the RBA’s statement that it’s not expecting an economic recovery for a few years.
That’s why it’s focusing whatever artillery it has on the economy. The RBA says: “For its part, the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range.” For that to happen, we need wage growth and for that to happen, we need an unemployment rate of 4%. The RBA acknowledges that’s not going to happen for at least three years. We’re in for a very rocky road. So much for a V-shaped recovery.
The ANZ Job Ads recovery maintained a steady pace into October, rising 9.4% for the month. Job Ads have now regained more than three-quarters of the plunge they took in March and April.
According to the Australian Bureau of Statistics, building approvals soared during the month following the relaxation of COVID-19 restrictions, with Western Australia and South Australia leading the way. The data show that building approvals rose 15.4%, significantly beating expectations of a 1.5% rise. In August, that number had declined by 1.6%.
House prices across Australia have risen overall for the first time since the start of COVID-19. House prices were up nationally in October. It follows five months of national declines during the coronavirus pandemic. Melbourne is the only capital city market that did not record a rise in values in October Monthly data from CoreLogic shows that, as a collective average, the housing market experienced a 0.4% rise in October. It follows month-on-month average declines since the pandemic started shaking the nation’s economy.
New research has found that if climate change goes unchecked, it would cost Australia $3.4 trillion and almost 900,000 jobs by 2070, dwarfing the impact of the coronavirus recession and devastating key industries such as tourism and mining. The research by Deloitte Access Economics suggests the country could adopt a net-zero emissions policy at a fraction of the cost of dealing with the pandemic that would help grow the economy over the next half-century and add a quarter-of-a-million jobs.
The report, based on the assumption of a three-degree increase in global average temperatures by 2070, examines the economic fallout if nothing is done to address climate change. It differs from most other economic models because it takes into account the impact of higher global temperatures whereas almost all others assume there is no cost from a hotter, drier, and more variable climate.
According to Deloitte Access, unchecked climate change would reduce Australian economic growth by 3.6% a year and cost 310,000 jobs annually by 2050. By 2070, the economic cost will have almost doubled to 6%, or $3.4 trillion in present value terms, and 880,000 jobs. The impact is around the same as the economic cost of the coronavirus pandemic until 2055 and then grows. The report’s principal author, Dr. Pardeep Philip, said the costs to Australia of climate change would continue rising every year, with farmers, builders, manufacturers, miners, and tourism-related businesses at the economic “front line”.
Big United States retailers have been stocking up again on consumer staples in anticipation of a renewed bout of pantry hoarding by shoppers as COVID-19 cases soar, which has in turn flowed through to robust demand for pallets at logistics giant Brambles. Bramble’s chief executive Graham Chipchase tweaked the group’s full-year sales and profit guidance towards the upper end of a previous band given in mid-August because of the solid trading in the September quarter. Mr. Chipchase said conditions were volatile and it was hard to predict where the economy was headed. But the group’s US operations had experienced a strong three months to the end of September.
Australia’s fuels sector has been dealt a further blow with more than 100 jobs cut due to the slump in demand for jet fuel amid analyst predictions. Ampol may shut its Lytton refinery after BP’s decision to close Kwinana.
The reductions across jet fuel operations at some of Australia’s biggest airports have exceeded 100 workers after steep falls in demand given the shutdown of air travel. Several of Australia’s biggest jet fuel suppliers including Ampol and Viva Energy are among companies that have permanently shed roles given the rapid reduction in aviation demand.
Ampol said in October jet fuel volumes declined 64% due to international and domestic travel restrictions while Viva said volumes fell by three-quarters compared to the same period a year earlier. The job losses add to 600 manufacturing workers out of a job within six months following BP’s decision on Friday to close the nation’s largest refinery, Western Australia’s Kwinana facility.
BP will also slash 20% of its Australian staff in a further blow to the nation‘s energy sector, with the British oil and gas giant starting the process of cutting about 200 office roles. Energy Minister Angus Taylor held crunch talks this week with Ampol, which runs Lytton in Brisbane, Viva Energy, operator of Geelong in Victoria, and ExxonMobil, owner of Victoria’s Altona plant, as fears mount the entire oil refining industry could be gone within a year.
Online book retailer Booktopia is taking advantage of a COVID-inspired boom in book sales to list on the Australian stock exchange, four years after pulling the plug on a previous run at the boards. Booktopia is raising $43.1 million from investors, $25.1 million of which will be used to expand its range and distribution capacity and reduce debt and $18.1 million of which will be paid to existing shareholders.
However, co-founder and chief executive Tony Nash, who owns 20.2% of the company and is credited with building the business over the last 16 years amidst the arrival of online juggernauts Amazon and The Book Depository, does not plan to sell any of his shares into the IPO. Releasing Booktopia’s prospectus on Monday. Mr. Nash said online book sales had boomed in the second half of the financial year 2020, fuelled by demand during the pandemic.
A $41 billion pension fund being sued in Australia for failing to properly account for climate change in its investments has settled the lawsuit ahead of a three-day hearing Monday. The Federal Court in Sydney was adjourned after Retail Employees Superannuation Trust and Mark McVeigh, a 25-year-old fund member who brought the action, reached a settlement.
