Business Now | 12 August

Published Aug 12, 2024, 7:09 AM

The profit reporting season gets into full swing this week, Deputy Governor Andrew Hauser warns against forecasting the RBA's decision. Plus, the national clearance rate drops to 60.8 per cent.

This is Business Now with Ross Greenwood.

Hi there and welcome to Business Now for another week. Thanks for your company. I'm Ross green We're coming up on the program today. The profit reporting season gets into full swing.

This week. We're going to show you how it started.

With JB High Fi Car Group and It's Carsle's Business, Beach Energy and the rail operator Arizen.

Is it a difference of opinion or in all that brawl?

We explore the apparent difference between the Reserve Bank and our Treasurer about whether the government's helping or hindering the.

Fight on inflation.

Loction clearance rates dips in most capital cities after a week when a clear message will scent the buyers.

Interest rates will not be cut anytime soon.

So all that and plenty more coming up on today's program. Other stories we think you should know about today include Reserve Bank Deputy Governor Andrew Howser.

Today went a little well.

Donald Rumsfeld on us for these speech entitled Beware False Offits. His speech to the Economic Society in Queensland was about forecasting. Is the fairly risen input from the Bank of England observed Sport in Australia off on play's second fiddle to the RBA on newspaper front pages these days.

As humans were all prone to over confidence, particularly when forecasts in the future. In many cases, actually, as those chants from Menty really powerfully showed, the right answer that we should give is we just don't know. But it can be hard to say that, particularly if your job is to give a view, and particularly whereas I've shown, even small changes in judgment can have first order effects on people's lives.

Well after showing modeling that suggests even the Weather Bureau predicts within a range of consistency, he noted the claiming supreme confidence or certainty over what is intrinsically uncertain and ambiguitous outlook is a very dangerous game.

In some cases, uncertainty may induce you to be less active as you weigh for more data or try to avoid triggering tailors through your own actions. In others that can reduce you to it can induce you to be more activists. For example, the asymmetry of potential outcomes underpinning the policy response in many countries, including in Australia during the COVID nineteen pandemic. But but where anyone who claims it's obvious what to do for they are false profit.

And just for the record, money markets say so today there's an eighty seven point eight percent chance for the IRBA won't change rates.

It's next meeting in September. To me, that's a pretty good certainty.

Well, Microsoft, a pioneer in generative artificial intelligence with its ten billion dollar US investment in Open AI, is now rolling at applications in Australia's first major.

Customer, Telstra. But look, it's a bit of a quid pro quo.

Telstra all by twenty one thousand licenses for Microsoft's co pilot AI app and partly in exchange, Microsoft will be the first major customer on Telstra's intercity.

Fiber network now.

That fiber network as part of Telstra's Infraco, which at one stage was put up for sale. Eventually Telstra kept it as the potential of AI and the demand for high speed network services was being realized well. Telstra CEO Vicki Brady says the partnership involves building more high capacity intercity fiber roots for Microsoft to achieved end to end connectivity across key telecommunications routes in Australia and across the Asia Pacific. Telstra results are due on Thursday this week. Now brading doesn't need a few wins. With Telstra's share price down more than nine percent in the past year. You can see it here compared with the ASX two hundred, which has gained six point six percent. And Muhammed Unus is Bangladesh's most famous citizen. The founder of the micro lending bank, the Grammen Bank, transformed the once poverty stricken nation's economy.

The eighty four.

Year old Nobel Prize winner has again been pressed into civil service. He's going to lead an interim government there. Bangladesh has been in crisis for weeks because of students' rights, which led to the resignation of the Prime Minister Shake Hasena, who has fled to India.

Will Unison shake Hasina.

Are long term political rivals and famously have traded lawsuits for decades. And as Unice has returned home at the request of the military, graph charges that he faced under the previous government filed by the nation's Anti corruption Commission suddenly were dropped. Unis says his first objective is to hold fresh elections there. Now.

The good news is after.

Three weeks off ed Boyd's back in business and just in time for the profit reporting season ed. Welcome back to the company. Results started the flow of the day. So let's start with jbhi Fi, the best.

Perform on the market.

Ple Let's be honest, the results are not as flash as we normally expect.

Yeah, ross the results from one of Australia's largest electrical and white goods retailers.

They don't look great on paper.

