Unemployment rate near record low, insolvencies jump, Netflix password crackdown works

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Michael Thompson: Australia’s unemployment rate at near- record lows as jobs surge,

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Michael Thompson: corporate insolvencies jump post- COVID, and Netflix’s crackdown on password

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Michael Thompson: theft is working.
Welcome to Fear and Greed Business News,

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Michael Thompson: Australia’s best business podcast. It’s Friday the 21st of July

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Michael Thompson: 2023. I’m Michael Thompson, and good morning, Sean Aylmer.

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Sean Aylmer: Good morning, Michael.

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Michael Thompson: Sean after the show, you are speaking today to Ed

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Michael Thompson: John, executive manager stewardship at ACSI, which is the Australian

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Michael Thompson: Council of Superannuation Investors. Sounds impressive, a council of superannuation

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Michael Thompson: investors. This is a very influential group.

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Sean Aylmer: It is. It’s all the big superfunds are part of

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Sean Aylmer: this. In fact, if you combined the assets of the

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Sean Aylmer: ACSI members, on average, you’ve got about 10% of every publicly-

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Sean Aylmer: listed company, so it is a huge group, very, very

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Sean Aylmer: influential.
Basically, we talk about CEO pay and the fact

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Sean Aylmer: that realized pay has come off somewhat after a pretty

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Sean Aylmer: big year last year. Whether that’s a good or a

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Sean Aylmer: bad thing and what Ed John thinks is going to

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Sean Aylmer: happen in the future, it’s all about CEO pay. Fascinating topic.

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Michael Thompson: Yeah, it’s a really good conversation and well worth a

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Michael Thompson: listen this morning.
The main story, though, before we get

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Michael Thompson: to that, Sean, any way you look at it at

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Michael Thompson: the moment, the labor market is hot with unemployment last

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Michael Thompson: month coming in at 3. 5%, thanks to a surprising

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Michael Thompson: jump in jobs.

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Sean Aylmer: The economy is supposed to be slowing, Michael. I mean,

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Sean Aylmer: that’s what the retailers are telling us. That’s what loan

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Sean Aylmer: arrears that the big banks are saying. That’s what the

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Sean Aylmer: Reserve Bank and the government is talking about, but someone

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Sean Aylmer: forgot to tell the jobs market.
Now, to be fair,

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Sean Aylmer: the labor market figures from the Bureau of Statistics are

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Sean Aylmer: a lagging indicator. So while the impact of the higher

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Sean Aylmer: cost of living and interest rates is hitting most sectors,

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Sean Aylmer: it hasn’t yet knocked on the door of the labor

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Sean Aylmer: market. But still, you’d expect some sort of impact by

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Sean Aylmer: now, especially given leading indicators. Things like job vacancy ads

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Sean Aylmer: and hiring intentions have come off.
To the numbers, employment

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Sean Aylmer: raised by about 32, 600 people in June and the workforce

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Sean Aylmer: is now over a million people larger than pre- COVID. Full-

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Sean Aylmer: time employment has increased by 380,000 over the past year,

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Sean Aylmer: while part- time employment is up about 30,000. The states of

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Sean Aylmer: New South Wales and Tasmania with unemployment rates of 2. 9%

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Sean Aylmer: and 3. 5%, respectively, now have all- time low unemployment

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Sean Aylmer: rates. The participation rate edged up, though, it still remains near-

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Sean Aylmer: record lows. There are more hours worked. It just is

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Sean Aylmer: quite a red- hot labor market. Michael.

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Michael Thompson: Quite red- hot. I like that. Sean, you know how

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Michael Thompson: every now and then I like to prove to you

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Michael Thompson: just how much I listen to you.

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Sean Aylmer: Yes, yes.

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Michael Thompson: Well, on Wednesday, I believe it was, when we were

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Michael Thompson: talking about the minutes from the last meeting of the

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Michael Thompson: board of the Reserve Bank, you said that before they

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Michael Thompson: make a decision next time on rates that there’ll be

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Michael Thompson: two key sets of data that they’ll be looking at.

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Sean Aylmer: Ah, you were.

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Michael Thompson: One of those is inflation data out next week, and

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Michael Thompson: the other one, the other big one is, of course,

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Michael Thompson: the unemployment figures from yesterday. What does it all mean

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Michael Thompson: for interest rates? Have I proven to you, first of

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Michael Thompson: all, that I listen and that I take notes?

