Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
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 six in our series for 2019 and today’s date is Friday, March 8.
Listen to the full podcast here:
First, I talk to Scarlett Vespa, a personal branding expert titled the ‘Human Brand Futurist’ and the Founder of the Mrs V Shift. She’ll be talking about how executives, entrepreneurs and small business owners can build unique personal brands that stand out in an age when technology and artificial intelligence is changing business.
And then I talk to AMP Capital chief economist Dr. Shane Oliver assessing the latest profit reporting season and how Australian businesses are tracking.
But first, let’s talk to Scarlett Vespa.
China lowered its economic growth target this year to between 6% and 6.5%, bowing to a deepening slowdown that can’t be quickly arrested without aggravating debt levels that are already high. Opening the annual session of China’s legislature on Tuesday, Premier Li Keqiang laid out plans to fend off risks in the economy and keep the nation’s jobless rate steady. Chief among the remedies to prop up growth: increasing deficit spending, launching new tax cuts and other fee reductions for businesses.
Most or all U.S. tariffs on China are likely to be lifted as part of a trade deal between the world’s two largest economies. Talks are now in their final stages. Beijing made clear in a series of recent negotiations with the U.S. that removing the tariffs on $200 billion of Chinese goods from day one was necessary to finalize any deal. The Wall Street Journal reported earlier that the U.S. and China were close to finalizing a trade pact. China is offering to lower tariffs on U.S. farm, chemical, auto, and other products, the newspaper said, citing people familiar. Washington is considering removing most sanctions levied against Chinese products since last year. As part of a deal, China is pledging to speed up the timetable for removing foreign-ownership limitations on car ventures and to reduce tariffs on imported vehicles to below the current auto tariff of 15%. Bloomberg reported Friday that the U.S. is eyeing a summit between Presidents Trump and Xi as soon as mid-March.
The Reserve Bank of Australia (RBA) kept Australia’s cash rate unchanged at 1.5% in March, as expected.
Australia’s economy continued to slow in the December quarter. And without population growth, the economy went backward. According to the Australian Bureau of Statistics, the economy grew by 0.2%, below forecasts for an increase of 0.3%. With the economy decelerating sharply in the second half of the year, growth over the year slowed to 2.3%, below the 2.5% level expected. That was also well below the 2.8% year-ended pace forecast by the RBA just a month ago. With Australian population growth running around 0.4% per quarter, per capita GDP went backwards, falling by 0.2%. Combined with a 0.1% decline in the prior quarter, that means Australia has officially entered a per capita recession. A per capita recession has not been seen in Australia since the early 2000s, until now. If there is one big thing that is keeping the economy from officially going backward, it is population growth
Australia’s current account deficit narrowed to $7.2 billion in the fourth quarter of 2018 from a $10.68 billion gap in the previous quarter – better than markets expected, driven by a larger trade surplus of $8.4 billion up from $5.8 billion surplus.
Australian new car sales are still falling, according to figures from the Federal Chamber of Automotive Industries., The numbers show new car registrations fell to 87,102 in February, down 9.3% on the level of a year earlier. The declines are widespread across most categories and states and are being led by New South Wales and Victoria. Falling home prices and tighter lending standards are the likely culprits behind recent trends.
ANZ Australian Job Advertisements continued to fall, slipping 0.9% m/m in February, down 4.3% over the year. This was the fourth monthly decline in a row. In trend terms, job ads fell by 0.7% over the month and 2.8% on a yearly basis.
Company profits posted a modest headline rise if 0.8% in the 4th quarter, following a downwardly revised rise of 1.2% in the 3rd quarter. After adjusting for inventory valuations the result was a little better, with non-financial profits on a GDP basis rising 1.8% on the quarter. Once again, profit growth was held up by the resources sector, with mining profits up a solid 4% for the quarter and 26% for the year. Non-mining profits actually fell in the 4th quarter, down 1% although this number was weighed down by a reported 27% drop in finance sector profits. Excluding finance & mining, profits were broadly flat.
