The business community warns Australia could become the "unlucky country", BCA's Bran Black explains what needs to change to stop businesses leaving our shores. Plus, Victoria's economy falls behind and the property market wobbles.
This is Business Now with Ross Greenwood.
Hi there and welcome to Business Now for a new week. Thanks for your company. I'm Ross Greenwood. Coming up on the program today. The stock market hits another record high, but Bitcoin stools just as it was about to crack one hundred thousand US dollars for the very first time, and business leaders unite to implore the government that created a vision, a fresh vision for Australia to prevent capital and knowledge from walking out overseas. The Business Council's Chief executive, Brand Black will be with us today. Plus investor activity in housing markets. It's the highest point in almost eight years. The prices will they're still soft in some capital cities, so we'll let and plenty more coming up on today's program Now, a couple of stories you should know about. There's temperatures sought across the East coast of Australia. The Australian Energy Market Operator this afternoon is warning about a lack of electricity reserves tomorrow in New South Wales and in Queensland.
Look, there are no warnings of blackouts yet, but email.
Is calling for an industry response, either for generators to commit more electricity to the system or for major industrial users to cut back their demand. The warning coincides with unplanned aided outages at coal fired power stations in Queensland, New South Wales and Victoria.
A severe heat wave.
Is forecast across eastern states. Today temperatures were at thirty seven degrees in klon Curry and Queensland, thirty eight in Condoblin in New South Wales, and thirty nine at Burke. Surely before we went to wear New South Wales. Wholesale electricity prices where you can see them here one hundred and eighty one dollars per mega what hour, It's around two and a half times the October average. Let's also go now to work by the economist soul s Lake that shows the economic performance of Victoria has dwindled at the same level as Tasmania. That it's not to insult Tasmanians, but justice illustrate how far Victoria has fallen. It's measured in a range of charts GEDDP per capita, household disposable income, and massive and mounting state debt and interest. The fourth Victoria into higher taxes, and the Victorian political reporter Simon Love breaks down that decline.
An interesting economic argument has emerged as state labor marks ten years in power here in Victoria. In an analysis for The Financial Review, economist Saul S. Lake has found in Victoria the declining household income per capita, economic activity, rising debt and interest payments, but there's also an increasing share of economic activity in labor intensive sectors such as education, healthcare, and retail. The premiere just into alan flag that an economic growth state that is still due by the end of the year. She ruled out higher taxes or cuts to services.
Now there's only let's be clear, there's only one show in town that talks about cuts, that talks about closures, that talks about an American style debt cap that results in an American style health system.
How can the premier rule out savage cuts to services when they're already happening.
The political argument came just days after Victoria's Order to General issued a scathing assessment of Victoria's economy, arguing and warning that the state's finances are unsustainable, with net debt rising to two hundred billion and gross state debt expected to pass two hundred and twenty eight million by twenty twenty eight. Order to General Andrew Greeves warn the government against blaming COVID, stating prolonged operating losses and ongoing fiscal cash deficits are not financially sustainable, largely because they lead to higher debt levels than otherwise and indicate underlying structural risks.
We will need to continue to be focused on making those sensible and disciplined budget decisions.
I think the Allen Labour government is diluted in thinking that everything's going well for the Premier and her minister, who have the chaff driven cars and the great salaries. They may not see the problems that Victorian businesses and households have to contend with on a daily basis.
The Order to General's annual financial report may sound somewhat of an alarm, but it's still two years away until the general state election here in Victoria. Although there might be a litmus test early in the new year with a bi election and due to be held for the inner city seat of Paran and at least the Liberals and Greens indicating that they will be fielding a candidate.
Son of Love there.
But the stock market clearly is ignoring the economic headwinds and today hit yet another all time record ed Boider's with me and look, I counted near fifty six stocks that today hit fifty two week highs.
Is like the banks. These are retailers like gbhi FI. What else was there? There was QBE, the energy company.
Origin was there as well, biotechs, Promedicas, so it's really really broad ross.
There was really broad b gains across the whole stock market today. Almost every sector was in the green. Property reached and retailers were up about two percent. Back's, insurance companies and material stocks were the weakest sectors, but they run them down very slightly. The market jumped to a new all time high, finishing the day up point three percent.
Now.
