Speaker 1: This is Business Now with Edward Boyd.
Speaker 2: Hi, I'm welcome to Business Now. Thanks for your company.
Speaker 2: I'm Edward Boyd. Coming up on the program, Global markets
Speaker 2: rebound and oil prices plunge after US President Donald Trump
Speaker 2: announced a ceasefire between Israel and Iran. We'll cover the
Speaker 2: relief rally with Matt Sherwood from Perpetual and talk implications
Speaker 2: for global shipping with Tom Jensen from the Freight and
Speaker 2: Trade Alliance. Airline Virgin Australia relisted on the ASX this afternoon,
Speaker 2: more than five years after being placed into voluntary administration.
Speaker 2: Today's listing was a chance for majority owner Bank Capital
Speaker 2: to sell down a.
Speaker 3: Portion of at stake.
Speaker 2: Plus there's also been the New South Wales and Queensland
Speaker 2: state budgets today, with both treasurers focusing on hows our
Speaker 2: political reporters are standing by. That's all coming up on
Speaker 2: today's show. Let's get straight into the state budgets. The
Speaker 2: New South Wales Shadow Treasurer says tech billionaires and filmmakers
Speaker 2: are the winners of this year's state budget in New
Speaker 2: South Wales, which was light on new cost of living relief.
Speaker 2: New South Wales political reporter Julia Bradley has the breakdown.
Speaker 3: Julia, what are the big highlights?
Speaker 4: And it was absolutely a back to basics budget this
Speaker 4: time around for Daniel Mookie his third budget. There were
Speaker 4: some centerpiece policies though announcements we have seen. Housing really
Speaker 4: takes center stage here and also child protection. So on housing,
Speaker 4: the government has unveiled a guarranteall scheme. Essentially they're wanting
Speaker 4: to put up or offering to put up a billion
Speaker 4: dollars to help get a construction of new apartment blocks
Speaker 4: up off the ground in New South Wales, so developers
Speaker 4: don't need to get that fifty percent to eighty percent
Speaker 4: guarantee upfront during free sales. Instead the government is opting
Speaker 4: to cover up to fifty percent of that. So this
Speaker 4: means that we could see five thousand dwellings supported and
Speaker 4: even more in the years to come. So a five
Speaker 4: year period this would run four. Now the other big announcement,
Speaker 4: as I said, child protection a record more than one
Speaker 4: billion dollars spend and this is going to support increasing
Speaker 4: payments for foster carers, also new government owned care homes
Speaker 4: and also delivering pay rises for caseworkers. But as I said,
Speaker 4: and as you said, before light on cost of living handouts.
Speaker 4: As a treasurer about this today.
Speaker 5: The government is yet to make his final decisions on
Speaker 5: what happens with the toll cap. Is the first point
Speaker 5: i'm back, and the second point I make is that
Speaker 5: there is record levels of cost of living relief in
Speaker 5: our first two budgets that continue with this one. Initiatives
Speaker 5: like our Bulk Billing GP initiative goes on the energy
Speaker 5: support that we're partnering with the federal government to deliver
Speaker 5: is rolling out. And on top of that, we are
Speaker 5: offering additional rebates for pensioners and low income households when
Speaker 5: it comes to their water bills. But you're quite right
Speaker 5: to say we need to pair relief with.
Speaker 1: Reform winners, tech billionaires, Hollywood studios. They're winners, but the
Speaker 1: losers are families and communities.
Speaker 4: Well, the budget is still in the red. There are
Speaker 4: some bride sparks. The Treasurer of forecasting a return to
Speaker 4: surplus come twenty twenty seven. The deficit this year three
Speaker 4: point four billion dollars. We've still got some juicy revenue
Speaker 4: streams payroll tax up, stamp duty up as well. Now
Speaker 4: there will be some difficulties in getting that return to surplus.
Speaker 4: The Treasurer definitely admits that both domestic but also global pressures.
Speaker 4: Of course, we've been talking about those US tariffs, but
Speaker 4: here interesting to note just how much recovery payments have
Speaker 4: gone up for natural disasters, one thousand times more expensive
Speaker 4: than that was sixty year ago.