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Sean Aylmer: Well, you listen, and you understand. Even more impressive.

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Michael Thompson: I’m impressed, too. Please, go on.

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Sean Aylmer: It certainly puts pressure on the Reserve Bank to lift

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Sean Aylmer: interest rates one more time, but it isn’t a done

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Sean Aylmer: deal. As you just mentioned, the quarterly inflation figures for

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Sean Aylmer: the June quarter, which is due out next week, that’ll

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Sean Aylmer: come into calculations. In fact, that’s probably even more important,

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Sean Aylmer: the inflation data, than the employment data.
Now in March,

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Sean Aylmer: annualized inflation was 7%. The Reserve Bank will really want

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Sean Aylmer: it closer to 6%, maybe not 6%, 6.3, 6. 4% for

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Sean Aylmer: the June quarter. If it comes in at that, it’ll

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Sean Aylmer: be a very finely balanced decision.
Now, bond markets have

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Sean Aylmer: now ascribed a 40 to 45% chance that the Reserve

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Sean Aylmer: Bank will lift rates when its board meets on Tuesday

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Sean Aylmer: week. If the inflation data next week is a little

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Sean Aylmer: bit stronger than expected, alongside yesterday’s labor force data, well,

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Sean Aylmer: it’s likely that rates will go up. But if it’s

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Sean Aylmer: not, it probably won’t.

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Michael Thompson: All right. Okay. I think I’ve probably reached my quota

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Michael Thompson: now of showing off. I’ve got nothing left in the

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Michael Thompson: tank for the rest of the show, Sean. Local markets,

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Michael Thompson: how did they perform yesterday?

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Sean Aylmer: The S&P/ASX 200, it closed up very slightly. In fact, it

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Sean Aylmer: was up one point, I think, to 7, 325 points. It

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Sean Aylmer: started sharply higher on the back of Wall Street, then

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Sean Aylmer: pretty much lost ground all day.
Given the economic news

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Sean Aylmer: and what that could mean for interest rates, it actually

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Sean Aylmer: wasn’t a bad day. The financials and tech companies were

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Sean Aylmer: the best performers, while the healthcare index was the worst

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Sean Aylmer: of the 11 sub- indices of the ASX 200. CSL was

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Sean Aylmer: down again. Since the beginning of last month, the one-

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Sean Aylmer: time largest company on the boards is now off 15%,

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Sean Aylmer: quite a fall from grace.
The banks were mixed yesterday.

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Sean Aylmer: QBE Insurance jumped 2. 4%. Fortescue Metals Group raised 1.4%. Some of the

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Sean Aylmer: gold miners performed poorly. Northern Star led those ones down.

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Sean Aylmer: In corporate news, Telstra said it will cut nearly 500

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Sean Aylmer: jobs so it can automate some operations and compete harder

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Sean Aylmer: with software rivals.
For business customers, its share price closed

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Sean Aylmer: down slightly, (inaudible) share price jumped 37% after the

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Sean Aylmer: company, which develops investigative software for large businesses, said it

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Sean Aylmer: expects earnings to be higher than they were last year,

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Sean Aylmer: thanks to a couple of major contracts it signed. And

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Sean Aylmer: buy now, pay later group Zip Co recorded a big

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Sean Aylmer: jump in revenue and transactions, sending its share price up

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Sean Aylmer: to, well, it finished up 2%, but earlier in the day

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Sean Aylmer: was up quite a bit more. Mind you, at 45

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Sean Aylmer: cents a share, it is still a long way below

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Sean Aylmer: the February 2021 peak of more than $ 12.

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Michael Thompson: Yes. Yes it is. There’s a bit of corporate news

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Michael Thompson: around. Okay, what’s happening in international markets?

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Sean Aylmer: Well, it’s earning season on Wall Street, so there’s plenty

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Sean Aylmer: going on there. We’ve had some big companies releasing results

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Sean Aylmer: recently, including Tesla and Netflix. I’ll talk about them a

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Sean Aylmer: bit later.
So far, the market has held up pretty

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Sean Aylmer: well. There were fears that earnings would disappoint, that would

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Sean Aylmer: send the S&P 500 and tech- heavy NASDAQ lower, but so

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Sean Aylmer: far, so good.
Not a lot going on in commodity

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Sean Aylmer: markets, Michael, and the Aussie dollar, well, it was helped

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Sean Aylmer: a little bit by the labor market news. It is buying 68.

