Speaker 1: This is Business Now with Edward Boyd.
Speaker 2: Hi and welcome of Business Now. Thanks for your company today.
Speaker 2: I'm Edward Boyd coming up on the program. As we
Speaker 2: start the new financial year, Australian consumers appear to have
Speaker 2: turned the corner house sold incomes are growing, the Reserve
Speaker 2: Bank is cutting rates, and inflation is starting to be
Speaker 2: under control.
Speaker 1: Now.
Speaker 2: This is all great news for retailers which have been
Speaker 2: under serious financial pressure. Goohant fall for a morning Start
Speaker 2: is up shortly. One major concern for both businesses and
Speaker 2: consumers is the rising cost of electricity. Large energy users
Speaker 2: who buy power on the volatile spot market now have
Speaker 2: the option to purchase morning and evening peak futures contracts
Speaker 2: on the A six. It all sounds pretty complicated, and
Speaker 2: to explain it, we have Giles Wolgenwitz, the head of
Speaker 2: energy markets at ERM Energetics. A little later in the show,
Speaker 2: plus billionaire Elon Musk has pledged to start his own
Speaker 2: political party if US President Donald Trump's Big Beautiful bill
Speaker 2: legislation passes. Congress will have an update on that for
Speaker 2: you as well. That's all coming up on today's show.
Speaker 2: Other stories today you should know about the new financial
Speaker 2: year began today and with it a range of changes
Speaker 2: affecting Australians. The minimum wage has increased by three and
Speaker 2: a half percent, bringing the hourly rate for Australia's lowest
Speaker 2: paid workers to twenty four dollars ninety five. The minimum
Speaker 2: amount employers must contribute in super has also risen from
Speaker 2: eleven and a half percent up to twelve percent. The
Speaker 2: amount of paid parental leave available for families has increased
Speaker 2: to twenty four weeks and it will increase again next
Speaker 2: year to twenty six weeks. The pension rate will not increase,
Speaker 2: but the way its measured will, which will allow thousands
Speaker 2: of Australians to receive more in benefits and bigger payments.
Speaker 2: There are also changes to road rules, NDIS pricing, Center
Speaker 2: link index, action power prices, and rebates for installing batteries
Speaker 2: in your home. Here's the Prime Minister Anthony Alberizi speaking
Speaker 2: this morning to Peter Stefanovic.
Speaker 3: Today is an important day for the government's priorities, which
Speaker 3: are July one delivering increased cost of living relief just
Speaker 3: as we said we would so today an extra two
Speaker 3: weeks pay perenal leaf super paid on pay perenal leaf
Speaker 3: for the first time, paid prack for people undertaking to
Speaker 3: be a teacher or a nurse or a social worker
Speaker 3: for the first time, making a difference. Importantly, a three
Speaker 3: point five percent wage increase for three million Australian workers
Speaker 3: who need that, people on the minimum wage, people on
Speaker 3: awards that will make an enormous difference to them, as
Speaker 3: well as measures kicking in such as ten thousand dollars
Speaker 3: for construction apprentices, the thirty percent reb eight on batteries
Speaker 3: for people who have solar panels on their roofs to
Speaker 3: make sure they get lower energy bills permanently, as well as,
Speaker 3: of course, the one hundred and fifty dollars rebates all
Speaker 3: of these kicks in today, as well as for small
Speaker 3: businesses the twenty thousand dollars into an asset ride off.
Speaker 2: Australian Council of Trade Union Secretary Sally McManus believes Labour's
Speaker 2: proposed superanuation tax changes should be indexed in the future
Speaker 2: to reduce the number of people caught up paying the tax.
Speaker 2: Labours proposing higher taxes on Australians with a superranuation balance
Speaker 2: of three million dollars or more. The tax on earnings
Speaker 2: above three million is proposed to increase from fifteen percent
Speaker 2: to thirty percent, and an unrealized capital gains tax would
Speaker 2: apply as well. Modeling from the Financial Services Council is
Speaker 2: shown that under four separate scenarios, anywhere from five hundred
Speaker 2: thousand to one point eight million Australians could end up
Speaker 2: paying more in taxes by the time they retire now.
