Business Now with Ross GreenwoodBusiness Editor Ross Greenwood returns for his first Business Now of the year, as markets prepare for Donald Trump's inauguration. Plus, analysts warn of looming energy shortages and the Coalition announces tax-free lunches for SME's.
This is Business Now with Ross Greenwood.
Hi there and welcome to Business Now, my first program for twenty twenty five, our Brave New World. There's no doubt thanks to your company. I'm Ross Greenwood. Coming up on the program today. As Donald Trump is about being inaugrated as a forty seventh president of the USA, his economic policies could mean fewer rate cuts than you expect this year. The ANZ bankschief economist, Richard yet Singer, will be with us today.
Well, Trump this afternoon said he'll.
Immediately declare an energy emergency in America that changes a picture about energy transmission right around the planet, including here in Australia and the Albinezer Government's committed to spend two billion dollars to get Addie minium spelders to use renewable energy in the future, but the coalitioner took a different tac promising small business tax deductible lunchers up to twenty thousand dollars a year. So we'll that ad plenty more coming up on today's program. Now, look, other stories we think you should know about today, includ well, look, let's start with the government's two billion dollars commitment to the adiuminium industry to create green energy for the electricity dependent industry. The future of Australia's aluminium smelters have been in question due to the cost and reliability of electricity supply, especially with the closure of qualified power stations. Prime Minister Anthony Albanezy, Industry Minister Ed Husick and Tito's Australian CEO with today at Rio's Tomago smelter north of Newcastle.
What that will do is target support to Australian aluminium smelters, including here at Bell Bay Gladstone, right throughout the supply chain process of Portland, to make sure that by providing these production credits, companies can invest with the certainty on what they want to do, which is to shift to renewable and clean energy, not just because it will help the environment, but because it will lower the costs and make them more competitive.
So we're incredibly pleased with the announcement. This is a belief in manufacturing, it's a belief in jobs, and it's a belief in aluminium industries.
And the future of casino operator at Star Entertainment is today in serious doubt after revenue in the last quarter of twenty twenty four Deterier added even further. The Star today said quarterly revenue was down fifteen percent to two hundred and ninety nine million dollars compared with the same time in the previous year. Last week, the company entered a so called safe harbor provision to give it time to reorganize its finances and to protect it against creditors claims. The company wants to draw down a second tranch of one hundred million dollars from lenders, but admits it conditions to do so are challenging, so it's exploring other financing options. The Star statement today said, while discussions continue with respect to a range of different solutions, there's no certain that any of those negotiations will result in one or more definitive arrangements that might materially increase the group's liquidity position. In the absence of one or more of those arrangements, there remains material uncertainty as to the group's ability to continue as a going concern.
Look the Star's shares. You can see these.
They fell even further to day, and at one point they got banned to twelve cents here at the close. That's close to an all time low. They've closed at that point, down seventeen percent. The business is now worth less than four hundred million dollars. Let's get across today's market moves with Edward Boyd and ed the mark is just a bit better off today. But the miners they're way off their highs, aren't they.
Ross The mining companies have really been struggling over the past twelve months due to falling commodity prices. The material sector was one of the weakest performers today. Overall, market lifted at the open thanks to banks and tech stocks, ASX two hundred finished the day up about half a percent. Top stocks today included wagering company tab Corp, shared trading platform Iris Data networking business Megaport, and the tech health stocks Nanosonics and Promedicus. Losing value included the gold mining sector, led by Resolute and West Gold. The mining services company Parente was down to rare Eertz min Alignus was sold off as well, along with the debt collector Credit Corp. And here's a look at the performance of the five largest mining companies over the past twelve months. BHP and Rio Tinto both slumped sharply due to falling iron ore prices and a collapse in the lithium and nickel markets. But both companies also produce other commodities like copper and aluminion, so that's meant they've fared off better than the pure play iron ore minut four to Skew Metals, which only really relies on iron ore business to propel its share price. The American gold mining giant Newmont it held up pretty well thanks to gold prices reaching an all time record high in October twenty twenty four, and the diversified minus South thirty two had.
A topsy turving twelve months.