Australian residential building approvals rose 2.5% m/m in January, following an 8.1% decline in December. The improvement was led by a 3.8% increase in unit approvals from an 18.7% fall, while house approvals rose 1.9% from a 1.7% decline. The trend in approvals remains soft though, with approvals falling 3.2% m/m in trend terms and 28.6% year-on-year.
Treasury has provided no modeling to support Scott Morrison’s promise to create 1.25 million jobs over five years. Labor lodged a freedom of information request to Treasury seeking all documents and modeling related to the pledge, which the prime minister made in January. “The Treasury holds no documents within the scope of your request,” the department said in a response released on Monday. Shadow treasurer Chris Bowen says it’s “lazy and reckless” for the pledge to not be supported by appropriate modeling. But Trade Minister Simon Birmingham says the proof of the pledge “is in our policies”. The coalition oversaw the creation of 1.2 million jobs over the last five-and-a-half years instead of the one million promised, he said.
The energy minister has again insisted Australia’s emissions are going down when the government’s official figures show emissions continue to increase, as the government struggles to sell the latest incarnation of its energy policy. In an interview with the ABC program Insiders, Angus Taylor repeatedly stated emissions had decreased by 1% repeating the line first said by the prime minister, Scott Morrison, that Australia would meet its Paris commitments in “a canter”. The latest report released by the environment department, looking at emissions between September 2017 and September 2018, showed total emissions in Australia had increased by 0.9%, continuing a pattern of increases over the past five years.
This coincides with a new survey finding that more than a third of voters support reducing carbon emissions to the levels required by the Paris climate change agreement, while one in four voters support going beyond a 27 per cent reduction by 2030, a new survey has found. The YouGov-Galaxy survey of 1027 voters last month – jointly published by the Liberal Party-aligned Menzies Research Centre and the Nationals-aligned Page Research Centre – found just 17 per cent of voters support pulling out of the Paris agreement.
At the same time, Labor is finalising plans to hit heavy industry – from big manufacturers to liquefied natural gas exporters – with strict carbon emissions caps that would work like an emissions trading scheme. The opposition also plans to unveil policies to impose tougher fuel emissions standards on the vehicle industry and land clearing restrictions on farmers to make those sectors do their bit towards Labor’s aggressive 45 per cent emissions reduction target in the coming weeks, as the countdown to the May election continues.
Australia’s iron ore queen Gina Rinehart has maintained her spot in an elite list of the world’s top 100 billionaires But she slipped down the ranks to number 75 in 2019, from 69 last year. Still, her current and depleted fortune of $US15.2 billion ($A21.5 billion) is nothing to scoff about.
A former National Australia Bank (NAB) executive has been charged with more than 50 offenses relating to an alleged $40 million fraud after she handed herself into police at Surry Hills Police Station. Rosemary Rogers was chief of staff to former NAB boss Andrew Thorburn and his predecessor Cameron Clyne. Police allege Ms Rogers received $6.6 million in corrupt commissions to continue a contract with an events management company and overpay their invoices. Last Friday the founder of the Human Group Ms Helen Rosamond was arrested by Strike Force Napthali and arrested on 56 counts of bribery. Ms. Rosamond was arrested at a residence in Potts Point after a multiyear investigation into an alleged procurement scam that saw the bank pay heavily inflated invoices for services to the bank that included executive travel and retreats. Ms Rosamond was also charged with obtaining benefit by deception and attempted fraud, in addition to the bribery charges.