Speaker 2: The government is expected to introduce this legislation when Parliament
Speaker 2: resumes later this month. ACTU Secretary Sally McManus believes the
Speaker 2: three million dollars superannuation balance should be indexed to inflation
Speaker 2: in the future over time.
Speaker 1: I do think it's got to be indexed, and because
Speaker 1: you've got to make sure eventually people don't end up there,
Speaker 1: but that's a very long time in the future. I
Speaker 1: think that asking you know, those people not to get
Speaker 1: you know, super isn't there to be a tax fraud.
Speaker 1: It's said to make sure you've got a dignified retirement.
Speaker 2: National property prices surge to a new peak during June,
Speaker 2: lifting zero point four percent. Prices are now four point
Speaker 2: six percent higher than they were a year ago. The
Speaker 2: median value of a property in Australia is now eight
Speaker 2: hundred and twenty one thousand dollars. The latest home price
Speaker 2: index report from prop Track shows capital city markets performed
Speaker 2: better than regional areas. Sydney prices lifted half a percent
Speaker 2: during the month. The median value of a home in
Speaker 2: Sydney is now one point one eight two million dollars.
Speaker 2: Brisbane lifted zero point six percent to nine hundred and
Speaker 2: eight thousand, and Adelaide prices were also up point six
Speaker 2: percent to eight hundred and thirty seven thousand. Camber and
Speaker 2: Perth prices both jumped zero point three percent to eight
Speaker 2: hundred and thirty six thousand. Melbourne is now the sixth
Speaker 2: ranked capital city in Australia. Prices increased point three percent
Speaker 2: to eight hundred and eighteen thousand, Hobart was up half
Speaker 2: a percent to six hundred and fifty six thousand, and
Speaker 2: Darwin lifted zero point two percent to five hundred and
Speaker 2: twenty five thousand. Prop Track says market momentum's building amid
Speaker 2: renewed by a confidence and improved sentiment thanks to falling
Speaker 2: interest rates and expectation of another rate cut next week. Well,
Speaker 2: let's see how the stock market finished up today. The
Speaker 2: local market it opened high this morning, up point four percent.
Speaker 2: Most sectors were in the green. Telcos in industrials were
Speaker 2: sold off and the market did fall at the end
Speaker 2: of the day. It finished the day down just one point.
Speaker 2: Medicine maker Mesa Blast was the top performer after it
Speaker 2: cleared another regulatory hurdle for one of its products in
Speaker 2: the United States, IDP Education. It jumped after State Street
Speaker 2: Global Advisors increased its stake in the business to nine
Speaker 2: point four percent. Litigation funder Omnibridgeway was up as well.
Speaker 2: Takeover target Insignia Financial said it's still working through the
Speaker 2: proposal with CC Capital, so it lifted five point two
Speaker 2: three percent, and gold miner Resolute jumped after Mitsubishi UFJ
Speaker 2: bought a five percent stake in the company. Pathology provider
Speaker 2: Helius was sold off. Rare Earth's minor Linus was down two.
Speaker 2: Pharmaceuticals business Klinnievel was the worst performing health stock. Five
Speaker 2: er cement supplier James Hardy it dropped quite a bit
Speaker 2: as well, and the engineering specialist Walley slumped about one
Speaker 2: point seventy five percent well. The near term outlook for
Speaker 2: Australian retail sector is becoming more positive thanks to growing
Speaker 2: household incomes, RBA rate cuts and inflation staying within the
Speaker 2: target band. At the same time, the imp ployment markets
Speaker 2: in pretty good shape and your wage growth increases are moderating.
Speaker 2: So for more on this, I'm joined by morning Stars
Speaker 2: director of equity Research, Go Hands for Go Hands. Thanks
Speaker 2: for your time. We sort of said a little in
Speaker 2: the intro, but why is the outlook getting a bit
Speaker 2: better for the retail sector which has been under so
Speaker 2: much pressure for so long.
Speaker 4: I think just the things you just mentioned are critical.