Revenue was down zero point four percent during the financial year to about nine point six billion dollars. Net profits slumped more than sixteen percent to about four hundred and thirty nine million dollars, but this was better than the market was expecting. The company, which also owns The Good Guys, has purchased a majority stake in the Victorian white goods retailer E and S Trading for about forty eight million dollars. Look, the dividend dropped, but the board announced a special dividend of eighty cents. So this is probably why the share price has taken off. And let's have a look at the shares. You can see jbhi Fi climb today up about eight point four percent. It also reported increased sales growth during the month of July, and that really shows that ossies are starting to spend their tax cuts on things like retail. So that news Ross probably helped lift the shares as well.

Okay, so what about car Group formerly car Sales. It did perform well thanks to acquisitions in both Brazil and also in the US.

Yeah, the company's been expanding into new markets for quite some time and now owns vehicle retail businesses in the US, Brazil, Chile, and South Korea. Now, this was the first full year of trading since purchasing Trader Interactive in the United States. Adjusted revenue for the year was up forty one percent to about one point one billion dollars. Profits slumped about sixty one percent, but on an underlying basis which strips out the acquisition costs and restructuring fees, the profit lifted to three hundred and forty four million.

Let's take a quick look at the shares.

You could see it was one of the top performers on the market today it was up just under five percent.

Look.

Car Group also increased its final dividend by six cents per share. That also helped lift its price today. Ross on the stock market.

Okay, so on the flip side ed the Freighton Railway operator arise and it just got hammered today.

Yeah.

Look, it missed its consensus earnings estimates. Underlying profit and earnings were below expectations. Earnings from its coal haulage unit, basically in North Queen Queensland, jumped sixteen percent during the year. That's thanks to higher volumes and better yields. For the company's overall revenue, it did increase nine percent to roughly four billion dollars, profit, did jump, underlying earnings, lifted and arise, and announced one hundred and fifty million dollars share buyback. It all sounds good on paper, but investors were clearly expecting a lot more.

Let's look at the shares.

You can see it was one of the worst performers on the market today, down a bit over nine percent. Also decreased its dividend to seven point three cents, and that's always a pretty risky move. Perhaps if they'd increased the dividend instead of buying back shares, then it may.

Have performed a little better ross. All right, let's go to the oil sector.

Beach Energy twenty nine percent owned by the seven group.

It got smashed up as well.

Yeah, heavily sold off today.

Beach Energy the company.

It increased its revenue nine percent to about one point eight billion dollars, but its underlying profits slipped eleven percent to three hundred and forty one million, and on a statutory basis, it actually reported a loss of four hundred and seventy five million. The biggest issue for investors today seems to be the downward revision to its resource reserves. The CEO said there was a pressure decline at its enterprise gas field asset, which has resulted in a smaller reservoir than expected. So that caused investors to punish Beach Energy. You can see today it was down pretty sharply, down twelve point five percent. The dividend was also flat, ross at two cents per share.

Okay, so now you've got the results, let's take go go through the overall market.

How did that finish up? Yeah?

Look, decent day for the ASEX two hundred. Tech sector was up almost two percent to scretch through, retail up one and a half percent. Mining company's energy stock slump market finished the day up about half a percent. JB High Fi was one of the top performers and its positive results seems to have lifted the whole retail sector. You can see Harvey Norman Super Retail Group both had pretty good days. West Gold Serge sharply it recently financed it's finalized its merger with Coora Resources Wagering Company TAB Corp took off in the afternoon after the government seemed to water down the proposed ban on gambling, ads and metal detect to make a Codan was up about four aer point six percent. Apart from Beach Energy in a Horizon. Other companies to fall included the Liftium producer, Pilber Minerals, mineral sands producer, Iluca Resources, Gold Miners and Barbara and the Diversified Minor Mineral Resources was off of just under four percent. Look, outside of the mining sector, the property's fromwell while they were down as well and Ross that is the day in markets.

Yeah, ed, good to have you back, many thanks for your time today.

Well, look, we mentioned at the top of the program of the speech by the.

Reserve Bank Deputy Governor Andrew Houser about the risks of forecasting, and that's highlighted by an obvious difference of opinion between the Reserve Bank and the government and notably the Treasurer Jim Chalmers. Now to workout how that difference might manifest itself. Let's bring in here Stephen Anthey, the head of macro research at Macroeconomics, who also has experienced at the Federal Treasury and the International Monetary funds.

Stephen, many, thanks for your time.

Look, just as we start this, because this is obviously dispute and it goes to the future structure of the Reserve Bank, we'll want to play you something from Friday Night which has been reindorsed by J. D Vance the Price, the vice presidential candidate in America. This is Donald Trump being asked about the role of the Federal Reserve in the United States on Friday Night.

Have a listen.

The Federal reserves a very interesting thing. And it's sort of gotten it wrong a lot. And he's tending to be a little bit later on things. He gets a little bit too early and a little bit too late. And you know, that's very largely a it's.

