+ About Peter Switzer
About Peter Switzer
Peter Switzer is one of Australia’s leading business and financial commentators, launching his own business 20 years ago. The Switzer Group has since grown into three successful companies spanning media and publishing, financial services and business coaching.
Peter is an award-winning broadcaster, twice runner-up for the Best Current Affairs Commentator award for radio, behind broadcaster Alan Jones. A former lecturer in economics at the University of NSW, Peter is currently:
• weekly columnist for Yahoo!7 Finance
• a regular contributor to The Australian newspaper and ABC radio
• host of his own TV show, Switzer and Grow Your Business, on SKY News Business
• regular host of the Super Show on 2GB radio.
Dear Peter, What fun! You are really very good at what you do. I appreciated our time together and wish you continued success in all you do. Have fun (I know you will).
Jack Welch, former CEO, GE, and ‘Manager of the Century’ (Fortune magazine)
Peter, It was great to have worked with you – you really made the event come alive. I hope you enjoyed yourself. I know Steve Ballmer [CEO, Microsoft Corporation] did.
John Galligan, Director of Corporate Affairs & Citizenship, Microsoft Australia
Here’s a home truth, my only real education – or teacher who I actually ever listen to – is your interviews on Qantas. So thank you with sincere respect.
Sean Ashby, Co-Founder, AussieBum
Peter did a wonderful job on the night; keeping the program moving, working around changes to the run sheet, and ensuring each award recipient, and our sponsors, were made to feel welcome and important.
The feedback received from those attending has all been extremely positive.
Peter Mace, General Manager NSW, Australian Institute of Export
Peter, We would like to congratulate you for performing your master of ceremonies role in such a professional, entertaining and informative manner. We were impressed by your ability to tease out each winner’s story so that the audience gained maximum benefit from their collective business experiences.
Greg Evans and Nicolle Flint, Directors, Australian Chamber of Commerce and Industry
Hi Peter, I listened to you speak this morning and thought you were amazing. I am an accountant and in risk management and have never thought about doing a SWOT on myself – thanks for the tip!
Serife Ibrahim, Stockland Corporation Ltd
Dear Peter, Thank you for your valuable contribution to this year’s forum. Ninety-two per cent of delegates rated your presentation highly, commenting on its useful and topical content.
Catherine Batch, Head of Marketing and Communications, Indue
Peter has facilitated our CEO and CFO symposiums over the last three years. A true professional, he takes away the stresses of hosting and organising an event.
Justine Goss, Strategy Group
Tuesday, February 21, 2017
Here’s a question for you: why don’t our education systems teach business to everyone? After all, we all learn English and Maths and yet many people/parents can’t even speak proper English, let alone help their kids with fractions!
However, a lot of those parents run businesses, employ people, train those employees and are serious role models for many young Australians!
These ideas came to me after doing what I do every morning. First, I check out how Wall Street is doing, in case there have been developments that could hurt or help our overall desire to get richer rather than poorer.
I’ve always believed comedian Sophie Tucker when she revealed: “I’ve been rich. I’ve been poor. Rich is better.”
After Wall Street, I always like to check out what the major newspapers are offering as the stories of the day. And today, The Australian got me in with this headline: “Classroom focus shifts to life skills.”
The thought of an education system and a Board of Studies getting real quite excited me, so it got me in.
I learnt that in NSW “The curriculum overhaul, the first in two decades, will ‘correct’ the existing emphasis on studying a breadth of subjects to ensure students leave high school with deeper knowledge and the skills to navigate a changing world.”
That’s not bad and The Oz’s Stefanie Balogh explained what that means.
“Maths will look at statistics and the algorithms used by Google for search engines, while English will include explicit references to structure, grammar, spelling, vocabulary and punctuation,” she wrote. “Students taking history extension will better understand the nation-shaping role of the Anzacs in politics and culture.”
As I read, I was hoping that provision for business in the curriculum — as a compulsory subject — might be a good idea! But Stefanie made no reference to the notion, so I guess business again fails the real life test by educators and even politicians!
The vast majority of the non-government workforce spend at least a third of their life working in business. And it would be great if public servants and academics at least had a reasonably strong understanding and empathy with business because they work with people who are in business or one day will work in businesses!
I know business courses are offered but I think they should be compulsory in the final two years of study. The subject might not have to be examined in the final exam for school leavers but we should at least try to give them the business and money-making, as well as money-saving skills, to avoid being poor!
Imagine if we were all smart enough to avoid poverty and how that could help the Budget’s bottom line! We would be a more productive nation and that can hardly be frowned upon by the most artistic of Australians.
After all, a lot of my artistic friends are in business selling their works of art, their writings and their ability to act. Last night, I interviewed Damon Gameau, the actor who made that great film called That Sugar Film.
It was a work of art that has become a business and social education juggernaut. Even though I didn’t ask Damon about his business skills, I bet over the past few years he would have thought, as his brand/business has grown, “Gee, I wish I was better at business and money management!”
So what would a business/money course teach young people? Apart from managing money to build wealth, it would show them how to build their personal brand or business. It would teach the value of systems, which might mean not only could they build a successful and sellable business, they might not always lose their keys!