Speaker 3: Man, great, thank you, Julia. Let's go to Queensland now.
Speaker 2: The Treasurer of David Janetski has tried to deliver on
Speaker 2: major infrastructure requirements for the state while managing debt and
Speaker 2: assisting with cost of living pressures. State political reporter Harry
Speaker 2: Clark joins us at the end of a big day
Speaker 2: at Parliament House. Harry, how's the Queensland by the balance
Speaker 2: sheet looking.
Speaker 3: Today?
Speaker 6: Ed well, Queensland's books will remain in debt and deficit
Speaker 6: for the next four years, but Treacher with David Ganetski
Speaker 6: says it's an improved state of affairs from the midyear
Speaker 6: outlook and what would have been under the former Labor
Speaker 6: government in his first budget, he said, here has tried
Speaker 6: to address cost of living measures for Queensland while providing
Speaker 6: infrastructure for the growing state and also bring down debt
Speaker 6: which has been ballooning over recent years. I'll take you
Speaker 6: straight to some of the numbers. The operating deficit eight
Speaker 6: point six billion dollars that's for the next financial year,
Speaker 6: and the debt reaching one hundred and forty seven billion
Speaker 6: dollars in January. In the midyear Financial Economic Outlook, which
Speaker 6: Treasurer David Jenski called Labour's last budget, he the deficit
Speaker 6: was projected to reach nine point one billion dollars by
Speaker 6: twenty seven twenty eight, but that's been reduced to four
Speaker 6: point three billion dollars in today's budget and will come
Speaker 6: down to one point one billion by the end of
Speaker 6: the new forward estimates.
Speaker 3: State dead state debt in the.
Speaker 6: Midyear Budget Outlook was growing to two hundred and seventeen
Speaker 6: billion dollars in twenty seven twenty eight, but will now
Speaker 6: reach less than that one hundred and ninety that year
Speaker 6: and two hundred and five billion dollars in twenty eight
Speaker 6: twenty nine. Here is the Treasurer are bringing a bit
Speaker 6: of interstate rivalry when it comes to fiscal management.
Speaker 7: Harry on the debt figure under MYIFA at to eighteen
Speaker 7: to eighteen that's where we started. The highest debt per capita,
Speaker 7: higher than Victoria. Those budget improvements that we brought forward
Speaker 7: today twenty seven billion dollars worth of budget improvements. We've
Speaker 7: now got the debt per capita under Victoria, so we're
Speaker 7: not the worst in the country. We've brought those in
Speaker 7: movements to bear here today and it has laid the foundation.
Speaker 2: Thanks Harry Clarke. There, let's move on to our next story.
Speaker 2: Australia's second largest airline, Version Australia, really sit on the
Speaker 2: stock market this afternoon, more than five years after it
Speaker 2: was placed into voluntary administration. Bain Capital bought the airline
Speaker 2: in twenty twenty for about seven hundred million dollars and
Speaker 2: have spent years preparing the.
Speaker 3: Business for today's IPO.
Speaker 2: Now it allowed Baying to sell down about thirty percent
Speaker 2: of the shares in Virgin, raising six hundred and eighty
Speaker 2: five million dollars for the investment giant.
Speaker 8: The IPO. What it really does for us is it
Speaker 8: allows a transition of shareholders, right and so as you know,
Speaker 8: since we're not raising primary money, it's not about sort
Speaker 8: of having enough money to invest in fleet or other growth.
Speaker 8: We already have enough money. Honestly, we're bringing in sixteen
Speaker 8: planes next year. We already have all that financed and
Speaker 8: so we're not sure at a capital which is great.
Speaker 8: I think what it does is it transitioned us to
Speaker 8: a new set of long term shareholders. We're going to
Speaker 8: be with us on the next stage of the journey
Speaker 8: and continue you to back and invest us as we
Speaker 8: grow and compete.
Speaker 2: The IPO was priced at two dollars ninety per share,
Speaker 2: but when the airline began trading, it open at three
Speaker 2: dollars twelve. You can see it actually finished at three
Speaker 2: dollars twenty three, so up eleven point four percent now.