Some of it's oursets doing well are the struggling due to poor weather and political unrest, and Ross that's marketing.
It's interesting to see those mining companies said thanks so much for that well. Donald Trump's inauguration in around eleven hours time will trigger an immediate change in economic policies that will affect global market dynamics.
Now, the prospect of owner's tariffs on.
Nations including China, but even Canada and the European Union raised fears, and inflation won't fall as expected, but could rise as goods become more expensive in America. Countering that are pro business policies of lower taxes and more energy production that Trump expects will trigger economic growth in America. Well, a short time ago I spoke with Richard yet Singer, the chief economist of the A and Z Bank, and got him to explain how all this affects Australia, its policies and indeed it's interest rates.
I think it would be a mistake to focus on one. What matters is the mix. Trump can do some things on tariffs and on tax which kind of add to economic activity in the US, but he also needs to be doing things on deregulation and reducing the size of government to try and offset those and, if you like, provide the room for those things to occur, provide the resources for those sectors to thrive. If he tries to do something with the left hand but doesn't act with the right hand, that's when that's when we have a problem. And look, I am a little bit sanguine, certainly relative to some of the more alarmist views. It just seems untrump like to want to really upset the economy, and taking him literally around tariff's in day one, I think would upset the economy. And that's why I think they're likely to be something which occurs over time rather than on the first day.
But isn't it interesting though, Richard, and just looking at Australia, say, for example, from a really a deregulation point of view, we're kind of stuck. We really can't transform our economy because politicians are very weary about making any big deregulation to the tax system, to the overall economy, to freeing up business. Whereas in Trump's situation, he's almost promising a brave new world in terms of getting America back to work and trying to get business going, and really that with his control of the Congress and the Senate always gives him a clear path to do so.
Look, it is a path, how clear it is, Let's see. I mean, let's remember Trump has four more years, never has to face voters again. There are a number of members of Congress who would like to stay elected for quite a few terms, so their interested will be in picking Trump's policies that they think had the broadest appeal, not necessarily picking all of Trump's policies. So the alignment of the Republican Party certainly does smooth Trump's way, but it doesn't it doesn't make it all smooth saleing.
Okay.
So, given the fact that the Biden administration had its IRA policy, the Inflation Reduction Act, which saw massive government subsidy going into its own industry, being followed by Australia, is there a chance that even Trump's subsidies it rather that he's tariff's his tariff policies may end up going around the world almost creating another trade war, and Australia might ultimately be caught up in that.
Well, look, it's it's possible. I mean, you're I think you're right to say that this kind of industry policy or the Inflation Reduction Actor you use, one of Biden's policies, but also the Chips Act and other things. Lots of economies I think are looking at kind of free trade in general and saying, well, maybe there are some costs that. Certainly in a world which is less secure, there are probably some industries or some capability that we would like to have Domestically, The market might not necessarily want to go that way. We need to do some things to give us those and we can debate about what those things are, but I think it's clear the world is less secure and there are some things you want domestically, if pushcump comes to shove and things become a prop I mean certainly an extension of that is tariffs and trade is not free anymore. It's an open question. And the US is the world's biggest economy, contributing incredibly to global growth. In the IMF's latest forecasts, the US numbers were revised noticeably higher, growth for many other economies, particularly Europe and China revised meaningfully lower. So the US does have a certain amount of gravitas, if not genuine heft, to try and get its views across and it seems to be willing to use tariffs as a bit of an extra inducement.
Okay, So globalization though, you know, and now if it goes towards tariffs, it goes away from globalization where inflation was reduced as a result of cheap imports, in particular from China. If that starts to disappear, the grave fear is inflation rises, interest rates don't fall as most people would anticipate that they will.
Is that the byproduct of what might.
Be Trump's prime economic policy.
Look, a less globalized world is the more inflationary world. We should understand that the process of globalization was disinflationary and wealth creating, at least wealth creating for those who were in the right position. Obviously it wasn't for everybody, and that's part of the challenge that we now face. I think, the inequity of how those gains were distributed, and so there's pushback against that, and we should expect that to be a bit more inflationary. I don't think we'll end up with materially higher actual inflation, because, of course are now compared to the nineteen seventies. For instance, we have a range of independent central banks with targets that they need to meet. But certainly it does mean the interest rate cuts we expect both in Australia and the US are going to be modest. In Australia, for instance, we only expect two rate cuts in the first half of next year. In the US we expect three over the course of the full year.