The top company today was the battery materials maker Novo Vix Novo Nix, which signed a five year deal to supply synthetic graphite to the Volkswagen subsidiary Power Co from twenty twenty seven, so it jumped Sharply. Fleet management and car leasing business SG Fleet had a good day too, after receiving a takeover bid from the private equity firm Pacific Equity Partners pep OR, offering about one point two billion for that business. Other tops included the data scrubbing firm app and card payments company EML and the property developer Mervak. And losing value today included the gold miner Resolute. Its employees were released from detention in Mali. Last week, Ramsey Healthcare slunt due to a twenty four hour nurses strike. Wagering business tab Corp was sold off to along with the ultrasound probe cleaning business Nanosonics and Bend to go on Adelaide Bank, which today announced some new appointments to its executive team. And here's the look at the price of bitcoin, which lifted to ninety nine thousand, eight hundred US dollars per coin over the weekend. Cryptocurrency is very close to breaking through the one hundred thousand US dollar barrier. You can see one bitcoin is currently worth ninety eight thousand, one hundred and forty three and ross. That's markets.
Thanks Ed well.
One thing I can tell you about is growing this quiet from Australia's business community about the performance of the Albanese government. And this is not simply from one lobby group or another, but from all of.
Them collectively now. And this is not just.
From a liberal loving group, from a range of businesses prepared to give plenty of room to the new labor government to make good on its promise to reform and also to make economic conditions in Australia better, but face with the prospect of a toughening industrial relations environment, a flat economy, seemingly irrational environmental decisions like the banning the mcphillamy's Goal project in Blaney, and also an expensive and uncertain future for energy in this country. More multinational companies are right now moving more of their capital overseas, and especially to the United States, where their returns are more certain. Well now, a group of business letters have again called on the government the set of vision for the future. Among them the Chief Executive of the Business Council of Australia Brand Black Brand always good to chat to you.
A lot of people are going to look at you here and.
Say, of course you'd say that you're going to subpect the Liberals, You're going to do all this sort of stuff. This is way more than this. This is about the future of Australia and what it looks like and the place that this government has got in designing that future.
Well, look, thanks so much for having me on the show. It's about what any government can do. And the critical point that we've been making in our advocacy, particularly over the last few months, is that the challenges that we're experiencing now, particularly with respect to productivity, are challenges that have been on the books, so to speak, for the last couple of decades. But what we're saying is that the platform is burning now. We know from last year's Into Generational Report that unless we take steps to address our competitiveness and productivity challenges, we will be leaving a future for our kids worse off than what we've been fortunate enough to experience.
And you can already see that. We've already highlighted that on today's program. With what's coming out of Victoria, you can see what happens when you'll state, you know, when your state GDP effectively collapses, when your income per household falls, and where the government takes on massive debts and therefore basically has to put itself in hock and has to start raising taxes, productivity again drops. So this is symptomatic of what could happen across the whole country unless the right policy settings are put in place.
That's right, it's all about being competitive about having the most competitive productivity settings or the most competitive business settings, I should say, because with competitive settings you attract investment. With investment, you drive productivity, and productivity is the best determinant for real wages growth, certainly over the last six decades. So what we've been saying is if we want to see real wages growth, and that's got to be the overarching ambition that we should all push towards, then let's start at the other end of the scale, which is about getting the right competitive settings. And to your point, what I hear from CEOs right across my membership, but also when I'm out and about talking to people around the country, they are saying to me increasingly that the settings that we have in Australia aren't sufficiently competitive to continue to justify further investment in Australia. And that's a critical point. Enough investment. We don't have enough investment now. We have to do more than what we're on a trajectory to achieve in order to deliver that high quality of life that we want our kids to enjoy.
Okay, so this is about investment into Australia and if the settings aren't right, that investment doesn't come into Australia to grow business, to grow infrastructure, to grow a.
Range of different things.
And then there's a second aspect, and that is that capital leaves the country, and that is that multinational companies here and big investment funds send more of their money overseas to where they earn a high return on their capital.
And that's happening right now.
Well, yes it is, and we're concerned that with other countries increasingly looking to make their settings more competitive, unless we really start to move the dial a bit in Australia, we'll see a continue exit of capital from our country. Just to put this into a little bit of perspective, in twenty seventeen, when the United States last reduced its company tax rate from then a headline rate of thirty five percent to its existing rate of twenty one percent, we became a net exporter of capital to the United States for five consecutive years. Now, the last time we'd been a net exporter of capital for five consecutive years was nineteen twelve. We are looking now at the prospect of the United States again reducing its company tax rate, So that begs the question, are we going to see more capital leave the country. What this means more broadly is that it's just another incentive for us to be thinking, how can we be more competitive? What is it that we need to do to be as competitive as possible as against all of those peers that are striving for capital.