Speaker 2: Virgin appointed its chief commercial officer, Dave Emerson as CEO.
Speaker 3: In March, and he told reporters this afternoon.
Speaker 2: The airline operating today is very different to the one
Speaker 2: which went bust in twenty twenty.
Speaker 8: So we're very now focused on serving the domestic Australia
Speaker 8: market and serving the customers we can win. We're serving
Speaker 8: the small business, serving the value corporate, serving the premium
Speaker 8: leisure segment, those people who really value the product that
Speaker 8: we put out there, and we think that's going to
Speaker 8: be very successful going forward, and you can already see
Speaker 8: it in our numbers. And so we've changed the whole
Speaker 8: business model.
Speaker 3: Let's see how the stock market finished up today.
Speaker 2: The local market opened high this morning, surging after the
Speaker 2: US President Trump said on truth Social there would be
Speaker 2: a ceasefire between Israel and Iran that coused oil prices
Speaker 2: to plunge, resulting in anergy and utility stocks being sold off.
Speaker 3: Everything else was in the green, led by the banks.
Speaker 2: The market finished the day up almost one percent, and
Speaker 2: it's only one percent away from its all time record high.
Speaker 2: Here's a look at the price of Brent crude. You
Speaker 2: can see it basically fell off a cliff as soon
Speaker 2: as it became apparent the conflict in the Middle East
Speaker 2: region was starting to wind down. You can see it
Speaker 2: slumped fourteen percent in less than twenty four hours to
Speaker 2: about sixty eight US A barrel. KFC franchise operator Colin's
Speaker 2: Foods was the best performer, better than expected full year
Speaker 2: profit from them. The company operates about three hundred to
Speaker 2: eight hundred KFC outlets in Australia. It said consumer spending
Speaker 2: has been picking up in recent weeks, so you can
Speaker 2: see colin Foods up almost seventeen point four percent today.
Speaker 2: Data scrubbing stock app and was the top tech company
Speaker 2: Clinievel Pharmaceuticals up to, along with the fund manager Magellan
Speaker 2: buying our service business zip O. The tops corporate travel
Speaker 2: management outlook for the travel sectors obviously improved since the
Speaker 2: ceasefire announcement. Online retailer Cogan up as well. The pure
Speaker 2: play iron all Mine affourd to skew up almost five percent. AARB,
Speaker 2: the four wheel drive fit out company up as well,
Speaker 2: along with Comwealth Bank, which lifted to a new all
Speaker 2: time record high question is will it get to two
Speaker 2: hundred dollars within the next few weeks. Losing value included
Speaker 2: the gold miner Saint Barbara. Australia's largest oil and gas producer, Woodside,
Speaker 2: was sold off thanks to those oil prices.
Speaker 3: Viva Energy, which sells petrol.
Speaker 2: Was down to along with Origin Energy, which sells gas
Speaker 2: and produces it, and the shipbuild Ostill finished the day
Speaker 2: down almost three percent, and global markets, well, there've been
Speaker 2: rallying since the ceasefire was announced less than twelve hours ago.
Speaker 2: Here's a quick look at some of the major markets
Speaker 2: across Asia Pacific which are.
Speaker 3: Still trading as we speak.
Speaker 2: Hong Kong Hang Seng is up about two percent, Japan's
Speaker 2: nik about one percent, Koreas cost me two hundred up
Speaker 2: three point three percent, and two major markets in China
Speaker 2: up about one percent a piece. So earlier this afternoon
Speaker 2: to talk about the market reaction and the outlook for rates,
Speaker 2: I caught up with Matt Sherwood, the head of investment
Speaker 2: strategy at Perpetual.
Speaker 9: I think the ceasefire and the you know, the associated
Speaker 9: the line in oil prices really have given the market
Speaker 9: a bit more confidence that we've seen the worst of
Speaker 9: this Middle East conflict. That remains to be the case,
Speaker 9: whether you know, sorry, it remains to be seen whether
Speaker 9: that's the case. But markets generally have become more and
Speaker 9: more confident since the middle of April. And you know,
Speaker 9: this was just the latest of a long list of headwinds,
Speaker 9: but the market seemed to get over it pretty quickly.