A gut feeling.

I believe it's really a gut feeling. And I used to have it out with him. I had it out with him a couple of times very strongly. I fought him very hard, and you know, we get along fine, We get along fine, but I feel that I feel the president should have at least say in there. Yeah, I feel that strongly. I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than in many cases people that would be on the Federal Reserve or the chairman.

So Stephen, the independence of a central bank is seen to be sacracin there is a presidential candidate signed well, actually I'm the president.

I think this is a political decision. That's what Chad Event said. A we kind of creeping a little bit towards that view here in Australia as well.

Well, yes, let's separate the two cases. So you've got a US former president who did respect the integrity of the Federal Reserve, whilst Jewel boning quite aggressively from the sidelines, and who certainly wants a lower dollar. So I would interpret a lot of what Trump's doing there, and the other side of Trump is low taxes and low lower spending. They can get away with it. Whereas in Australia, I think we've got a different situation. We've got a set of governments that are committed to higher spending and higher taxes. Now that's a different it's a different macro mix. And when you combine it with you know, this tendency to put the Reserve Bank on the hot plate for two years, which is you know, essentially they've had them in a review bill, you know, for twenty four months, enormous pressure on the on the on the new governor. They've removed the govern you know, I think that that case could be better made for Australia. Actually, right now.

You talk about Trump jaw boning the Federal Reserve and you could argue that's exactly what he's doing there. You could also argue that our own Treasurer in recent times has jawboned the Reserve Bank, particularly when inflation has got higher, and him also continued to argue until night becomes day that government spending does not create inflation in Australia, what were us?

And I think you can interpret Jim Charmers in the context of his say, a few Christmases ago. He's a big spender. He's an advocate of modern monetary theory and industry policy. Marianna mescado. And that's all well and good, but essentially that takes you closer to a situation where you know, a treasury and reserve bank are combined as liability agents, which theoretically is quite possible. But you know, that makes us more like a developed nation and less like an advance to economy, and that certainly, you know, is very bad signaling to markets.

Okay, but that doesn't that also mean that it gives the government the chance to say it's not our fault, the inflation is not our fault. So politically, they're trying to overcome a hurdle and they're pushing all of the blame for whatever comes back onto the Reserve Bank. And the Reserve Bank now you sense is starting to push back a bit of this.

Well, that's right, and the Reserve Bank is the only agency in the nation really that's holding the line, holding the sort of the rational line to maintain stability and to focus on economic growth into the longer term. That's what they're doing. The government, on that the other hand, is playing another game. It's more about a distributional game, and this is detrimental to like econ reformed, detrimental to productivity, it's detrimental to to growth.

But as you know, even though they would preach an independent Reserve bank, if you've got Donald Trump saying if I become president, maybe the president does get to say that becomes a global trend, just as on I'll give you this, the Inflation Reduction Act all of a sudden became a future made in Australia because we had to somehow compete.

Night follows days.

I say that's right, especially where it's what they were planning to do. Anyway, it's wonderful cover. And you know, look, if you want to interpret Albanez, he's very much like this Victorian government that is heavily indivindualist, and it's really walked away from those grand reforms of the nineteen eighties and nineteen nineties.

And so that's the danger, and that also goes to interest rate policy. I haven't got much time to go, but it seems to me as though this is just a trend that is going to be ongoing into the future. And can I say, Stephen Anthony, he was always good to have a chat, so you were going to do this again, I would suggest, as this issue is not going away anytime soon.

Many thanks few times today. Yeah, great stuff.

Well, coming up after the break on the subject of interest rates, we check out the housing markets as a reserve bank, of course, gives a strong indication that rates are not coming down anytime soon.

It's great to have you're coming to year on business. Now, let's get.

Across the auction numbers from over the weekend and around the country. There were fifteen hundred and seventy auctions and the clearance rate was sixty point eight percent. A few more auctions, a few less sold, compare with last week. In Sydney there were five hundred and eight auctions, that's fewer than last week, and the clearance rate there is only just above fifty seven percent. In Melbourne six hundred and fifty five auctions and around two thirds of those were sold.

In Brisbane there.

Were ninety three auctions and a clearance rate of around about sixty percent.

In Adelade seventy two auctions.

Pretty strong here, still seventy five percent of them sold, not like last week when it was eighty percent. In Canberra forty auctions more than sixty two percent of them sold, and in Perth just four auctions. But last week there were five hundred and sixty four private sales. So let's bring in here and Flaerty an economists with Ria Group who joins us regularly, and many.

Thanks for your time. Just going to those auction results.