Business can teach life skills that are missing in Canberra and in many families, such as leadership. Imagine teachers dedicating time talking about leadership — imagine the positive effects for both student and educators!
What other good stuff could we offer students?
CNBC recently looked at “What billionaires Bill Gates and Warren Buffett would do if they lost it all and had to start over.” Gates said “he would devote himself to either artificial intelligence, energy or biology.”
Artificial intelligence will be huge, he says, and the world needs cheap, clean energy. And mastering biology could lead to solutions to life problems of obesity, cancer and depression.
Gates sounds like a pretty decent role model to throw at school kids, doesn’t he?
Meanwhile, the 86-year old Buffett, said he would make the same choices and become an investor. "I had fun when I was in my twenties, my thirties, and now I am 86 and I am having fun," he said. "I would be a failure at anything else, probably."
He actually had great advice for students but, in fact, it’s good for anyone: "I advise students, as much as possible, to look for the job that you would take if you didn't need a job," he said.
He insists we all have to avoid "sleepwalking through life," arguing that it’s "like saving up sex for your old age. It's not a good idea."
Imagine if we gave Buffett’s advice to all students: "You really want to be doing what you love doing and if you don't connect strongly to your first job or two, don't give up before you find it."
Now that’s a business life skill really worth teaching and makes me rudely ask: “What in the hell’s wrong with teaching business to our kids?”
Monday, February 20, 2017
With footie season not far away, I’ve been thinking about the political football that Bill Shorten wants to kick around — his Royal Commission into the banks. Sure, politicians need issues and selecting one that appeals to most people — bashing banks — seems pretty sensible, if not predictable.
(Leader of the Opposition Bill Shorten. Source: AAP)
However, what else is predictable is this preoccupation of politicians being prepared to waste $53 million (that’s what Royal Commissions cost) to win an election and get themselves a pay rise.
You see, Bill Shorten and most of his colleagues spent two terms running the country and Bill was Minister for Financial Services and Superannuation and no great changes were put forward then. And are you telling me with that experience that he wouldn’t know what he thinks is wrong with the banks? There has also been a David Murray inquiry into the financial system, which underlined areas where changes should be made.
But don’t stop there, there’s a pretty well-informed body called the Australian Prudential Regulation Authority (APRA), which recently didn’t like how much banks are lending to property investors and effectively put a cap on it per bank!
My point is Labor can easily determine what’s wrong with banks and then make the promises before an election. The problem with that is that objective economists and industry experts could model the changes and reveal that the reforms look great politically and socially but not economically!
It could lead to less business investment — especially foreign-sourced, which of course we need in order to push along economic growth and then jobs.
I’m often giving Malcolm Turnbull advice on becoming a more credible leader and now it’s Bill’s turn — give us Labor policies that create jobs and growth because these two things not only will help repair the Budget but they will deliver social reform.
A fast-growing Australia will give unemployed young Australians jobs and hopefully break a lot of the tragic family situations where successive generations don’t have a job and live on welfare.
Imagine Bill actually having a sellable policy like that!
Right now the world (not just Australia) is tired of politicians promising the same old things. Their track record has pushed them into the hands of Donald Trump and Pauline Hanson, who are promising things that a lot of people like.
The Trump test will be his first four years but Wall Street might only give him 100 days to prove that he can deliver on his promises. Right now, they like less bank regulations, more infrastructure spending and lower company taxes and while it looks self-serving to big business, it also looks economically sensible for jobs and growth.
Fortunately for our sake, Malcolm, while performing badly until a couple of weeks ago, has over two years to show us that a pro-business political model can deliver not only jobs and growth but better social outcomes.
The NAB boss Andrew Thorburn took a team of executives around the country recently and this is what he concluded:
"There's growth in the economy, there's jobs being created, there's prosperity around Australia."
I liked the fact that NAB, the Commonwealth Bank and ANZ reported lower that expected bad debts this month, which adds to my “it’s getting better” picture I’ve drawn for our economy using economic statistics. It’s a pretty picture.
Good stuff is happening like higher commodity prices, a better global economic outlook, interest rates are starting to rise to reward savers rather than borrowers for a change but rates still are historically low. And in case you missed it, unemployment fell last week from 5.8% to 5.7%.
The banks don’t want a Royal Commission because it will cost them. The accounting, legal and PR costs would run into the hundreds of millions across all banks, as they prepare for public scrutiny.
So that’s the test for the PM and the banks over the next two years — get it right so Bill doesn’t have a political leg to stand on when it comes to his Royal Commission.
Of course, I’d love to see him come up with policies that only appeal to lefties. Right now, Labor has lost left supporters to the Greens and the Coalition has lost voters to Pauline but only great leadership from both major parties will bring people back to the fold. And by the way, older Labor voters, who have diligently built up their super and maybe bought some investment properties, have started voting Liberal or for Pauline, as Labor chases lefties.
Maybe the banks new lobbyist, ex-Queensland Premier, Anna Bligh, can help her Labor buddies come up with a better banking policy that won’t cost over $50 million!