Speaker 4: So the cost of living crisis that we saw the
Speaker 4: last two years, we think that is over now for
Speaker 4: most Australians because real incomes are going up again. We
Speaker 4: haven't seen that in a while, so consumers are feeling better.
Speaker 4: The consumer sentiment we expect it's going to lift over
Speaker 4: the years, so that's going to really help discretionary spending.
Speaker 4: And you also mentioned inflation's back down. It looks like
Speaker 4: it's going to stay down, so we're not going to
Speaker 4: get high high increases in prices really chewing into those
Speaker 4: household incomes in more. So, all up, I think they'll
Speaker 4: look for the retails are really good in general.
Speaker 2: Yes, So Australians saving a little more money cash rates.
Speaker 2: Cash rate is falling, they're getting a bit more cash
Speaker 2: there instead of spending it just on needs, and now
Speaker 2: they's going to discretionary retail and spending on things that
Speaker 2: they actually want to buy exactly.
Speaker 4: So that's what we're really expecting, is that instead of
Speaker 4: buying needs now they can actually spend unloice the house
Speaker 4: and they'll really help the discretionary categories that have really
Speaker 4: been struggling in the last few years. Furniture is a
Speaker 4: big one that's been struggling hard, where sales have also
Speaker 4: struggled in the last little while. So we see those
Speaker 4: those categories really benefiting from what lies ahead. And who knows,
Speaker 4: if IRBA cuts as much as the market is predicting,
Speaker 4: that might even further boost spending.
Speaker 2: Yeah, well we could get a cut next week hopefully,
Speaker 2: but the retail sales figures for the month of May
Speaker 2: come out tomorrow. Just broadly, how has re TELL spending
Speaker 2: been tracking this year.
Speaker 4: So as far this year it's been a bit better
Speaker 4: than last year in terms of growth. So last year
Speaker 4: was really the trough if you think about the entire sector,
Speaker 4: very very slow growth. This year was a bit better.
Speaker 4: The reason being, even though we had all those task
Speaker 4: cuts and we had wages going up quite a bit
Speaker 4: ahead of inflation, people started saving more. So when we
Speaker 4: had that living cost of living crisis, people really started
Speaker 4: expending their nest eggs to keep their living standards up.
Speaker 4: And now where they're seeing a bit more income or
Speaker 4: had seen a bit more income come through, they started
Speaker 4: saving more, which is quite natural. But now the saving
Speaker 4: strait is kind of where you'd expect it to be
Speaker 4: over the longer term, so that's no longer going to
Speaker 4: be a headwind. So I think the additional money that
Speaker 4: households now have, they'll be able to spend that, and
Speaker 4: they'll be spending that on discretionary things.
Speaker 2: Today's July one, it means we just spoke about the
Speaker 2: increase in the minimum wage to twenty four dollars ninety five.
Speaker 2: Obviously a big cost for retails and the superannuation guarantee.
Speaker 2: But are they going to be able to manage those
Speaker 2: costs a bit easier this year than in previous years.
Speaker 4: Yeah. I think that's a really good point you make.
Speaker 4: So previously, in previous years that had been difficult because
Speaker 4: sales growth had been weak. For quite a few retailers,
Speaker 4: and less so than the 'ptick that we saw on wages,
Speaker 4: which means they're really getting squeezed. The margins are getting squeezed.
Speaker 4: They have to find efficiencies or costs evens elsewhere to
Speaker 4: protect their profits. Whereas this year where we're forecasting is
Speaker 4: somewhat you know, if you add on the supernovation hiak
Speaker 4: and you're around about the four percent mark in terms
Speaker 4: of alley wages going up. We think that hopefully retailing
Speaker 4: growth will be at a similar level, so you won't
Speaker 4: get that margin crunch this year.
Speaker 2: When you look at some stocks on the A six
Speaker 2: two hundred, are there any that stand out for you
Speaker 2: that could do pretty well in the retail market.