Speaker 2: Yeah, the markets have really been on a real roller
Speaker 2: coaster this year. We hit record highs in February, then
Speaker 2: President Trump came out with various different tariff announcements. There
Speaker 2: was a big sell off, then things ticked up again.
Speaker 2: Now they've been a bit bumpy the past couple of days.
Speaker 2: But what do you think the turning point was in April,
Speaker 2: which really got the market back on this strong trajectory.
Speaker 9: Well, undoubtedly it was President Trump and playing Trump Put,
Speaker 9: where he was talking incredibly strong game in relation of
Speaker 9: US trade policy and what taris he was going to
Speaker 9: inflict on major trading partners, And after the market was
Speaker 9: off nearly twenty percent, all of a sudden, he booked,
Speaker 9: you know, and he said, let's get together and negotiate
Speaker 9: on giving you ninety days. And that really gave the
Speaker 9: market some confidence that they, you know, we were passing
Speaker 9: the point of maximum risk for several thematics which I
Speaker 9: think had worried investors and dog price is really in
Speaker 9: the first half of the year. And you know, they
Speaker 9: included cuts to US spending, US government spending in the
Speaker 9: wake of the DOGE, you know, lower immigration intake with
Speaker 9: tightenings of rules, you know, reduced AI capix, you know, not.
Speaker 10: To mention the increase in tarifts itself.
Speaker 9: So markets were pretty worried about the outlook. But the
Speaker 9: fact that the Trump Put was played I think gave
Speaker 9: everyone pause for thought that even if the Fed doesn't
Speaker 9: need policy, Trump's not going to go as hard. Then
Speaker 9: all of a sudden there was big capital market inflows,
Speaker 9: and that has just continued to drive markets up, you know,
Speaker 9: and with the fact that those thematics weren't as bad
Speaker 9: as what everyone was thought.
Speaker 10: Suddenly the market rights has been supported.
Speaker 9: By a very fast improvement in the S and P
Speaker 9: five hundreds earnings revision breadth, and that then became a
Speaker 9: self fulfilling rally, and and all of a sudden that
Speaker 9: it didn't really seem like many risks mattered.
Speaker 2: All right, We've obviously seen a lot of risks accelerating
Speaker 2: in the past few days, and now there is that
Speaker 2: relief rally happening. But do you think all of the
Speaker 2: risks are over in the Middle East? Or is there
Speaker 2: still a long way to go here for investors?
Speaker 9: Well, I think investors certainly believe we've seen the worst.
Speaker 9: The fact that the you know, the two parties were
Speaker 9: able to get together agree.
Speaker 10: To cease fire. You know, that's always going to be
Speaker 10: good in the scheme of things.
Speaker 9: You know, I was getting constant phone calls from journalists
Speaker 9: are the last two weeks? You know, you know, is
Speaker 9: this going to be a recession event? You know, will
Speaker 9: inflation catail? Central banks easing? And you know, we felt
Speaker 9: the answer to both those questions with no, And when
Speaker 9: you actually have a look at geopolitical events over the
Speaker 9: past seventy five years, what you can see that three
Speaker 9: quarters of them actually have share price gains in the
Speaker 9: next twelve months, you know. And of the twenty five
Speaker 9: that I could find and I could think of, you know,
Speaker 9: only five.
Speaker 10: Actually led to recession.
Speaker 9: And sorry, it led to the clients, and they were
Speaker 9: all associated recessions. And the fact that oil prices rose
Speaker 9: seventy five percent year on year. You know, as of
Speaker 9: this morning, the oil prices are thirteen percent relative to
Speaker 9: this period last year, So, you know, in the wake
Speaker 9: of that, and the fact that the growthat.
Speaker 10: Looks not as bad as some people thought, it's.
Speaker 9: No real surprise that markets are recovering and in many
Speaker 9: cases are up for you know, this year to date.