Our banks need reforming, as many businesses do, but I know what’s wrong with them and so does the Coalition and Labor. We just need two leaders who can convince them to change.
On the flipside, I know what’s great about our banks and not going near broke in the GFC, like many banks around the world, is one great thing. This saw them in the top 10 safest banks in the world and partly explained why we didn’t go into recession — no other Western economy avoided that!
A recession would’ve taken unemployment to 10% plus, while our jobless rate didn’t breach 6%!
The next two years will be interesting for the banks, Bill and Malcolm, with jobs and growth critical to who wins.
(P.S. ANZ has dropped its credit card rate by a whopping 2% to a low of 11.49%! Who said banks can’t change?)
Friday, February 17, 2017
Economics has been branded as the dismal science but that might say a lot about the people who’ve dominated the profession and how a lot of people are disappointed about what the economy doles out to them. Economics also can offer some good news but, on the other hand, it can simultaneously bring bad news.
Yesterday’s job numbers were a case in point, with the headline being a loss of 44,800 full-time jobs! But that was only a part of the story because the unemployment rate actually fell from 5.8% to 5.7% with part-time jobs up 58,300, so the overall employment gain for January was 16,300, when economists tipped 10,000.
Also as CommSec’s Craig James noted: “full-time job creation in the December quarter was the strongest in six years. So it was not unexpected that there would be some pull-back in full-time positions” in the following month.
But that’s not the end of the story, as James informed us that the numbers showed the “biggest lift in employable population in eight years!”
If you need more good news, then you should know that the hours worked were up 0.6% over the month to be 1.2% for the year. This is a measure that suggests more incomes being earned by households.
But there’s more good news with the working age population rising by 33,800 in January – the biggest lift in almost eight years. The working age population rose by 290,400 (1.5%) over the last year, which is the fastest growth in 32 months.
And by the way, rising populations are a positive omen for economic growth because when people go from not having work to getting a job, they spend more, which turns the wheels of the economy.
And while we’re on good news, let’s look at what you might be missing because the media invariably goes long bad news. Here goes:
- The IMF has upgraded the global economic outlook.
- China is growing faster than expected.
- Even Europe is growing faster than expected.
- The Reserve Bank sees the economy growing at 3% for the next two years and any number around that is good for job creation.
- The latest business survey from NAB showed business conditions went from 9.9 to 16.2 — a nine-year high and says doing business right now is a ripper! The long-term average is only 4.9!
- NAB’s business confidence reading went from 5.7 to 9.8, which is a three-year high. The long-term average is 5.8.
- Job advertisements rose by 4% in January to 167,164 ads – a five-year high. It was the strongest monthly rise in 2½ years. Job ads are up 7.1% on a year ago.
- The Westpac/Melbourne Institute survey of consumer sentiment rose by 2.3% in February to 99.6.
- Iron ore futures beat $US100 late last week and copper hit the highest price since May 2015, surging 4.6% to close at $US6090 a tonne. Copper is a great omen indicator for world growth and we sell this stuff!
- Australia posted a record trade surplus of $3,511 million in December, up from the $2,040 million surplus in November.
- Last quarter, CommSec estimated that the terms of trade (ratio of export prices to import prices) likely rose around 4.5%. The actual increase was 4.4%. Based on calculations, they expect that the terms of trade rose by around 12.2% in the December quarter — the biggest lift in incomes in over six years!
- The Bureau of Statistics (ABS) reported that new vehicle sales rose by 0.6% in January. Sales of SUVs (442,077) hit fresh record highs in annual terms, while annual sales of “other” vehicles stood at 250,630, just shy of record highs.
- In November, the number of passengers on the Sydney-Melbourne route was up by 4.2% on a year ago to a record 797,669. The Sydney-Melbourne route is also a key measure of business activity. On all domestic flights, passenger traffic rose 2.2% in November compared with a year ago.
- Retail did ease by 0.1% in December but is up 3% over the year. Non-food retailing fell by 0.5% in December but non-food retailing had risen by 2% in the prior four months. Non-food retail spending is up 3.1% on a year ago.
- New dwelling approvals fell by 1.2% in December but rose by 7.5% in November. It was the fourth decline in five months. In trend terms, approvals fell by 2.5% – the seventh straight decline. This isn’t great news but dwelling approvals have been really high and there are a lot projects in the pipeline, so they had to go off the boil with the RBA stressing about too much housing activity.
I could go on and I could find some bad news but even in areas of wage rises and lower-than-wanted business investment there are signs that these two trouble spots will become less troublesome over the year.
We have gone 101 quarters without a recession and with Trumpomania driving stock markets and the US President’s policies encouraging global talk of lower taxes, more government spending on infrastructure, less financial regulation and even our Prime Minister finding his mojo via a little bit of Trump inspiration, we will become the world’s greatest growers by some time this year.
That’s worth not being dismal about, isn’t it?
Thursday, February 16, 2017
European and US stock markets were up again overnight, and with reporting season here not spoiling the party and another rise for the Oz indices likely, the question has to be asked: Are we living in La La Land and what happens when the music stops?