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Sean Aylmer: 2 US cents or thereabouts.

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Michael Thompson: Okay, we’ll be back in a moment with the rest

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Michael Thompson: of the day’s business news.
Sean, Prime Minister Anthony Albanese

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Michael Thompson: was among a host of politicians from both sides of

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Michael Thompson: the political fence to attend former cabinet minister Simon Crean’s

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Michael Thompson: funeral yesterday.

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Sean Aylmer: The 74- year- old died suddenly last month while in

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Sean Aylmer: Germany and a state funeral was held in Melbourne yesterday.

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Sean Aylmer: Albanese called Crean ” a great Australian and beloved son of

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Sean Aylmer: the Labour Party.” He said, ” Above all, he had a

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Sean Aylmer: sense of fairness as his guiding star.”
Meanwhile, the secretary

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Sean Aylmer: who developed and rolled out the Robodebt program has been

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Sean Aylmer: suspended without pay. Kathryn Campbell was suspended on July 10,

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Sean Aylmer: following the release of adverse findings against her by the

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Sean Aylmer: Robodebt Royal Commission. Campbell had been serving as a deputy

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Sean Aylmer: secretary in the AUKUS Task Force group at the Defense

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Sean Aylmer: Department after losing her secretary job at the Foreign Affairs

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Sean Aylmer: and Trade Department.

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Michael Thompson: Sean, Flight Centre’s share price jumped 4% yesterday after it

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Michael Thompson: upped its profit guidance, thanks to a surge in corporate

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Michael Thompson: travel earnings.

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Sean Aylmer: Flight Centre increased its earnings forecast by about 6%, Michael,

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Sean Aylmer: joining Alliance Air Services and Ardent Leisure in upgrading outlooks.

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Sean Aylmer: They have been the exception, though, because most companies around

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Sean Aylmer: the place have been downgrading.
Anyway, Flight Centre said high

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Sean Aylmer: airfares and a big expansion in corporate travel clients meant total

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Sean Aylmer: transaction volumes jumped nearly 25% last financial year, compared to

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Sean Aylmer: the pre-COVID 2019 financial year. Flight Centre Managing Director Graham

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Sean Aylmer: Turner, he was pretty upbeat yesterday. He said he expects

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Sean Aylmer: the larger volumes of new business to continue.

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Michael Thompson: So clearly, the predictions that everyone would just kind of

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Michael Thompson: stick with Zoom meetings from now on, instead of corporate

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Michael Thompson: travel, are a little bit off.

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Sean Aylmer: Well, in the case of Flight Centre, I don’t know

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Sean Aylmer: that we can say that as a blanket comment, but

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Sean Aylmer: certainly in the case of Flight Centre.

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Michael Thompson: They’re my favorite kind of comments, Sean, blanket comments that

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Michael Thompson: apply to all.

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Sean Aylmer: All right.

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Michael Thompson: Anyway, we will push on then, Sean. Helen Rosamond, who

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Michael Thompson: defrauded National Australia Bank of millions of dollars, will spend

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Michael Thompson: a minimum of eight years in jail for what the

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Michael Thompson: judge said was ” a scheme that was quite breathtaking in

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Michael Thompson: its audacity.”

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Sean Aylmer: Judge Robert Sutherland sentenced Rosamond to 14 years with a

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Sean Aylmer: minimum non- parole of eight years. Last November, a jury

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Sean Aylmer: found her guilty of 92 fraud charges laid against her.

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Sean Aylmer: The fraud involves sending falsified and inflated invoices from her

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Sean Aylmer: event management company, Human Group, to her friend Rosemary Rogers,

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Sean Aylmer: who happened to be the chief of staff to the

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Sean Aylmer: National Australia Bank Chief Executives Cameron Clyne and then Andrew

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Sean Aylmer: Thorburn.
Rogers, who was authorized to approve payments of up

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Sean Aylmer: to $ 20 million, would then approve the invoices without questioning

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Sean Aylmer: them. Rogers pleaded guilty to charges of being an agent

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Sean Aylmer: corruptly receiving a benefit. She was sentenced to eight years

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Sean Aylmer: jail earlier in the year. Rosamond is going to jail

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Sean Aylmer: for 15 years.