Speaker 4: Yeah. I think that some some stocks where they are
Speaker 4: highly depending on discretion and spending, like Collins Foods, I'm
Speaker 4: the KFC franchise, the KFC's franchise, or even Dominoes in
Speaker 4: Australia might benefit quite a bit. Another stock that we
Speaker 4: think that could benefit is Colgan, and that's that's a
Speaker 4: stock that's really well placed in a in a in
Speaker 4: an online channel that's outgrowing all the brick and mortar.
Speaker 2: What about you mentioned hardware. What about the likes of
Speaker 2: and white goods retails. I guess JP, High five, West, Farmers,
Speaker 2: Harving Norman.
Speaker 4: They're definitely going to benefit from that from that move, and.
Speaker 2: Their share prices look a little expensive though.
Speaker 4: That's the thing, So is it priced in an art
Speaker 4: That's where all will's done, back to valiation, and we
Speaker 4: would say that the market has already priced that into
Speaker 4: the into share prices, So we don't see much opportunity
Speaker 4: in those names now.
Speaker 2: If the RBA does cut rates next week and potentially
Speaker 2: a few more cuts within the next twelve months, I mean,
Speaker 2: what's that going to potentially do to retail spending in
Speaker 2: the second done.
Speaker 4: As a or as we discussed earlier. I think that's
Speaker 4: gonna be good for sentiment. If anything, it's gonna alleviate
Speaker 4: those those mortgage payments, right, They're going to get less,
Speaker 4: so there's more money to spend elsewhere. Again, I'll go
Speaker 4: into discretion of spending. That's our opinion.
Speaker 2: And then the online sector and Amazon, how much more
Speaker 2: can that company grow here?
Speaker 4: It can grow quite a bit more so this year
Speaker 4: we think they've grown by over twenty percent. We think
Speaker 4: that they're going to keep on growing strongly in Australia,
Speaker 4: but the whole channel's growing strongly as well, so there's
Speaker 4: enough space for other players like jab Hifel, like other
Speaker 4: omni channel players, but also like pure players.
Speaker 2: Heart thanks much you time, appreciate it so much.
Speaker 4: Well.
Speaker 2: After clearing a key hurdle over the weekend, it's crunch
Speaker 2: time for President Donald Trump's massive tax and spending bill,
Speaker 2: as Republicans work to meet the president's July fourth line.
Speaker 2: Karon Kaifer reports from the White House.
Speaker 5: It will be a marathon in the timeframe of a
Speaker 5: sprint on Capitol Hill this week. After Senate Republicans worked
Speaker 5: through the weekend and inched a head on this megabill
Speaker 5: that includes many of President Trump's domestic policy priorities. Still
Speaker 5: there is work to be done. A weekend Senate vote
Speaker 5: was a vote to move ahead with the bill. The
Speaker 5: GOP saw just two defections, a no vote from Senator
Speaker 5: Ran Paul of Kentucky, who objects to how much the
Speaker 5: legislation will add to the federal debt, and another from
Speaker 5: Senator Tom Tillis of North Carolina, who objects the depth
Speaker 5: of the cuts to Medicaid. After President Trump lashed out
Speaker 5: on Tillis at social media the North Carolina Republicans said
Speaker 5: he won't run for reelection next year, hinting he'll also
Speaker 5: be a no on final passage. A scoring by the
Speaker 5: nonpartisan Congressional Budget Office underscored the concerns of both flanks
Speaker 5: of Republicans who have expressed doubt about the bill, and
Speaker 5: how challenging it may be to reconcile them. The CBO
Speaker 5: said the Senate version of the bill will add three
Speaker 5: point three trillion dollars to the federal deficit over the
Speaker 5: next decade, more than the House version and drawing the
Speaker 5: attention of fiscal conservatives and for moderate's concerned about cuts
Speaker 5: to Medicaid. The CBO estimated nearly twelve million more Americans
Speaker 5: will be uninsured by twenty thirty four, again more than
Speaker 5: the House version. On Monday morning, the Senate kicked off
Speaker 5: what's known as a vote rama, a marathon voting session
Speaker 5: where senators can offer as many amendments as they want
Speaker 5: to vote on before a final vote on the bill.