Everybody's looking at interust rates, everybody's looking at the Reserve Bank commentary plus its decision to keep rates on hold last week. It's surely got to have an influence on the banks, on the people buying, on the investors.

Everybody's got a stake.

In this absolutely, and auction results are a fantastic pulse on the market in any given week. And the fact that we're seeing clearance rates they're pretty resilient at the moment, but they are definitely down from where they were hovering a few months ago, shows that people are a little bit more hesitant at the moment. There is a bit more of people being held back. But I think the fact that we saw interest rates hold steady is really going to provide a boost of confidence to a lot of people out there.

Okay, then we get to all the roadblocks that we know about.

So this population growth so tick property we know, so for example, a shortage of houses another tick for property. We know that rents have risen tick for property. So we've got a few ticks going on that side. But against that, the lack of housing is an issue now in regards to new homes being built. Is there simply enough to keep up? I mean, surely at some stage the business case comes back in favor of those who want to build houses.

Well, what we need is really a tipping point, and we know that for a lot of developers, property prices aren't yet at that level that they require, particularly in the unit market, to justify those developments, to make them feasible. And that's why we're seeing with dwelling approvals, you know, apartment developments, they're the ones that have absolutely fallen off a cliff. So we know that, yes, property prices are rising across the country, but in a lot of locations we're not seeing those prices reach those levels quite yet to actually make those developments stuck up.

Okay, So, and the tipping point could be a cutting industrates all several which obviously is now not in the horizon. It could be that prices to a point out which there is sufficient sort of return for the risk that needs to be taken, but that just doesn't go to the developer making a decision. It goes to the banks as well, doesn't it the financiers exactly.

And of course, you know, most people borrow to buy a home and it needs to stuck up, so those valuations need to add up. And we know, actually there's a lot of When we look at the unit stock, for example, being developed at the moment, it tends to be premium, and if we look at the new houses, they tend to be a bit nicer. So what we're seeing is development happen at the higher end of the market. What we're really missing is that stock of affordable property that's being built right now, which is going to trap a lot of people in the rental market longer.

But there's something else about this.

It's not just the finance available for developers, but also for individual buyers themselves. And I'm saying p came out last week and It's bank was saying they've been highly selective in those people that are providing housing credit.

To and when unemployment's rising.

That becomes a real issue for everybody seeking credit.

You are absolutely right, and I think that there's a lot of uncertainty that the banks are looking at right now. Yes, technically, the unemployment rate is still really, really low, but if we look at the total number of job ads online, they're down about seventeen percent from twelve months ago, and we're seeing this month on month, So the forward looking indicators suggests that unemployment is going to rise. We're seeing record numbers of businesses and to insolvency. Again, that means that that unemployment risk is going up. And of course banks are going to be more cautious in who they're lending to, okay.

So that therefore means that if they're more cautious, they're not lending to bigger developments because there's risk there. They're increasingly not lending to individuals unless they've got superb credit ratings, and so that becomes a little bit of a squeeze on the housing market.

Doesn't it look absolutely And at the end of the day, you know, we desperately need new, more new homes built. But until we start to see a lot of these conditions ease, you know, access to credit, lower interest rates, approvals, all of these things, we are staring down the barrel of a worsening of the undersupply of housing.

And so that's going to be a big problem because that could actually push the house prices high, which seems bizarre. But amongst everything else we've said, and Flarity from Mario Group always got to chat to you many thanks for your time today.

Thank you.

Well, let's finish up the program.

And there are a few historic moments in showbies over the weekend as well. And the first is that the movie Deadpool and Wolverine, starring Ryan Reynolds and Hugh Jackman, became just the second R rated movie in history to take more than a billion US dollars in global ticket sales.

The other movie, by the way, is Joker.

Now for some perspective, the very non R rated Disney Pixar movie Inside Out Too took one point five to five billion US earlier this year. Reynolds and Jackman, well, they're each report doing around twenty million US per movie. But Reynolds also will pocket more as a co director of Deadpool and Wolverine, and Jackman's reported also to have taken a clip of that box office The movie Cred another little piece of history for Reynold's wife.

Blake Lively is the star of the second top Billboard hit this week.

It ends with US. It took an estimated fifty million US dollars. Well Variety magazine says this is the first time since nineteen ninety that a husband and wife have shared the top two spots at the box office. It happened last in nineteen ninety, when Bruce Willis in Die Hard to outsold his then wife Demi Moore's movie Ghost. There you go, showbiz right anyway, That is it for today's program.

Thanks for your company. We'll see you tomorrow.

Business Now with Ross Greenwood

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