Adani Australia’s mining chief executive has suggested the company could seek “sizeable compensation” – potentially billions of dollars – from the Queensland government if its mining leases are canceled. A state parliamentary committee is hearing evidence in relation to a private member’s bill, tabled by the Greens MP Michael Berkman, to ban coal mining in the Galilee Basin. Much of the hearing on Monday morning focused on the potential legal implications of the legislation, which would have the effect of terminating several previously approved mining leases and exploration permits in the untapped resource basin. The bill is unlikely to pass, but the committee hearing has revealed what would be at stake if Adani’s Carmichael coal mine ends up in the courts. The Adani Australia mining chief executive, Lucas Dow, told the committee the company had spent “$1.4bn to date” on the Carmichael mine and associated rail plans. “Clearly there would be a legal recourse to this, not only to the cost incurred but also the future profits that would have been foregone as well. So that would be a sizeable compensation,” he said.
Supermarket giant Coles has divested from poker machines by entering into a joint venture with KKR’s Australian Venue Co, which will run Coles’ Spirit Hotels business in Queensland. Coles is offloading management of its 87 pubs in a $200 million deal with private equity-controlled Australian Venue Co. The Spirits Hotels business runs about 3,000 poker machines. The supermarket giant will set up a 50-50 joint venture with Melbourne-headquartered AVC, which is controlled by KKR & Co, to split the operation of its Spirit Hotels business. Coles will continue to manage 243 retail liquor stores in Queensland and 10 more attached to Spirit Hotels in WA and SA, while AVC will pay $200 million for the management of the 87 hotels that comprise Coles’ hotel and gaming business. Australian Venue Co will manage the day-to-day operations of Coles’ 87 Spirit Hotels, including about 300 poker machines, and will receive earnings from this business.
The ramifications of AMP’s decision to sell its life insurance business in a $3.45 billion deal are filtering through with S&P downgrading AMP Group and its subsidiaries including AMP Bank to A- from A with a negative outlook. Furthermore, S&P said the credit rating of AMP Group was likely to be downgraded from its current rating of A- following the sale but would refrain from doing so until it had more clarity about AMP’s strategy.
Myer has swung back into the black, reporting a $38.4 million half-year net profit, after significant write-downs drove the department store to a $476 million loss in the crucial December half a year earlier. However, total sales in the six months to January 26 fell 2.8 per cent to $1.67 billion and were down 2.3 per cent on a comparable basis. Its profit margin rose on the back of cost cuts, prioritising private label products, exiting unprofitable products such as furniture and bedding to focus on apparel, beauty, and private-label goods and closing dozens of concessions.
GrainCorp has signed a $350 million deal to sell a unit that operates eight terminals around the country storing and handling bulk liquid oils, fuels and chemicals for a range of customers. The Australian Bulk Liquid Terminals business will be bought by ANZ Terminals, a privately held company that provides storage terminals in Australia and New Zealand. The exit from the business, which was acquired by GrainCorp (GNC) in 2012 as part of its deal for Gardner Smith, includes a long-term storage agreement that will allow GrainCorp to continue as a customer for its oils business while also releasing capital, the company said. The business has a combined storage capacity of about 211,000 cubic meters.
A new report by McKinsey Australia has warned that unemployment could spike by up to 2.5 per cent as a result of expected automation of 45 per cent of jobs in Australia. Demand would increase for workers in unpredictable and interactive roles such as nursing, care giving and sales but will fall for workers including radiologists, mechanics and legal research assistants. The McKinsey report estimates 3.5 million to 6.5 million full-time equivalent jobs could be affected, with 1.8 million to 5 million workers needing to change professions. It says disruption by industry could range from 16 per cent of jobs in the education sector and up to 33 per cent of jobs in transport. The impact could vary from 21 per cent in city centres to to 30 per cent in mining regions including the Pilbara.
And that’s it for this week. And next week, I’ll be talking to Simon Madder, the CEO of Prime Financial and he’ll share some interesting insights on the opportunities for smaller financial services firms in the wake of the Royal Commission, which has the banks retreating from the wealth management space.
And I’ll be talking to CommSec economist Craig James about what to expect from the market in the week ahead.
And of course, I’ll be bringing you all the week’s news. 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 great week, take care, be good and looking forward to bringing you Talking Business next week.