Speaker 5: And after a final vote, the Senate approved version still
Speaker 5: needs to go back to the House for a final vote.
Speaker 5: Remember that that July fourth deadline was imposed by the President,
Speaker 5: so there's no real pressing need for it to be
Speaker 5: met other than the president's insistence.
Speaker 2: After the break, energy market consultants ERM will join us
Speaker 2: to explain why large scale pal uses to become complacent
Speaker 2: about managing their energy costs and what they can do
Speaker 2: to fix it.
Speaker 4: Welcome back.
Speaker 2: The rising cost of energy has been a major pain
Speaker 2: point for all businesses across Australia. The biggest energy users
Speaker 2: often lock in long term contracts, paying a fixed price
Speaker 2: for electricity and gas over a certain period, but other
Speaker 2: businesses buy energy on the volatile spot market, which can
Speaker 2: sometimes result in cheap prices. But you can also pay
Speaker 2: through the nose. Joining me now is Giles Woganwitz, the
Speaker 2: head of Energy Markets at ERM Energetics. Giles, thanks for your.
Speaker 4: Time, Thank you for having look.
Speaker 2: Let's start with the state of our energy market right
Speaker 2: now in Australia. How unreliable is it when it comes
Speaker 2: to power generation and pricing?
Speaker 6: Well, we have an aging fleet of call fimbile sessions.
Speaker 6: I've aout sixty percent of old called fleet is more
Speaker 6: than forty years age. That means sometimes unreliable boilers and
Speaker 6: with leakage that means that we have more often than
Speaker 6: expected plantages, and we do have as well as a
Speaker 6: compounding effect if you want, we do have the predictability
Speaker 6: of weather and therefore wind generation, win power generation and
Speaker 6: solar power generation. Like today we probably can.
Speaker 2: Expect victually no SOUL on the East coast with all
Speaker 2: the rain.
Speaker 6: But that's not about weather today. This is more about
Speaker 6: them pretty duty of supply, and as you can expect
Speaker 6: when you have unpreadable supply of power and the demand
Speaker 6: is there, well, it means that the merritor oc curved.
Speaker 6: The dispatch of paces is quite unpredictable. The market to
Speaker 6: perwa is doing his maximum to obviously dispatch the lowest
Speaker 6: cost power generators more often than not. Nowadays we have
Speaker 6: extremely picky days and with extremely high prices. So typically
Speaker 6: in the middle of the day when it's a sunny day,
Speaker 6: we may have negative paces. At the end of the
Speaker 6: afternoon we may have prices at multiples of tens of
Speaker 6: thousands of mega what hours, so extremely relative paces.
Speaker 2: Yeah, we've actually interviewed a business owner runs a foundry
Speaker 2: with a blot with a blast furnace basically and here
Speaker 2: only turns it on when electricity prices are very low
Speaker 2: and the rest of the time he doesn't operate his
Speaker 2: business at all. But is there a better way to
Speaker 2: manage your electricity costs than just being on the spot
Speaker 2: market like that?
Speaker 6: So obviously this is an extreme example where this specific
Speaker 6: business has the ability to flexible its demand and to
Speaker 6: adjust the demand to the pace. Most of businesses in
Speaker 6: Australia do not have this leisure. They have a manufacturing
Speaker 6: plant and the production costs is significance. They can't just
Speaker 6: shut down and bringing one back home or in some
Speaker 6: property building, they can't just switch of the air conditioning
Speaker 6: and lighting, and so the alternative option is to mimic
Speaker 6: basically what twcty retailers are doing, which is you hedge
Speaker 6: your position by buying financial products or by buying out
Speaker 6: financial products on Osian Sook exchange for example. What you
Speaker 6: do you receive this spot pace and that's offset the
Speaker 6: exposure you do have on the spot pace, and therefore
Speaker 6: you end up paying just the price of this funcial.
Speaker 6: And what we've been seeing over time is those products
Speaker 6: have not been adapting sufficiently quickly to the new market
Speaker 6: conditions we are facing. But that's an antility. Way is
Speaker 6: to either contact with a were Donna or market participate.