And what could stop the music and all this joyous dancing with the devil? No, Donald Trump is not the devil but he could have a devil of a time getting his promises (that are driving markets now) through Congress.
That could stop the market’s merry melodies, which have key influencers of bourses around the world buying shares with their ears pinned back!
(Ryan Gosling and Emma Stone in a scene from La La Land. Source: AAP).
I could list Brexit-type geopolitical issues, such as the French and German elections (and they will be relevant this year). However, even with Grexit, the Italian referendum and the Syrian ongoing tragedy, stock markets resumed their march higher.
Well, certainly a surprise President Donald Trump sped up the rise of stocks with his outside-the-square policies. However, the seeds had been sown for improving US and Chinese economies. And even the Eurozone’s growth prospects are looking better than expected.
As The Guardian reported: “GDP rose by 0.5% in the last three months of 2016, new data shows, meaning that it grew faster last year than America.” And the jobless rate fell again to 9.6%. And in Germany, the number was a post-reunification low!
Meanwhile, in the home of La La Land, consumer confidence did dip there, but note this, it was from, wait for it, a 15-year high!
Personal consumption historically represents 70% of America’s GDP, so the economic outlook has to be positive. Meanwhile, when it comes to what company earnings are doing, nothing there is killing the optimism.
So the two most important E’s — earnings and the economy — are conspiring with Trumpomania to power up these higher share prices.
How long can share prices go higher after we started this climb out of the GFC crash in March 2009 eight years ago? Markets often struggle at the 10-year mark of a rising bull market.
AMP’s chief economist, Dr. Shane Oliver, has given La La Land lovers a pearl worth admiring.
“We are still a long way from the peak in the investment cycle. There is little sign of economic excess globally: underlying inflation is low; spare capacity remains; there is no sign of overinvestment; credit growth is modest; monetary conditions are not tight; share market valuations are okay; and investors are not euphoric.”
A strange promise from the US central bank boss is also helping optimism. This explains why European markets were up overnight. Have a look at this from CNBC: “European markets closed higher on Wednesday after Federal Reserve Chair Janet Yellen hinted at a possible rate hike next month. Janet Yellen said in prepared remarks Tuesday that waiting too long to raise interest rates would be ‘unwise,’ given the rise in inflation and economic growth.”
So in fact, stocks went up on comments that are less like La La Land and more like the normal world, where economic growth promises inflation, higher interest rates, profitable banks, higher wages and more jobs. All this combined encourages big and small businesses to invest and creates more growth and so on.
Of course, the stock market will find reasons to sell off and I know some smart fund managers who are now holding 50% cash in their funds. They’re hurting now but one day their bets will pay off.
However, that won’t mean curtains for this bull market. No, it will be another buying opportunity. Right now, the USA and the world believe the Trump dream. And if Congress plays ball and the worldwide economic improvement continues, which is consistently predicted right now, then La La Land just might pull off an economic and market Oscar for best picture!
And will Donald get best director?
Wednesday, February 15, 2017
We Aussies got some really good economic news but not one newspaper website gave it any headline prominence! However, despite the reluctance of the fourth estate to care about business conditions being at a nine-year high and business confidence being at the best level in three years, the better news on the economy is at least getting some media airing.
Yep, I have to be fair on my media buddies, because last Wednesday the AFR led with “RBA gets bullish on economy”, which actually made me keep that newspaper I got on my plane trip to Melbourne, ahead of the birth of my grandson, young Ted!
I saw it as a good omen but, as you know, I do stretch my neck to find reasons to be optimistic on Australia.
The positive headline in question followed the new Reserve Bank Governor, Dr. Philip Lowe, giving our economic outlook a pretty solid thumbs up. His effective message was to forget about talk of a technical recession after the negative quarter of economic growth in September, because the December quarter looks good.
(A technical recession requires two quarters of negative growth.)
Dr. Phil tipped we were in the 3% growth region for the next two years, which put him at odds with a Fairfax survey of 27 economists, who had average growth of only 2.4%. In fact, quite a few were much lower, which brought the average figure down.
Along with Treasury, six economists were in the 3% club and HSBC’s Paul Bloxham was at 3.4%. And after the business reading yesterday, he might come out as the champion economic guesser of the country in 2017.
Be that as it may, I like it when the RBA, the body with the most credibility for economic forecasting, agrees with my assessment that economic things look a lot better than the media is portraying it.
Sure, I’ve disagreed with the RBA on the state of the economy in the past and when they should cut rates. However, being occasionally wrong doesn’t mean you’re hopeless at forecasting. The RBA is a market-moving body because it has credibility and firepower.
Another important implication of Dr. Phil’s speech last week was that it said the economy is doing so well that it won’t need another interest rate cut. And this partly explains why the Oz dollar is testing the 77 US cents level.
And yesterday’s solid NAB business survey reinforces all these good tidings on the economy.
In case you missed it (and I suspect you did):
- Business conditions went from 9.9 points to 16.2 points — a nine-year high and says doing business right now is a ripper! The long-term average is only 4.9!