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Michael Thompson: I mentioned this one at the top of the show,

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Michael Thompson: Sean. The number of corporate insolvencies jumped by 62% in

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Michael Thompson: the year to June with the potential for many more

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Michael Thompson: as the economy slows.

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Sean Aylmer: Australian Securities and Investments Commission figures show that nearly 8,

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Sean Aylmer: 000 Australian companies went into administration, liquidation or receivership last

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Sean Aylmer: financial year, up from 4, 900 the previous year. It’s the

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Sean Aylmer: highest number of business failures since 2018- 19 and during COVID,

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Sean Aylmer: insolvency numbers fell, thanks to temporary measures put in place

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Sean Aylmer: by the Morrison government to protect vulnerable businesses from the

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Sean Aylmer: economic shock of the pandemic.
The construction sector is definitely

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Sean Aylmer: among the hardest hit with insolvencies up 72%. New South

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Sean Aylmer: Wales and Victoria accounted for the bulk of those and,

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Sean Aylmer: in fact, those two states recorded the biggest rise in

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Sean Aylmer: overall insolvencies. We talked a lot about the likelihood of

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Sean Aylmer: insolvencies surging, didn’t happen during COVID, definitely is happening now.

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Michael Thompson: How about this story, Sean? Pacific Islander fruit pickers and

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Michael Thompson: farm workers across two states will be found new jobs

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Michael Thompson: after a federal government decision to revoke a business license

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Michael Thompson: in response to what unions say amounts to modern slavery.

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Sean Aylmer: Yeah. Australian labor hire company Linx Employment has been under

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Sean Aylmer: investigation following claims workers were mistreated. The company claims to

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Sean Aylmer: have a large database of local and international workers sourcing long-

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Sean Aylmer: term employment solutions from the Pacific Islands. But workers at

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Sean Aylmer: the Tasmanian labor hire company claim management seized their visas,

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Sean Aylmer: refused to provide payslips and staff were bullied and threatened.

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Sean Aylmer: Australian Workers Union National Secretary Paul Farrow said the business

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Sean Aylmer: model amounted to modern slavery. Now the government has stepped

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Sean Aylmer: in and revoked the company’s business license.

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Michael Thompson: Sydney Airport has called for Qantas and Virgin Australia to

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Michael Thompson: make room for other airlines at the gateway by giving

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Michael Thompson: up slots.

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Sean Aylmer: Airport boss Geoff Culbert issued the call on the back

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Sean Aylmer: of new passenger data showing numbers on key domestic routes,

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Sean Aylmer: such as Sydney, Melbourne are still well down on 2019

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Sean Aylmer: levels. Culbert said if incumbent airlines are flying less on

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Sean Aylmer: those routes, they should give up their slots to other

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Sean Aylmer: domestic carriers or international airlines seeking to operate out of

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Sean Aylmer: Australia’s biggest gateway. Slots are allocated to airlines at capacity-

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Sean Aylmer: constrained airports like Sydney, allowing them a specific period for

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Sean Aylmer: takeoffs and landings.
Under current rules, airlines must use their

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Sean Aylmer: slots in Sydney at least 80% of the time in

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Sean Aylmer: order to keep them. Now June passenger traffic released by

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Sean Aylmer: Sydney Airport yesterday show just, I mean a very slight

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Sean Aylmer: increase, 1. 2 increase in domestic travelers compared to June

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Sean Aylmer: 2022, but a 67% jump in international passenger numbers.

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Michael Thompson: Well, that is significant.

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Sean Aylmer: Sure is.

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Michael Thompson: Tech billionaire Scott Farquhar says demand for workers to return

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Michael Thompson: to the office cubicle is shortsighted, and that half of

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Michael Thompson: new staff at Atlassian now work remotely based in regional

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Michael Thompson: areas around the world.