Speaker 9: You know, but of course markets are always vulnerable to
Speaker 9: second round effects, but they tend to spark less of volatility,
Speaker 9: and so therefore I think the markets can continue to
Speaker 9: rally in the second half of this year, even though
Speaker 9: US growth is probably going to slow pretty significantly in
Speaker 9: the wake of the tariffs, all.
Speaker 2: Right, and then what about the rates outlook for the US?
Speaker 2: I hope we're going to hear from Jerome Powell of
Speaker 2: the next couple of days in Congress.
Speaker 9: Yeah.
Speaker 10: Well, my suspicion is you may get one.
Speaker 9: I believe you probably won't get any, and I don't
Speaker 9: think that will really worry the market too much. Futures
Speaker 9: markets have got one fed cut priced in at the
Speaker 9: end of this year. The Power and the FOMC have
Speaker 9: already said we're in a weight.
Speaker 10: In the C mode.
Speaker 9: So I think the markets are kind of for the
Speaker 9: fact that the FOMC is not going to really add
Speaker 9: too much support to markets this year. But to be honest,
Speaker 9: I don't think they really need it, because earnings expectations
Speaker 9: have come down nine percentage points over the last couple
Speaker 9: of months, and that means to me that all the
Speaker 9: bad news was priced in. And so when Trump switches
Speaker 9: his focus away from tariffs and from military strikes to
Speaker 9: more grow friendly strategies such as tax cuts and deregulation,
Speaker 9: I suspect the market's going to be able to rally
Speaker 9: in the second half this year.
Speaker 10: Quite notably.
Speaker 3: Matt Sheild from Perpetual, Great to have you on the show.
Speaker 10: Thanks Ed, good to be with you.
Speaker 2: After the break, Iran threatened to block the Straight of
Speaker 2: Horm was this week a crucial shipping lane in the
Speaker 2: Middle East. Tom Jensen from the Freight and Trade Alliance
Speaker 2: is up next, Welcome back. Ocean shipping rates through the
Speaker 2: Middle East have been rising since the conflict between Iran
Speaker 2: and Israel began escalating several weeks ago. Investors have been
Speaker 2: concerned Iran could close the Straight of Horn, was an
Speaker 2: important shipping lane for containers oil and L and G gas.
Speaker 2: The latest research from Drury Maritime Research shows rates for
Speaker 2: oil tankers have increased anywhere from forty five percent to
Speaker 2: seventy percent, depending on the direction they're going. For more
Speaker 2: on this, I'm joined by Tom Jensen from the Freight
Speaker 2: and Trade Alliance. Tom, thanks so much for your time.
Speaker 2: You represent the international cargo supply chain sector. But how
Speaker 2: have cargo freight rates been going over the past few
Speaker 2: weeks as we've seen this escalation in the Middle East.
Speaker 11: Yeah, we're still to see the outcome of how it
Speaker 11: has affected the containerized freight market, but they obviously will
Speaker 11: be going up, no doubt. And however, it's shipping has
Speaker 11: become quite resilient over the last few years, in particular
Speaker 11: as a result of the Red Sea crisis, and rates
Speaker 11: continue to settle a bit in that market as a
Speaker 11: result due to familiarization by traders to get goods around
Speaker 11: that scenario. So as much as the strad or Hormones
Speaker 11: is a central point for the containerized trade, it does
Speaker 11: only account for four percent of global containerized trade in total.
Speaker 11: So the issues in the straight of hormones, coupled with
Speaker 11: the closures at airports through any missile strikes such as
Speaker 11: we saw in Oman, that sort of does bite into
Speaker 11: trade quite significantly.
Speaker 2: Yeah, just for context viewers, I mean, how resilient has
Speaker 2: the shipping sect to become. You mentioned the problems in
Speaker 2: the Suez Canal a few years ago where that was blocked.
Speaker 2: We've obviously had the pandemic heres where there was serious
Speaker 2: issues with cost escalations too, But how has it changed
Speaker 2: over the past couple of years or so.