- Business confidence, which needs no explaining, went from 5.7 to 9.8, a three-year high and where the long-term average is 5.8.
Call me an economist but I reckon this is the kind of news every Australian should hear but especially those of us who invest in businesses and create jobs.
And if the media won’t tell it as regularly as it should, then the Prime Minister should appoint a Minister for Good News and he or she should be forcing the media to cover it!
Tuesday, February 14, 2017
Even a committed glass half-full guy like me is scratching his head at how optimistic the US stock market is about Donald Trump and his promised policies.
Two hours before the closing bell on Wall Street, the Dow was up 163 points (or 0.81%), taking the most-watched index in the world again to record highs! The more important S&P 500 index is also at best-ever levels, up 0.6%. And the same goes for the hi-tech Nasdaq index.*
I have to admit I like his smart three policies of a lower company tax rate, more infrastructure spending and better regulation of financial institutions rather than the post-GFC, excessive controls on US banks.
It’s worse in Europe, which explains why banks there haven’t turned around quickly. Their failure to repair has meant their role as lenders and growth-creators has been stymied.
Right now, US investors love the Trump tax train and they all want to be on board. And what the President comes up with will not only have advantages for US companies, it will put pressure on other countries to compete with lower tax rates as well.
Last night on my TV show, PwC’s Paul Abbey argued that a lower company tax rate would add to economic growth and ensure that we, as a country, don’t miss out on foreign capital, which we depend on as a population-small country.
It’s not because we’re profligate spenders (though I know a few who fit the bill!) that our overall savings levels leave us foreign loan dependent. It’s because we don't have the people, who then save heaps relative to our resources and opportunities.
Japan is people rich and relatively natural resource poor, so they bankroll countries like Australia, and the USA for that matter.
Yesterday, the likes of Bendigo and Adelaide Bank didn’t report as well as the market would’ve liked. One reason was because the bank borrows from overseas to make up for its lower number of customers, and savings and overseas interest rates are rising.
Economists talk about capital as though it has feelings and argue that it goes where it’s loved. The best way to attract this all-important ingredient for economic growth is to create an attractive company tax rate.
Our company tax rate is at 30% and right now it will take us 10 years to get to 25% while the Poms are at 20% heading towards 17%. The Irish have 12.5%! And Trumpland is trying to take its 35% rate to 20%, or even lower.
(To be more precise, in Australia, companies with an aggregated annual turnover below $2 million are taxed at 28.5%. Companies with an aggregated annual turnover of $2 million or above are generally taxed at 30%.
The government announced a reduction in the small business tax rate from 28.5% to 27.5% for the 2016–17 income year. The turnover threshold to qualify for the lower rate will start at $10 million and progressively rise until the 27.5% rate applies to all corporate tax entities, subject to the general company tax rate in the 2023–24 income year. The corporate tax rate will then be cut to 27% for the 2024–25 income year and by one percentage point in each subsequent year, until it reaches 25% for the 2026–27 income year.)
Helping to pay for the proposed tax cuts in the US will be taking away the import tax deduction that US companies enjoy right now, if Donald gets his way. It’s virtually a 20% tariff but it will make the likes of Apple think about making stuff and locating more at home.
This tariff talk might be harder to get through Congress than lower tax talk, so we have to see how this plays out. Right now, however, the excitement on Wall Street for stocks also would reflect foreign capital chasing companies set to benefit from the newfound love of President Trump.
This puts enormous pressure on other countries to compete with the US on tax and the Turnbull Government with its May Budget, which has to show it’s fighting the deficit and debt, while hopefully coming up with a company tax reduction plan better than the current one.
But what about local investors and their franking credits? If we, say, went to 25% in a short space of time, then those relying on franking credits to push up their dividends would have to re-plan their retirement income.
The only answer that could make them less concerned would be that capital inflow chasing a lower tax system will create profits and jobs, so the actual dividend would (in all likelihood) increase to offset the reduced Government-tax rebate that franking credits effectively are.
Right now, the market loves the challenges that Donald Trump is creating to exit the economic obstacles to investment and economic growth. This stock market love of Donald can’t go on forever. The U-turn will come if his policies are rejected by Congress. Provided they result in only small changes, it will only mean a pullback, which, in all likelihood, I will call a buying opportunity.
Apart from Trump love, I do like the rising prices of iron ore and copper, with the latter being a historic good omen for the world economy!
*Note: At the close, the Dow Jones was up 143 points or 0.7%, the S&P 500 index was up 0.5%, and the Nasdaq was up by 0.5%
Monday, February 13, 2017
Australia got some ordinary retail numbers in one of the best months of the year — the mostly pre-Christmas 31 days of December! Of course, not all retail did badly: clothing sellers are under pressure but takeaway food businesses are eating up nice profits.
In a great look at the rag trade, author Eli Greenblat wrote a neat piece in The Australian entitled: “Clothing unravels as retail stalls.”
I’ve been anticipating the ‘you know what’ was going to hit the fan for retailers and it’s laughable how unions and Labor can ignore the arguments against ridiculous penalty rates, when Sunday is no longer what it used to be.