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Sean Aylmer: The co- founder of the software giant said attracting and

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Sean Aylmer: keeping talent in the sector was becoming increasingly important if

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Sean Aylmer: Australia was to maintain its position as the Lucky Country

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Sean Aylmer: in very difficult times.
Now, speaking at the Technology Council

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Sean Aylmer: of Australia’s National Tech Summit in Brisbane, Farquhar said flexible

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Sean Aylmer: conditions were a boon for decentralized states, such as Queensland

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Sean Aylmer: that did not have to attract entire companies to benefit

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Sean Aylmer: from growth in the tech sector. Farquhar said 53% of

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Sean Aylmer: new employees recruited by Atlassian over the past two years

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Sean Aylmer: live more than two hours from a company office. The

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Sean Aylmer: company employs more than 10, 000 people around the world, a

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Sean Aylmer: quarter of its Australian workforce live outside Sydney.

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Michael Thompson: Isn’t that funny just how divided basically the business community

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Michael Thompson: is over this, where you’ve got Atlassian at one end

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Michael Thompson: of the scale and then you’ve got the big banks

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Michael Thompson: right at the other end saying that they want people

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Michael Thompson: in the office pretty much as much as possible? There

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Michael Thompson: really does not seem to be a consensus.

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Sean Aylmer: No. Even within the tech industry, for example, remember Farquhar

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Sean Aylmer: actually took on Elon Musk over this because Elon Musk

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Sean Aylmer: wanted everyone back in the office. Farquhar tweeted how silly

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Sean Aylmer: that was and Elon Musk bit back and, yeah, there

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Sean Aylmer: really isn’t a uniform approach.

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Michael Thompson: Turning to international news now, Sean, and a very serious

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Michael Thompson: story, this one. Three people are dead, including the gunman

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Michael Thompson: and at least six are injured after an Auckland CBD

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Michael Thompson: shooting described by New Zealand Prime Minister Chris Hipkins as

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Michael Thompson: a quote, ” very grim morning.”

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Sean Aylmer: A police officer, who is critically injured, but has since

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Sean Aylmer: stabilized, is among the injured from the attack at a

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Sean Aylmer: building and construction site. Gunfire was heard in the center

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Sean Aylmer: of Auckland around 7: 20 AM. Dozens of police vehicles,

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Sean Aylmer: a helicopter and several ambulances scrambled to attend.
Once the

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Sean Aylmer: threat became clear, local media reported the gunman was a 24- year-

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Sean Aylmer: old man, who worked at the building and had arrived

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Sean Aylmer: there with a pump- action shotgun. He was later identified

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Sean Aylmer: he was serving a community- based sentence of home detention

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Sean Aylmer: for family violence offenses when this happened.

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Michael Thompson: Sean, I mentioned this one at the top of the

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Michael Thompson: show as well. Netflix has cracked down on passwords, seems

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Michael Thompson: to be working, with the streaming service recording one of

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Michael Thompson: its biggest jumps in subscriber numbers since the beginning of

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Michael Thompson: the pandemic.

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Sean Aylmer: Yes. Netflix added nearly 6 million subscribers in the three

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Sean Aylmer: months at the end of June. It now has 238

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Sean Aylmer: million worldwide subscribers, phenomenal numbers, but management warned that competition

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Sean Aylmer: is tough and not helping is the strike by both

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Sean Aylmer: writers and actors unions in the US. Investors weren’t impressed

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Sean Aylmer: at the end of the day and sold the stock

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Sean Aylmer: down.
Now Netflix reckons new subscribers this quarter will be

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Sean Aylmer: about the same level. Last year, it introduced a low-

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Sean Aylmer: priced option that includes commercials and then began to block

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Sean Aylmer: the sharing of passwords, which it said enabled an estimated

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Sean Aylmer: 100 million people to watch its TV series and films

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Sean Aylmer: for free. That crackdown is now working, hence, they’re getting

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Sean Aylmer: bigger subscriber numbers.

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Michael Thompson: Do you reckon password theft is a bit harsh?

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Sean Aylmer: Depends whether you do it or not really, doesn’t it?

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Michael Thompson: Oh, no. Look, I mean, just objectively I would say

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Michael Thompson: that like family entertainment collaboration or something like that is

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Michael Thompson: actually a nicer way to put it.

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Sean Aylmer: Ah, yes.

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Michael Thompson: But yeah, I can’t bring myself to sharing my password,

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Michael Thompson: unless I buy the family box, because I know Netflix is

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Michael Thompson: a massive company, but I don’t mind that. I don’t

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Michael Thompson: mind paying extra for that.