Details of the agreement were not revealed in court. McVeigh brought the case in 2018 claiming Rest wasn’t doing enough to protect his retirement savings against the impact of rising world temperatures. The case was seen as a test of whether money managers have a fiduciary duty to help combat the ravages of a warmer planet.
The settlement – while not binding on other investment funds – suggests that investors who lag their peers in testing their portfolios against climate change risk are vulnerable to lawsuits seeking to compel them to do so. Rest will now conduct scenario analysis to inform its investment strategy and strategic asset allocation, disclose its entire portfolio holdings and advocate as investors in companies to comply with the goals of the Paris Agreement, which seek to limit global warming by 1.5 degrees Celsius.
The battered 171-year-old wealth management icon AMP faces a potential sale. Australian wealth manager AMP Ltd. said a preliminary takeover approach from U.S. private equity firm Ares Management Corp. values the company at A$6.4 billion ($US4.5 billion.)
It is the first serious bid for the company since new AMP chairman Debra Hazelton put it on the sale block with a “portfolio review” in early September. In a filing with the Securities and Exchange Commission in the US, Ares Management said due diligence and “discussions” with AMP were “very preliminary and there is no certainty that any transaction will occur on the proposed terms, within any particular timeframe, or at all”.
Wesptac has revealed a 62% plummet in full-year cash profit to $2.608 billion, as the bank looks to draw a line under its AUSTRAC saga and battles with the fallout from the coronavirus. The hit saw cash profit for the full-year fall a whopping $4.247 billion lower and was well under analyst expectations for $2.65 billion, according to consensus forecasts from Bloomberg.
Among the key issues weighing on the result were the impact of COVID-19, lower-income, and higher costs. Impairments for bad and doubtful debts have been raised by $2.2 billion to $6.2 billion. The bank reported a steep fall in the number of loans it had frozen at the request of customers with 41,000 home loans in deferral worth $16.6 billion, down from 146,000 home loans worth $54.7 billion at the peak.
Woolworths’ September quarter sales rose at almost double the rate in the year-ago period – soaring 12.3% to $17.9 billion – buoyed by demand in stores and online for food, liquor, and homewares from consumers spending more time at home. Same-store sales in Woolworths’ earnings engine room, Australian supermarkets, rose 11.5% in the three months ending September, with online food sales doubling, surging 100% to reach 8% of sales. Food sales growth accelerated, despite the boost from pantry stuffing in the June quarter. The 11.5% September quarter gain followed 8.9% same-store sales growth in the June quarter and 6.6% in the September quarter a year ago.
China is threatening to impose bans on up to $6 billion of key Australian exports from Friday under a widely-distributed notice sent to the country’s food and wine distributors which has raised fears of a second wave of economic coercion as diplomatic relations hit a new low. The addition of copper ore and sugar to a growing list of Australian commodities being targeted by Chinese authorities has alarmed the agricultural and mining sectors which were on Tuesday scrambling to verify the authenticity of the notice.
The move came as China banned timber from Queensland and blocked trade from an Australian barley exporter after Customs claimed pests found in the imports threatened the country’s ecological security. China’s Commerce Ministry had verbally told food and wine importers at meetings in three cities on Friday not to initiate further orders for the six Australian commodities ahead of a possible ban. But traders and distributors interviewed on Tuesday questioned the authenticity of the directive.
Lobsters are the latest casualty of trade tensions. Commercial fishers across the country have been told to stop catching lobster amid fears tonnes of live product could sit stranded at Chinese airports as the seafood delicacy becomes the latest export caught up in trade tensions between Australia and China.
It is understood Chinese customs officials changed inspection procedures late on Friday, throwing the trade into chaos. Australia’s biggest lobster exporter, the Geraldton Fishermen’s Co-operative (GFC), has told fishermen to stop catching the seafood delicacy until at least Friday. Western Australian-based GFC has about 300 members who sell almost all of their catch to China. Trade Minister Simon Birmingham said the Morrison Government was aware of reports of customs clearance issues related to premium shellfish imports into China and was working closely with the industry to shed light on the situation.
Female workers bore the brunt of the economic shutdowns caused by the coronavirus pandemic, but men will be the bigger losers over the long term as male-dominated industries atrophy, according to an analysis released by Labor frontbencher Clare O’Neil. In a speech delivered to the McKell Institute think-tank, Ms. O’Neil, the shadow minister for the future of work, says there is no doubt women were “hurt terribly” by what she calls the artificial phase – when large sections of the economy were forcibly closed by governments.
But citing research by McKinsey, Ms. O’Neil says some of the hardest-hit industries running into March next year will be construction (88% male), manufacturing (73% male), and professional services (lawyers,
consultants – of which 57% are male). She said that McKinsey estimates that when JobKeeper and JobSeeker are withdrawn up to March next year, just under half a million jobs will be lost and that her analysis suggests that more than 60% of those jobs will be lost by men.
And that’s it for this week. And next week, I’ll be talking to entrepreneur Ringo Chan who is on his way to revolutionising the bedding industry with his eco-friendly, ergonomic, and philanthropic company, Ecosa. And I will talk to IFM Investors economist Alex Joiner about the RBA’s decision to cut interest rates to drag Australia out of the coronavirus 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.