Speaker 1: This is Business Now with Ross Greenwood.
Speaker 2: Hi there and welcome to Business Now on this Thursday.
Speaker 2: Thanks for your company. I'm Ross Greenwood. Coming up on
Speaker 2: the program today, Donald Trump threatens to Sackey's Central Bank
Speaker 2: boss Federal Reserve chaired your Own Power, labeling him as
Speaker 2: dumb and as a total and complete moron for not
Speaker 2: cutting interest rates.
Speaker 1: But Power for now is standing.
Speaker 2: Firm shares an accounting software company zero is slumped today
Speaker 2: after it raised money from shareholders to spend three point
Speaker 2: nine billion dollars in the.
Speaker 1: US business millio payments.
Speaker 2: And how Donald Trump's Big Beautiful Bill will play out
Speaker 2: here in Australia, especially the threat of that section eight
Speaker 2: nine to nine, which could add a tax burden to
Speaker 2: Australian investors putting their money into America. So all that
Speaker 2: and plenty more coming up on today's program.
Speaker 1: Now, a couple of other stories we think you should
Speaker 1: know about today.
Speaker 2: One of them is this reports this afternoon of surface
Speaker 2: of the world's biggest oil companies, Shell and BP are
Speaker 2: in talks to merge. If successful, it would become the
Speaker 2: biggest energy merger since Xcell and Mobile came together in
Speaker 2: late nineteen ninety nine. Shell, which has a market value
Speaker 2: of more than one hundred and fifty billion US dollars, is.
Speaker 1: The larger of the two companies.
Speaker 2: BHP's market value now around fifty six billion US. The
Speaker 2: reports of a merger first surfaced in the Wall Street Journal,
Speaker 2: but were immediately dismissed by Shell as market speculation. But
Speaker 2: below the surface here is the agitator investor, Elliott Investment,
Speaker 2: which previously targeted the Australian giant BHP and urged it
Speaker 2: to jettison its oil and gas business.
Speaker 1: It ultimately sold that business to Woodside.
Speaker 2: Elliot's accumulated more than five percent of BP shares and
Speaker 2: is again urging change.
Speaker 1: Much of that is to walk away.
Speaker 2: From a disastrous push into renewable energy sources, which dragged
Speaker 2: on the BHP share price for years, but BP already
Speaker 2: is seeking to sell its castrol oil business. In the
Speaker 2: past year, VP shares down twenty three percent, compared with
Speaker 2: Shell shares which have fallen by about nine percent. Both
Speaker 2: companies primary listings are on the London Stock Exchange, and
Speaker 2: today the Hong Kong Monetary Authority intervened into markets to
Speaker 2: defend the value of its local currency.
Speaker 1: Historically, the Hong Kong.
Speaker 2: Dollar is pegged to a narrow range of between seven
Speaker 2: point seventy five and seven point eighty five US dollars.
Speaker 2: Lace last week the currency fell to the low end
Speaker 2: of that band, and today saw sharp falls before the
Speaker 2: monetary authority stepped in and brought around one point eight.
Speaker 1: Billion US dollars worth of Hong Kong dollars.
Speaker 2: Though the PEG's been questioned for some years, there seems
Speaker 2: little expectation that China's authorities will do away with the
Speaker 2: PEG altogether, which some traders still urge.
Speaker 1: But look, let's get.
Speaker 2: Across the rest of the day's market moves with Edward
Speaker 2: board ed. Another flat day for our stock market here ross.
Speaker 3: It was another real flat day for the market. Most
Speaker 3: sectors were in the red, but mining companies were pretty strong,
Speaker 3: which kept them market really tracking sideways. The ASX two
Speaker 3: hundred finished the day down just eight points. And here's
Speaker 3: what it's done for the past five days. You can
Speaker 3: see it's gone hardly anywhere. The banking sector has been
Speaker 3: strong over the past week. It's up about three percent.
Speaker 3: Energy stocks have slumped almost five percent due to plunging
Speaker 3: oil prices. ASX is only up twenty points for over
Speaker 3: the past week. You don't see this flat trading very often.