That would be.
About the most modesty using cycle that certainly I can recall. And this deglobalization and industry policy trends are both part of that.
Oh, Richard, you're saying, it's always great to have in the program. Getting your input today to interest rate cuts is what you're predicting in this cycle here in Australia, much less and what many people would have anticipated. Thanks for your time, Thank you. And while a government acknowledges that it needs more energy in the energy grid here, oddly it's recommitted to a Morrison government decision to ban offshore gas exploration off the New South Wales coast, most specifically the so called PEP eleven permit zone, long thought to hold hydrocarbons which have never been discovered nor exploited.
So where does energy.
Come from when governments, state and federal ban different forms of energy?
Can even think gas in many projects and even nuclear lars.
Eric Nicholayson is the deputy chief executive of the globut renowned research company Rice that Energy, and I spoke with him earlier.
Energy demand is growing. It's coupled to economic development. We all want economic development and as such it is imperative to continue to grow the supplies of energy, whether it is through renewables or fossil fuels for that matter. And it's challenging though for governments to keep two thoughts in their heads at the same time. I think we need to develop multiple forms of energy also because of diversification of our supplies, which has proven to be so vital.
So you hear people.
Say that they are energy agnostic. In other people are quite clearly fans of renewables, or fans of nuclear, fans of hydrocarbons, whatever it might be. Is it actually possible for governments and industry to be genuinely energy agnostic.
Yeah, it's a good question. I mean, it's it's difficult. We were also remember we're also trying to solve for another objective here, which is to curb emissions and global warming, right, and we shouldn't forget about that, But sometimes we tend to get a little bit ahead of ourselves in that mission and to think that by curtailing the supplies of the traditional energy, which is fossil that that in and of itself will solve for us curbing emissions. It has proven very difficult to be truly energy agnostic. But this is the key challenge that we have is to balance this out. But again I want to, you know, obviously underscore the fact that we want to go somewhere here in the long term, and that is towards a cleaner and greener energy system, and I guess it's sort of striking that balance that has proven to be fairly difficult for governments around the world.
So do you since that with Donald Trump coming into the United States and he's going to have very much a pro nuclear sort of policy, e will have a pro hydrocarbons policy as well as well as the ongoing rollout of renewable energy forms. There the issue with that governments sometimes get confused about it is if they suddenly send one signal that we're going towards renewables, it almost blocks out other.
Forms of energy production. He's had a big issue for NAIs as a whole.
Yeah, I think, you know, with Trump donald Trump comment in I think he's been quite vocal he want to be, you know, an all of the above person, which means that he opens the doors in probably in new ways towards a renaissance for nuclear like you mentioned, also natural gas. I think he has said he wants to be he wants to be agnostic here. I guess the call for for nuclear natural gas has also been made by some of the energy consumers that are the large tech companies of this world, which all of a sudden find themselves in a situation needing incremental energy supplies into their own operations, and they have absent any sort of policy stimulis also been moving in the direction of calling for and making active strides into the value chains of energy, in mobilizing nuclear and also natural gas, particularly in the US.
So that's interesting because you say there it's not government driving necessarily the energy policy, but it is the likes of Amazon, Google, Microsoft actually making investments either directly into nuclear or indeed startup nuclear technology to try and move it along so that they actually have the assured sort of energy needs for their data centers, especially given that artificial intelligence is going to need many many more times the energy in the future than has used today.
Yeah, that's right.
It's a quite fascinating and new evolution in the energy domain. As such is that these big companies with a lot of financial muscle find themselves in a situation where they see their own demand the growing significantly driven by the trends you mentioned, and as such they're making active sort of intervention in the value chains of wanting to secure their own supplies, and they have found multiple avenues to play in. One is nuclear, one is natural gas, but they're also playing in the renewable space. So it's certainly taking somewhat of in all of the above type approach, but they have very predictable needs. They see that need growing. They have very stable needs for power and as such it lends itself nicely to a source of power that is stable. Nuclear is that and as such that is probably why they have gone in that direction in the US again alongside natural gas, but also renewables. We shouldn't forget about the huge strides that the big tech companies have done in renewables over the past ten years.