Because you know, last week we were talking to Bluescope Steel, which is putting more capital into America where it will be protected potentially by Donald Trump's tariffs, where its energy prices are between a half and a third as cheaper than what they are here in Australia, where it's wages bill is less, its return on investment is higher, and its market is bigger.
So there all of the dynamics that go about. But that's one company.
There are a lot more companies that could take a similar.
View to that.
That's absolutely right, and as I said before, it's a story that we're hearing increasingly from across our membership. I wish I could say there's a big single productivity lever that you could pull to fix the problem, but it's not quite so simple. There are so many different settings that you need to look at, be it workplace relations or your planning set, which you.
Could argue the government's gone backwards on workplace relations because they've made workplace is less flexible, not more flexible, which is what business would like.
That's unquestionably correct with respect to workplace relations. We have gone backwards and that goes back to the point that I was making before. It's not sufficient for us simply to continue along our existing trajectory, because what the Intergenerational Report told us is that if we do that, then we are facing into a future where there will be a greater burden on a proportionately smaller tax paying base. We need to be doing better and that means we need to get our settings right.
Okay, so we're.
Sort of laying it out for the government here, but there's got to be a plan for the future.
What is Australia.
And this is not necessarily the government saying, Okay, we're going to build more solar panels in Australia, or we're going to build a quantum computer in Australia. That's a government picking winners. That is maybe a good thing to do, but reality is that is not the economic settings that Australia is looking for to drive the nation and it's productivity for it.
Look there is certainly a place for initiatives like a Future Made in Australia with the settings correctly established. But we've always said that the best thing that government can do is get the fundamentals right. So that goes to the workplace, the taxation, the regulatory the planning, the energy costs and those settings. Those are things that we talk about when we say get the fundamentals right. If you get them right, then you raise the tide to float all boats rather than just picking winners here and there. That's what we think that we need to work towards, and we call on all parties ahead of the election and post the election to invest in that critical work to drive a genuine economic growth plan.
So just quickly, is there anything the government's doing that you can see right now that is on the right path.
Well, the one thing that I really would point out is that the announcement I think two weeks ago now of the National Productivity Fund is an excellent step in the right direction. The idea behind that is that the federal government incentivizes states and territories to undertake some difficult reforms in areas where they would other find it otherwise find it a little bit challenging. This is exactly the kind of thing that we've been calling for for some time. It's modeled off the competition payments of the nineteen nineties.
We know that works, and so we know about all of the companies that may go overseas. The one thing we, of course also have to consider is that a lot of companies are based here and cannot go overseas like some of those multinationals. Brand Black always good to chat to you many thanks for your time.
Today, Thanks for having me there.
You go well coming up after the break, We're were good across this week's auction results for Angus.
Moore from Aria Group. It is great to have your company here on business. Now we'll being the start of a brand new week.
Let's take you around the weekend auction markets, where again there are some signs of a little weakness just creeping into the housing markets, most notably in Sydney and Canberra. Here's the number of homes on the market, pretty much average for this time of the year and around about twenty two hundred and fifty six of clearance rates though are down around fifty five zero point one percent in Sydney eight hundred and fifty three auctions and around fifty four and a half.
Percent of those were sold.
In Melbourne, which is struggling for home price growth at the moment, seven hundred and eighty six octions and just a little over sixty.
One percent of those sold.
In Brisbane just one hundred and fifty one auctions, less than half of those were sold.
You can see there.
Even Adelaide is finally showing some size and maybe cooling off. Ninety seven auctions and two thirds of those were sold. In Canberra sixty four auctions, but fewer than fifty.
Five percent of those were sold. Per typically just.
Had five auctions, but there are a lot more private sales there. Let's bring in here, Angus, more senior economists with Aria Group. Angus, do you get a sense of maybe the price is cooling along with these auction clearance rates.
We certainly are, and if we look at the pace of home price growth over the past few months, it has started to slow down from what we were seeing earlier in the year. It's still positive most parts of the country, not everywhere, you know, Melbourne kind of the exception there where we have over the past sort of eure orsocent prices down but prices do look like we're starting to see of the momentum come out after you know, it's been a fairly surprisingly strong couple of years, given what's happened to interest rate.