Speaker 6: You participate yourself to the market and you hedge your
Speaker 6: position by buying those datative instruments, these financial products.
Speaker 2: Yeah, the ASX Energy Exchange, I believe there was a
Speaker 2: new contract that started yesterday on June thirty. That's so
Speaker 2: this is this is quite a new thing.
Speaker 4: It is.
Speaker 6: It is usually in the all days we used to
Speaker 6: buy just if you want a base block of those
Speaker 6: contracts basically twenty four hours as a certain quantity of
Speaker 6: volume that would match your manufacturing plans, so you would
Speaker 6: completely upset your spots exposure. But you can understand that
Speaker 6: Novaday is there are more and more businesses that have
Speaker 6: a launch manufacturing wolf toop capacity. They build a solar
Speaker 6: system at the top of this manufacturing plant, so then
Speaker 6: the load that are importing for the grid now, rather
Speaker 6: than being flat, is actually dented. So when you have
Speaker 6: a shape now that is then died in the day
Speaker 6: following the solar shape, you have a sort of a
Speaker 6: bustub and this bustub shape doesn't match well with the
Speaker 6: base block that you're buying. So that's why those specific
Speaker 6: businesses they may be better off than buying these evening
Speaker 6: pick products or morning pick products to really target the
Speaker 6: type of financial products that are paying for and hedging
Speaker 6: the risks on these shoulden periods because in the middle
Speaker 6: of the day they will have cheap pies anyway from
Speaker 6: their solar systems.
Speaker 2: And fasting going forward to twenty thirty, what might the
Speaker 2: power grid look like.
Speaker 6: By then, well, what is expected by then we will
Speaker 6: have a higher petuation of solar. We already have a
Speaker 6: very high You probably know a third of the horseholds
Speaker 6: in Australia have solar systems on we have an extra
Speaker 6: but ten percent of energy comes from yaslas on our farms.
Speaker 6: And then we have we need more wind generation as well,
Speaker 6: and then you can guess with that all of this
Speaker 6: extremely intermittent, extremely weather sensitive, so we need to add
Speaker 6: a lot of storage to be able to manage that.
Speaker 6: And when I say a lot of storage is because
Speaker 6: we have a net demand that is dequasing every day
Speaker 6: and that's really unmanageable by the market to perverto into
Speaker 6: more frequency of voltage. So we need to shift some
Speaker 6: of this sot of energy in the middle of the
Speaker 6: day that is in excess later in the afternoon.
Speaker 2: Charles, welcome, Thanks so much for your time. Appreciate it.
Speaker 6: Thank you.
Speaker 2: To finish up today. Elon Musk has threatened to start
Speaker 2: his own political party and topple the Republican Senators who
Speaker 2: are voting in favor of US President Donald Trump's Big
Speaker 2: Beautiful bill. The world's richest man's clearly unhappy with Trump's
Speaker 2: Cornerstone legislation, which will cut taxes but also increase the
Speaker 2: country's deficit by about three point three true US dollars.
Speaker 2: Musk wrote on x formerly known as Twitter, every member
Speaker 2: of Congress who campaigned on reducing government spending and then
Speaker 2: immediately voted for the biggest debt increase in history should
Speaker 2: hang their head in shame, and they will lose their
Speaker 2: primary next year if it's the last thing I do
Speaker 2: on this earth. He also said America needs a new
Speaker 2: political party. Trump clearly saw the posts because he hit
Speaker 2: back on his own platform, truth Social saying the Department
Speaker 2: of Government Efficiency should start cutting the subsidies for Musks
Speaker 2: businesses like Tesla and SpaceX. Elon may get more subsidy
Speaker 2: than any human being in history by far, and without subsidies,
Speaker 2: Elon would probably have to close up shop and head
Speaker 2: back home to South Africa. No more rocket launchers, satellites
Speaker 2: or electric car production, and our country would save a fortune.
Speaker 2: Perhaps we should have Doge take a good hard look
Speaker 2: at this big money to be saved. That's all for
Speaker 2: today's show. Thanks to your company.
Speaker 4: We'll see tomorrow