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Sean Aylmer: On my own there, Michael.

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Michael Thompson: No, no, no, no. It’s fine. It’s fine. It just

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Michael Thompson: feels like you’re kind of putting me in a corner

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Michael Thompson: here, Sean.
Let’s move on, Tesla. We mentioned Elon Musk.

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Michael Thompson: He gets a few mentions today, doesn’t he?

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Sean Aylmer: Yeah, he does. Yeah, as always.

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Michael Thompson: Yeah, they’re investing more than $ 1 billion on a supercomputer

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Michael Thompson: known as Project Dojo as the company pushes to create

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Michael Thompson: autonomous driving software.

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Sean Aylmer: Elon Musk said this supercomputer is being designed to handle

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Sean Aylmer: massive amounts of data, including video from Tesla cars. He

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Sean Aylmer: said the auto company has a staggering amount of video

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Sean Aylmer: at its disposal, thanks to customers’ use of camera- based

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Sean Aylmer: driver assistance software called Autopilot.
The announcement came as Tesla

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Sean Aylmer: said profitability shrank during the June quarter. Musk then also

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Sean Aylmer: said the company will probably keep cutting prices of electric

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Sean Aylmer: vehicles if interest rates continue to rise. Tesla’s on- track

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Sean Aylmer: to build 1. 8 million vehicles this year, Michael. Not bad.

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Michael Thompson: That’s quite impressive.

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Sean Aylmer: Hmm, very impressive.

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Michael Thompson: Not that I suspect Elon Musk really cares what I

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Michael Thompson: think.
Up next, Sean, Ed John, executive manager stewardship at

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Michael Thompson: ACSI, the Australian Council of Superannuation Investors.

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Sean Aylmer: All about CEO pay, a very controversial topic, well worth

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Sean Aylmer: a listen.

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Michael Thompson: Yeah, absolutely. It’s up next in the Fear and Greed

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Michael Thompson: playlist on your podcast platform or at fearandgreed.com.au.
Make sure

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Michael Thompson: as well that you listen tomorrow for the weekend edition,

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Michael Thompson: which is a very different program to our weekday shows.

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Michael Thompson: It’s where you and I really go head- to- head

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Michael Thompson: to pick the bigger story of the week and sleeper

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Michael Thompson: stories. There’s a lot of argy- bargy and we rope

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Michael Thompson: our Fear and Greed colleague Adam Lang in to be

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Michael Thompson: a fair and unbiased judge.

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Sean Aylmer: I was talking to a gentleman yesterday, who was very

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Sean Aylmer: senior consultant, and I was doing some other work, and

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Sean Aylmer: he said, ” Sean, I like the weekend edition.” I kind

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Sean Aylmer: of took a backwards step because I always think the

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Sean Aylmer: weekend edition can get a little silly, and he said, ” You

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Sean Aylmer: know, if I’m doing exercise, I just catch up on

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Sean Aylmer: the week and I listen to you to carry on

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Sean Aylmer: and it’s great fun.” I take that as a great

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Sean Aylmer: compliment that someone as senior as this gentleman likes the

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Sean Aylmer: weekend edition.

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Michael Thompson: Yeah, I don’t like the fact that he says that

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Michael Thompson: we carry on. For me, I’m treating it very seriously.

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Michael Thompson: It’s a competition that I want to win.

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Sean Aylmer: There’s no carry on as far as we’re concerned.

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Michael Thompson: No, no, no, no, no. I’m sorry if that’s the

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Michael Thompson: way that he perceives it. Anyway, we hope to put

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Michael Thompson: on a good show for him tomorrow, so make sure

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Michael Thompson: you hit Follow and Subscribe to the podcast so that

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Michael Thompson: it just lands automatically in your playlist. Thank you very

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Michael Thompson: much, Sean.

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Sean Aylmer: Thank you, Michael.

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Michael Thompson: It’s Friday, the 21st of July 2023, as I mentioned.

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Michael Thompson: Make sure you’re following the podcast and also join us

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Michael Thompson: online. You’ll find us on LinkedIn and Instagram, Twitter and Facebook. I’m

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Michael Thompson: Michael Thompson and that was Fear and Greed Business News.

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Michael Thompson: Have a great day.