In a world gone mad with double-worker families, childcare, Saturday sport for kids, dads ditching the golf clubs for early morning rides on bikes wearing lycra to be around for the family on the weekends (unlike many of their fathers) and the lure of buying online in a time-poor world, retailers who play an old game are on death row.
And it’s made a whole lot worse by the invasion of the European price-competitors such as Zara and H&M. Both the online and offline landscape screams at retailers to do something huge to get customers to love them but many just can’t cut it.
I know a bookshop that’s surviving but doesn’t accept American Express. It doesn’t have it and charge a surcharge; it just doesn’t accept the customer who wants to use an Amex card! When I don’t buy online, I like to go to bookshops. As I rummaged for my Visa card in another shop, the owners said: “We accept Amex and don’t charge a fee!” I’ll go back.
Eli pointed out that in recent months Pumpkin Patch, Payless Shoes, Howards Storage, David Lawrence, Marcs, Herringbone and Rhodes & Beckett are either going belly up or heading for administration, probably killing 5000 jobs simultaneously.
Post-Christmas businesses often go belly up after having a poor holiday sales period and carrying debt makes it worse, with consumers going on a temporary buying strike after going mad with their credit cards and splurging on their holidays.
But it’s more than that.
Matt Jensen, founder of menswear chain MJ Bale, says discounting has been big for months and consumers love it.
“Over the past few years, we’ve seen a lot of international brands — both online and offline — enter the market, all competing for what is essentially a finite amount of consumer spend,’’ Jensen told Eli.
He also made the point that clothing retailers now compete with food outlets because I think we’re addicted to coffee and smashed avocado or bacon eggs at trendy cafes!
Walk down King Street Newtown or Chapel Street Prahran and see the cafés loaded with people, trading off clothing sales for coffee, food and booze.
This is a dog-eat-dog retail world and the consumer is king but so many retailers treat them as stable hands and scullery maids!
They’re not helped by Labor and the unions, who don’t seem to care that they have less members or voters, as long as they represent the ones who are left.
Australians are used to a good lifestyle, with OK wages and great pay compared to the USA. For an American worker with health insurance coverage from his or her employer, the hourly rate is $US7.25. For a worker without medical coverage, the rate is $US8.25 an hour!
Competition is great for consumers. We can buy Uniqlo clothing for unbelievably low prices but it means local suppliers have to become more price competitive, workers have to be more efficient and/or receive less pay.
Having politicians with the guts to talk about penalty rates, the threat from overseas competition and what we have to do to ensure we create and keep jobs at reasonable pay scales is a public discussion we have to have.
Eli referred to Steve Kulmar, founder and analyst at consultancy RetailOasis, who said “the overseas retailers will force local players to lift their game, and those that fail to do so can quickly find themselves going out the back door.”
Recently I saw a Country Road store in Albert Park, Melbourne, that has a barista and café at one of the entrances — that’s innovative and the action has brought this free plug. On the other hand, I saw shops closed on Sunday that had products my wife wanted to buy. They had no apparent website or phone number to make sure they didn’t lose people like my wife.
These people are bad retailers and weak job creators but they’re not helped by a wage system that’s ignoring the Internet, global pay and job threats and foreigners who are beating down the door to win our consumers over.
Aldi, Costco, Zara, H&M, Topshop, Uniqlo and others, especially at the high end, are doing it already. What’s more worrying is that the greatest category-killing retailer of all-time — Amazon — is coming to Australia soon. That’s when it all will become even scarier for poor retailers and their staff.
When I saw the arrival of the Internet and then delighted in the wonders of online shopping, I wrote how it’s great news for consumers but a huge threat to wages and jobs.
Sure, retail jobs are disappearing while they are appearing in fulfillment at places like Australia Post, Startrack Express and FedEx. However, wage rates aren’t rising. For some, they’re falling.
Everybody has to get real and we need politicians who talk us into understanding the new world we live and work in. And retailers have to remember what marketing consultant Martin Grunstein always tells his clients: your marketing has to answer the question: “Why should I buy from you?”
Ironically, this is a question that both workers looking for a job and politicians looking for voters need to think about in this very different employment and business world we live in.
Friday, February 10, 2017
If our stock market rises today (and there’s a good chance it will, following Wall Street’s early lead), you can blame two very different key figures in our life — Donald Trump and Phil Lowe.
Phil who? Dr. Phil is the most important Dr. in Oz, as he’s the Governor of the Reserve Bank of Australia and replaced the former boss of the Big Bank — Glenn Stevens.
Philip Lowe. Source: AAP.
Overnight, President Trump surprised the stock market and political watchers by seemingly pushing tax reform ahead of killing Obama Care on his political timetable. And yes, the market liked it, with CNBC quickly pumping out stories, such as 25 companies that will benefit from a lower tax rate!
But in reality a lot more than 25 will benefit — most will. And even though the Trump rally since the November 8 election has been heavily based on the lower corporate tax talk, few CEOs or investors expected the President to move so quickly on this huge gift from Washington.
Lower company taxes go straight to the bottom line and justify higher share prices but economic theory says it encourages investment, job creation, income and production growth and then greater tax collections.