Speaker 3: Liftier Miners, Pilbrim Minerals and Igo were some of the
Speaker 3: best performers today after the investment giant Vanguard bought a
Speaker 3: five percent steak in both companies to FIRSTI Fied Mine
Speaker 3: and Mineral Resources was up to a long with the
Speaker 3: four wheel drive fit up business AARB and porfology provider
Speaker 3: Heelius jump as well after Japan's biggest financial group Mitsubishi
Speaker 3: UFJ bought a five percent steak in that company as well.
Speaker 3: Card payments business EML was another top performer. Mining services
Speaker 3: business Parenti lifted two after it's secured a two hundred
Speaker 3: million dollar contract to conduct underground mining at a West
Speaker 3: gold mine in Wa. Retailer Premier Investments had a good
Speaker 3: day on the market.
Speaker 1: A and Zed was the strongest.
Speaker 3: Bank defense company Drome Shield it kept lifting after signing
Speaker 3: that sixty two million dollar contract yesterday. It was up
Speaker 3: almost twelve percent today. Gold miners were sold off led
Speaker 3: by Northern Star and Evolution waterering business tab Corp down
Speaker 3: as well, along with the online car retailer Car Group,
Speaker 3: Global Packaging, Giant amcre and Ross.
Speaker 1: That's another flat day on the market. Flap day on
Speaker 1: the market. It's a longgoing story. Thanks Ed.
Speaker 2: Well, let's think about the US now in its economy.
Speaker 2: Donald Trump today had a major winners. Noto countries agreed
Speaker 2: to lift their share of defense spending. But Trump is
Speaker 2: not getting everything his own way at home, and especially
Speaker 2: not with the head of the US Federal Reserve, Jerome Pale,
Speaker 2: who continues to express caution about the impact of Trump's
Speaker 2: policies on tariffs and therefore inflationable. Trump has criticized Pale
Speaker 2: for months, for today came his most striving broadside. In
Speaker 2: another effort to cut interest rates. Today Trump Trump wrote,
Speaker 2: I've tried it all different ways. I've been nice, I've
Speaker 2: been neutral, and I've been nasty. Neutral didn't work. He's
Speaker 2: a dumb guy and obviously a Trump hater who should
Speaker 2: never have been there. He later said, in this tirerade,
Speaker 2: I don't know why the board doesn't override this complete,
Speaker 2: the total and complete moron. Maybe, just maybe I'll have
Speaker 2: to change my mind about firing him. But regardless, his
Speaker 2: term ends shortly. So let's bring in here. Mikhaela Fachilo,
Speaker 2: who's the chief economist at Jardon just to get some
Speaker 2: insight of this.
Speaker 1: Mikaela, good to chat to you.
Speaker 2: This is big, strong dispute between these two and it's
Speaker 2: going to end only.
Speaker 1: One way, and that is Jerome Powell is going to
Speaker 1: leave that.
Speaker 4: Office, yes, or he will cut one of the two.
Speaker 4: I think it's really interesting to see because we don't
Speaker 4: have clarity yet in the US or how the tarists
Speaker 4: are flowing through the data. In fact, inflation actually went
Speaker 4: down in May, it was quite contained, and goods inflation,
Speaker 4: which is the main one exposed to Tintario, hasn't really
Speaker 4: shown yet that prices are going up. But they're certain
Speaker 4: the right like don't forget we're in a pause and
Speaker 4: times talks will return in early July. So two of
Speaker 4: the board members of the FED are actually keen to
Speaker 4: start easing the raid in July. That was the headlines overnight.
Speaker 4: But he still thinks there's value in waiting and looking
Speaker 4: at the economy in the US. It's not really arguing
Speaker 4: or screaming for rad cards yet.
Speaker 2: So one of the things about this is that falling
Speaker 2: prices therefore falling inflation, don't always signal strength in an economy.
Speaker 2: In many cases, if companies can't raise prices. That signifies
Speaker 2: weakness in consumer demand and therefore weakness in the overall economy.
Speaker 4: Yeah, so I guess it's just a matter of the
Speaker 4: leads and lags in the psych right. Inflations normally stays
Speaker 4: a little bit longer in demand eventually falls through. But
Speaker 4: what we have seen on this one is there've been
Speaker 4: too any shocks policy support, then hikes, now tariffs, and
Speaker 4: so we don't really get a clear picture more consistent
Speaker 4: we wear activity sad. But in saying that the labormark
Speaker 4: is still in good shape, there's some measures of sentiment
Speaker 4: looking a little bit weaker, but we haven't really seen
Speaker 4: a major impact of any of these in the data
Speaker 4: in terms of inflation. So there's not really a strong
Speaker 4: case for the Fed to return to cuts. The market
Speaker 4: thinks at the end of the year we might see
Speaker 4: us many as too, but we shall see.