I'll say we'll speak again in the future of at least but lats. Eric Niklason, the deputy chief executive of risetet Energy, I appreciate your time in the program today.
Thank you, thanks for having me coming up.
After the bright The Coalition promises a small business twenty thousand dollars a year in text deductible lunches and entertainment. Is it a private inducement or a good wie to prop up aisland restaurants and cafes.
It's great to have.
Your company here on business now well figures today from the Corporate regulator Assex Show almost seven and a half thousand businesses collapsed in the last six months of twenty twenty four, more expected this year and most of those businesses are in hospitality and restaurants. So he's a coalition on to something saying that businesses would turnovers of less than ten million dollars a year should be able to claim twenty thousand dollars a year in tax deductible business lunches. Now it does exclude booze, but it certainly would be a shot in the arm. Where's Lambert is chief executive of the Australian Restaurant and Cafe Association and Joysman now where it's always good to chat to you. I mean, here's the interesting thing. Everybody says it's no such thing as a free lunch. Fringe benefits taxes burning place for decades now, and many people question as to why the government should or any government should actually change that policy.
It's a great question. This as we understand it will apply to the two and a half million small businesses around Australia weren't spending money in restaurants and cafes, that weren't going out and entertaining their clients and rewarding their employees. That weren't spending this twenty thousand dollars cap in restaurants and cafes, there won't be any loss of FBT or there won't be any loss of taxes. This is actually economic stimulus. This is encouraging the two and a half million small businesses around the country to actually get out to the restaurants and cafes in their local communities instead of spending that money in house or in other places.
So it's all upside.
I don't quite understand why. You know, many commentators today have said, you know that this is not a free lunch, or that this is not a policy that we should be focusing on. The hospitality industry is the fifth largest employer in Australia, and I'm going to say that again, it's the fifth largest employer in Australia. Where do you think these jobs come from. They come from a vibrant business community. They come from restaurants and cafes and hospitality businesses around the country actually being able to keep their doors open and not going insolvent.
They're trying, but they are anything pubs, but they're anything but vibrant right now, Given.
Those stats out of Asset today and.
Suggestions that there could be sixteen thousand businesses, maybe even seventeen and a half thousand businesses collapse this year, most of those directly in your sector.
Absolutely, we are the number two industry for insolvencies this financial year, and that is because of the cost of living process and the stubbornly high inflection that we've lived with in Australia now for many, many quarters. And this particular stimulus is a very strong policy and will lead to billions and billions of extra dollars spent in the hospitality industry and it will drive economic benefit and productivity.
So then take me to the whole issue about the government where this money would be spent. There's clearly no booze, but try to put some sort of, if you like, some rings around this so it doesn't get out of hand, which is a reason why I got banned in the first place. But I think it was the Keating government going all the way back. But it seems to me that you do need to have some sub borders around this so it doesn't get exploited.
Absolutely, and I think that the announcement over the weekend that it did not apply to booze means that there won't be any boozy lunches. This is specifically designed for small businesses two and a half that million small businesses in Australia to encourage them to go out and spend money in restaurants and cafes, not do things in house, not spend on other things, but actually take those that revenue that they make and spend it in restaurants and cafes to stimulate those local economies which will then drive jobs in the fifth largest employee industry in the country.
It's going to be a scenario.
Well, so a scenario would be any small business taking their best clients out or taking their best employees out and spending twenty thousand dollars, especially in the fourth quarter of the year and that April May June quarter, in order to reward those employees and reward those clients.
Indeed, I'll tell you what.
We's good to have you on the program as always, but it will only come the pass, of course, if Peter Dutton and the Coalition are re elected at the next selection. Wes Lambert from the Restaurant and Cafe Association, and.
That is it for today's program.
Thanks for your company and we'll do it all again tomorrow,