The oddity of lower tax rates leading to more tax collected was publicly argued by US economist Arthur Laffer ahead of Ronald Reagan winning the USA’s top job. Laffer’s premise was called Voodoo Economics by George Bush Snr., who actually became Reagan’s Vice-President, despite Ronnie’s support for Laffer’s work.
I met the well-known economist in Sydney a few years back when he was here to advise the Libs when Joe Hockey was Federal Treasurer.
Arthur still argues that lower taxes not only stimulate growth but deliver more tax to Government via a greater economic activity that delivers more income and then more tax collections. He also argues it decreases the ‘investment’ by businesses and high net worth people into tax dodging schemes — legal and illegal!
In case you’ve forgotten, “I think we can cut regulation by 75%, maybe more,” Mr. Trump said. And on the corporate income tax rate — currently 35% — he promised, “we're trying to get it down to anywhere from 15 to 20 percent.”
The speeding up of this explains why Wall Street liked the news overnight. However, with all things Trump, he had to go and slightly ruin it by mentioning his desire for a 20% import tax. Immediately, David Perdue (a Republican who used to be CEO of US-listed company, Dollar General) said of the tax or tariff idea that it’s "a regressive tax. It hammers low-income and middle-income people. It doesn't foster growth."
So into the taxing-Trump world enters the Clark Kentish Dr. Phil Lowe, who knocks up a speech overnight and The Australian comes up with a headline like this: “RBA chief Philip Lowe hurts Labor in company tax battle.”
The Turnbull Government wants to take the company tax rate down to 25% over time from the current 30% rate. With the USA looking at 15% and the UK already at 17%, as Dr. Phil told us: “…we need to make sure that our tax system is internationally competitive.”
On the other hand, he likes the “insurance” against GFC-threats of having a Budget Surplus, so his little talk told our politicians that we need to support a Budget that cuts spending and taxes while improving the budget bottom line.
How could this happen? Well, the Government and the Senate needs to accept excessive spending that could be cut back. And they need to get the tax rates down. Dr. Phil was messaging Treasurer Scott Morrison and the key Senators who could make or break the next Budget, which has to be a ripper. And the stock market’s reaction to it will be crucial.
Right now, Labor and the Greens are playing an old, caring game of talking up support for lower income Australians. However, the best way to help lower income Australians is by creating jobs.
Tax cuts are a good way to help everyone’s spending power and everyone’s chances of finding a job. I know it’s a gamble but in this new world with many countries we compete with bringing taxes down, can we really play an old tax game? I don’t think so.
In the late 1980s, then-Treasurer Paul Keating, said “even the galah at the local pet shop was talking microeconomic reform”. Well, now the galahs (not referencing Mr. Trump) and even sensible people, like Dr. Phil, are talking tax reform.
Thursday, February 09, 2017
Australia got itself a Prime Minister yesterday and it might mean that Cory Bernardi’s exit was the ‘rat in the rank’ Malcolm Turnbull had to have! However, I personally don’t want to go into the rights or wrongs of what the departed Senator has done. I only care about having a PM and a Government that’s good for the economy.
If we don’t get this double barrel necessity, we won’t get the business investment needed to power economic growth, which delivers the jobs and then income to get consumers to spend.
This then stimulates business to order new supplies, which creates more jobs and the vicious cycle of an economy weighed down by post-GFC anxiety gives way to a virtuous cycle of growth and positivity.
Paul Keating used to call it “going gangbusters” and that’s who Malcolm channelled yesterday in Parliament. And he can thank Opposition Leader, Bill Shorten, for helping him find his old self, which pre-PM was a combination of him being the smartest guy in the room and someone who found it hard to suffer fools gladly.
Given the way he ‘s looked lately, he must have found it hard to suffer his new Mr Nice Guy persona, who, at too many times, looked foolish and ineffectual to even Coalition supporters.
Last week, for purely economic reasons, I suggested he needed new advisers or advice because he was talking and listening to the wrong people. And the polls were warning him that it was curtains, unless change happened.
Well, yesterday, with Bill Shorten treating the PM like a dope on the ropes, giving it to him over his social welfare reforms and calling him “Mr Harbourside Mansion”, Malcolm got to his feet and put on a Prime Ministerial beating up not seen since John Howard and Paul Keating!
It was a good old-fashioned smack down, where it was so good that many watching would have forgotten what Bill was criticising the PM about.
PM Malcolm Turnbull during Question Time. Source: AAP.
He labelled Bill a “social climbing sycophant” to the Melbourne billionaire fraternity. “There was never a union leader in Melbourne that tucked his knees under more billionaires’ tables than the Leader of the Opposition — he lapped it up,” Mr Turnbull said.
He reminded everyone that Bill had supported company tax cuts in government and played ball with a company that made donations to his election, while at the same time cut a wage deal with that company, which didn’t look favourable to his members.
The rights or wrongs of Malcolm’s mauling is neither here nor there but it was more important to see a leader who excited his troops. If you missed it, check it out here, and this is the Malcolm Turnbull I’ve known for 40 years.