Speaker 11: Yeah, as you mentioned the word resilient, it's quite commonly
Speaker 11: used in our industry right now. So I guess shippers
Speaker 11: and exporters and importers usually did work just in time
Speaker 11: model to make sure they didn't have too much inventory
Speaker 11: on their shelves, but nowadays it's almost become a just
Speaker 11: in case scenario, We're exports are planning ahead and importers
Speaker 11: are shipping well in advance to try to make sure
Speaker 11: they're a bit more resilient. So what they're doing is
Speaker 11: when they're hearing all these global trade issues, the geopolitical
Speaker 11: issues which are impacting shipping, they're getting a chance to
Speaker 11: pause and sit back and wait and see.
Speaker 2: All right, and if costs do start rising in theory,
Speaker 2: how long does it take before that trickles through to
Speaker 2: Australian consumers that are buying products that have cost more
Speaker 2: money to bring to our country.
Speaker 11: Yeah, it takes a little bit time to trickle through.
Speaker 11: I mean, peak seasons generally start at this time of
Speaker 11: the year, so we're right at the start of the
Speaker 11: peak season for shipping, so a lot of our Christmas stock,
Speaker 11: a lot of orders for Christmas and so on, we'll
Speaker 11: be starting now. So basically the prices generally do tend
Speaker 11: to rise at this point in time. Obviously this will
Speaker 11: mean they probably rise a bit more significantly, and a
Speaker 11: bit more of a chance the do get a bit higher,
Speaker 11: But generally you're talking anywhere from a couple of weeks
Speaker 11: to a couple of months for it to hit the shelves, and.
Speaker 2: Then when you look around the world at where global
Speaker 2: shipping is right now, obviously we've had the US government
Speaker 2: with President Trump imposing tariffs and then putting them on pause.
Speaker 2: We've seen reports of China in particular, has been trying
Speaker 2: to move as much product into America as possible. What
Speaker 2: are the big factors here when it comes to tariffs?
Speaker 2: Is the sector still under a bit of pressure.
Speaker 11: Yeah, very much so, so what you mentioned there about
Speaker 11: the Trump tariff pause. Essentially in the last week, we've
Speaker 11: just seen the dreary will container in next drop by
Speaker 11: seven percent week on weeks. So prior to that it
Speaker 11: had gone up by about seventy percent year to date.
Speaker 11: So it's one of those sectors where at the moment
Speaker 11: it changes, things can change in the global context quite significantly,
Speaker 11: quite quickly in that sense. So what we're seeing now
Speaker 11: is basically the rates will continue to rise a little
Speaker 11: bit prior to Christmas, but the US tariff pause we've
Speaker 11: now hopefully seen the back end of the rating increases
Speaker 11: in that area. In the grand scheme of things, though,
Speaker 11: the one area does affect us more so than anything
Speaker 11: is usually the trade flow patterns. So when we see
Speaker 11: China rush all those orders through to the States. It
Speaker 11: might have impacts to Australian shipping where the carriers chase
Speaker 11: the dollar and they move their ships into the China
Speaker 11: US market, and that puts a bit of a threat
Speaker 11: on the Australian market where we don't necessarily have confidence
Speaker 11: that lines are making as much money as they could
Speaker 11: on our trade lane, and that puts pressure on governments
Speaker 11: and shipping lines to make sure they still service our
Speaker 11: market to the minimum service levels needed.
Speaker 2: Yeah, you mentioned government. I mean there's a big focus
Speaker 2: on productivity right now. How product How productive are our ports?
Speaker 11: Yeah, well, they'll tell you they're productive in terms of
Speaker 11: truck turnaround times, but on a global scale, the world
Speaker 11: rank them quite lowly in the last ratings. What we're
Speaker 11: seeing with the ports at the mart and it's great.
Speaker 11: You mentioned the productivity roundtable being mentioned by the government.
Speaker 11: So one area we've been talking about the government can
Speaker 11: act quite quickly on is terminal access charges and empty
Speaker 11: container park notification fees. They're unregulated at the moment and
Speaker 11: they're actually affecting importers and exporters quite more significantly than
Speaker 11: tom some of these geopolitical issues.
Speaker 2: Sorry, I've ran out of time. Really appreciate you coming
Speaker 2: on the show. Thank you, and that's it for today's program.
Speaker 2: Thanks for your company. We'll see you tomorrow.