So that means also for buyers there's just more stock on the market now, more to choose from, more to sit back and wait and have a look rather than trying to get into the next property as soon as you possibly can.
Yeah, that's exactly right. We're seeing quite a lot of properties hitting market at the moment. There is quite a lot of choice out there for buyers, which is making it a bit less competitive. It's probably part of the reason we're seeing a little bit softer clearance rates in the larger market. It's particularly when we compare to say, what we were seeing in Order More and Winter, when clearance rates were a little bit stronger. So I think that's part of the story there.
So just one thing, tell me about the number of apartments hitting the market in the capital cities right now. Brisbane went through a phase where there was an enormous number of new apartments built term side. Those sort of areas were very strong. In Adelaide, you've seen similar things take place Melbourne, Sydney keep on happening. The number of cranes in Sydney I noticed is starting to diminish. Even in Melbourne, the same sort of story there. How many new properties are hitting the markets right now.
We're not building a lot in ja general at the moment. It's come up a little bit, but in general, you know that the pace of building is right down from what we had been seeing in kind of the twenty teens late twenty teens when we were seeing enormous numbers of apartments being built in Brisbane and Melbourne, which really is part of the reason why Melbourne now looks relatively affordable compared to Sydney. You know, it is a lot cheaper to buy a home there than it is in Sydney. And that is part of the story that said Australia does continue to be a nation of kind of detached homes. We do still build predominantly detached homes. It's not as much as it used to. Apartments are a bigger share than they were, say two three decades ago, but they are still predominantly detached.
But apartments rely not just on empty investors going out and finding their apartment, maybe a holiday house somewhere else. They also rely on investors because investors rely then on renters to take it. Now, there's pressure in all these areas. So what's the trend in regards to investors being prepared to take on these properties.
Yeah, that's right.
We do see that investors do make up a larger share of lending for new homes versus existing you know, they are overrepresented in you know, kind of buying those new builds off the plan and in apartment buildings. The kind of good news for renters and what has been an incredibly challenging market with not a lot of good news is we are starting to see more investor activity. Investors are now making up thirty eight percent of new lending, which is kind of the highest share we've seen since about twenty seventeen. So and if you can see in the chart, they're coming off a really low level during the pandemic when investor activity was both very low in terms of new investors buying in and we were seeing a lot sell and that doesn't look like what perha So.
At that time, if you remember, it was because people were at home, they were buying sort of second properties, third properties, they were buying bigger homes, so they were really crowding out the investors. Because well, now the opposite is occurring that you've suddenly got maybe some weakness in Victoria in particular, a lot of investors, a lot of people who might have been buying sick times are getting out and maybe the investors are starting to take their players.
Yeah, and you know, rental market conditions have also changed a lot compared to what we were seeing. You know that when we were seeing that very limited investor activity was it's hard to remember now, but actually really weak rental markets. You know, twenty twenty, particularly in Melbourne, rental vacancy rates were very high. Rents actually fell in the Melbourne CBD by you as much as twenty to twenty five percent, which is enormous. So it was a very unattractive environment for investors. And that's obviously changed completely over the last few years. Rental markets are extremely tight. Rents are growing and have grown very very quickly. That's rebuilt rental yields and make it a lot more attractive for investors.
It's going to be fascinated to watch what happens in the next five years coming from here, whether that building recommences again and it's will always get to Jersey.
Any Thanks for your time today.
A pleasure, thanks for us and just.
To finish up today.
Over the weekend, one of the country's best regarded marketers, Lisa Romson, died after an all terrain buggy crash and her family property near dales Ford in Victoria. Lisa was the chief marketing officer at medibankan before that the marketing team at Cole's for four years. She'd previously worked for Telstrip, Visa, Carlton and United Breweries and Too of Australia at Tourism Australia. One campaign she was involved in was the Dundee Son of a Legendaryturns, which won a Titanium Mine Award at the Cannes Festival of Creativity.
Well today, a broad.
Group of senior marketing officials and advertising execs honored Ronson's passing. I've known Lisa for many years myself personally through her husband Chris and also her son Ben, and to them we pass on our heartfelt condolences.
Sad day.
Anyway, that is it for today's program. Thanks for your company. We'll see you tomorrow.