I know there were times when I’ve interviewed him, pre-PM, where he had a good grasp of economics, such that I picked an argument with him knowing that he wasn’t going to be a pushover.
I once saw him give it to a North Bondi Surf Club official, who was pressuring him for more political support. The dressing down he gave the guy, included a little note that he had personally donated $100,000 to the cause!
The Malcolm Turnbull I’ve seen was a shadow of his old self. The positivity he created for his team with his negativity toward Bill Shorten was what the Government needed in a week when they lost Senator Bernardi, who left as a ‘strong man’ fighting for old fashioned conservative values. I hope, on what I saw yesterday from the PM, he has awoken a sleeping giant!
Between now and the May Budget, the Turnbull Government has to rein in spending in some areas to create reasons and money to invest in infrastructure, which will create growth, jobs and improving material welfare.
The cuts and rearrangement of welfare payments are legitimate reasons for Mr Shorten to bag the Government but this tacky name-calling made Bill look strong and the PM look weak. This is a bad look for the Government members, the business leaders who need to invest in the Oz economy and the consumers/voters, who actually want to feel confident about their nation’s leader.
Malcolm has a long way to go but he does have two years. He will get those two years from his colleagues, if he stays on top of his game and on top of Bill Shorten.
Clearly the PM must come up with good decisions over that time but at least he hasn’t done a Sonny Liston, who, when fighting Cassius Clay (as he was known then) looked like he threw the fight. Malcolm has climbed off the canvas and now has to start throwing some knockout punches to the Opposition and knockout policies to bolster his polling as well as the nation’s confidence.
I really hope this new and improved Malcolm Turnbull is not a one-day wonder.
Wednesday, February 08, 2017
The economy is doing OK and is likely to get better over 2017, so ignore the doomsday merchants and get on board the Trump train, if you want young and older Aussies to get jobs. This isn’t the raving of a Trump-lover but the implied message from the Reserve Bank of Australia!
Yesterday, the RBA kept interest rates on hold and by using the central bankers term of keeping monetary policy on a “neutral stance” gave strong hints that first, interest rates are on hold for most of 2017 and second, when they do move, it’s more likely to be up rather than down.
Now I know sensible and sensitive human beings can’t stand the very existence of people like Donald Trump but economics has been tagged the dismal science and there are many reasons for it. One reason is that sometimes socially unacceptable policies can be OK economics.
A lot of what I say is summed up in the old cliché: “Good politics is bad economics and bad politics is good economics.”
Want an example? Try the GST. There were social implications, which compensation was used to offset, but it still had some negative social consequences but positive economic deliverables.
A tough crackdown on social welfare payments is another case in point.
So what did the RBA say that put it on the Trump train?
Of course, no one like the RBA Governor Phil Lowe would ever say Donald Trump is good for the Aussie economy but you can easily see he sees merit in the US President’s policies of lower taxes and more infrastructure spending and how it could help both US and global economic growth.
As an economist, Phil might know less banking regulations will lead to more lending and more economic growth, though as a central banker it could worry him, a little.
(Philip Lowe. Source: AAP)
This was CommSec’s chief economist Craig James' view on the RBA’s position on things economic: “Importantly though, the Reserve Bank remains positive,” he wrote. “The global economy has “improved”; domestic economic growth is forecast around 3 per cent; and headline inflation is tipped to lift to over 2 per cent in 2017. So while the Reserve Bank is sticking with its “neutral stance”, it clearly won’t be cutting rates anytime soon.”
In case you missed it, the Big Bank left the cash rate at 1.50%. The previous rate cut was in August 2016 (25 basis points). There have now been 12 rate cuts since November 2011, cutting rates from 4.75% to 1.50%.
James’ interpretation of the RBA’s statement got down to this: ”If the Reserve Bank was to change rates in coming months, the trigger is more likely to emerge from overseas, probably a development from policies adopted by the new US Government,” James concluded. “For instance, stimulatory policies could serve to lift the US, and the broader global economy, in turn boosting inflation. In that event, rate hikes would be more likely in Australia than rate cuts.”
Of course, Phil is never going to say “we’re on the Trump train” but he did put this out: “Conditions in the global economy have improved over recent months.” That’s the best you can expect from a central banker but when you think about “recent months”, you can’t do that without thinking Trump!
Phil has then focused on the Oz economy and this is what he said: “In Australia, the economy is continuing its transition following the end of the mining investment boom. GDP was weaker than expected in the September quarter, largely reflecting temporary factors. A return to reasonable growth is expected in the December quarter.
“The Bank's central scenario remains for economic growth to be around 3 per cent over the next couple of years. Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end. Consumption growth is expected to pick up from recent outcomes, but to remain moderate. Some further pick-up in non-mining business investment is also expected.”
I hope our most august economics outfit (the RB) is right on the economy, as 3% growth is great for job creation. And if we have to accept some annoying aspect of Donald Trump to get Aussies into work and a better life, then I can accept some slightly unpalatable politics for good economic and then social consequences.
The best way to improve the life of an unemployed Australian is to give them a job!