Speaker 2: But one of the reasons why Trump has come out
Speaker 2: with this strident criticism of your own power is when
Speaker 2: he broke down basically what other nations around the world
Speaker 2: were doing with inflation and interest rates, and they made
Speaker 2: the comparison back to America, where he doesn't think they're
Speaker 2: cutting fast enough. Despite Obviously, as you say, inflation coming down,
Speaker 2: other parts of the world seem more willing to cut
Speaker 2: interest rates, including here in Australia right now.
Speaker 4: Yeah, it's a really interesting one because finally we're seeing
Speaker 4: some diver divergence across different regions. Right Australia has finally
Speaker 4: got an inflation back into the target and we're seeing
Speaker 4: rates coming down, and perhaps the uncerventy around the US
Speaker 4: show it's what's getting the RBA to be pushed a
Speaker 4: little bit faster than perhaps domestic data is doing. But
Speaker 4: if you look at New Zealand, for instance, it's not
Speaker 4: very far from US. In the Central Bank in the
Speaker 4: last meeting mentioned that they're more worried about near term
Speaker 4: risk to inflation in their upside even though they cut.
Speaker 4: So it's just very very different depending on how this
Speaker 4: shock is expected to het different regions. But the clear
Speaker 4: consensus is that for the US attarists are suddenly inflationary,
Speaker 4: whereas everywhere else is more an issue of slower growth
Speaker 4: and how that feeds through the rest of the economy
Speaker 4: that is just recovering from a very very high inflation period.
Speaker 2: I was going to say, and that's also part of
Speaker 2: the history of inflation that just because you now have
Speaker 2: it suppressed, given the fact we've just had a breakout
Speaker 2: of inflation, the danger is, of course it breaks out again,
Speaker 2: and that is what central bankers, including Jerome Power, including say,
Speaker 2: for example here Michelle Bullock, are always highly wary of.
Speaker 4: Yeah, and it's also a matter of the mandates right
Speaker 4: central are targeting inflation, particularly at a certain level, which
Speaker 4: is in the US two percent. In Australia is a
Speaker 4: little bit more flexible two and three. But yeah, so
Speaker 4: I guess in Australia is a little bit more uncertain
Speaker 4: because some of the sectors of the economy still show
Speaker 4: some inflation being sticky, and that's a function of a
Speaker 4: labor market that's been surprisingly strong. So the RBA certainly
Speaker 4: has to be very careful. But in saying that, if
Speaker 4: the money is so weak and the private sector is
Speaker 4: not really moving and there's no spending, inflation should remain
Speaker 4: content just with a little bit of a lug.
Speaker 2: So, okay, mcalla just the final one, very quickly. How
Speaker 2: many right cats you got this year?
Speaker 4: I've got one in July, one in August and then
Speaker 4: a pause to see what those do, and another one
Speaker 4: in November. So a little bit more to come.
Speaker 2: I'll tell you it'd always good having the progrem MICHAELA
Speaker 2: for many Thanks for your time today, Thank you well.
Speaker 2: Coming up after the break, we stick with America and
Speaker 2: it's controversial section nine to nine bill which tax Australian
Speaker 2: investors when putting.
Speaker 1: Their money in the US.
Speaker 2: But despite that ruling, the New Zealand Australian accounting software
Speaker 2: business zero, spending three point nine billion dollars to expand
Speaker 2: in America. It is great to have your company here
Speaker 2: on business now.
Speaker 1: Well.
Speaker 2: Earlier this week, Donald Trump's One Big Beautiful Bill aimed
Speaker 2: at cutting US taxes past the US House of Representatives.
Speaker 2: Though largely a domestic bill, it does have a big
Speaker 2: sing in its tail for overseas investors in America, especially
Speaker 2: from Australia, and that's called section eight ninety nine. Now,
Speaker 2: this section could see an increase in taxes on dividends
Speaker 2: or interest earned in America, on profits repatri headed two
Speaker 2: overseas countries including Australia, and withholding tax on passive investment income.
Speaker 2: And all this comes at a time when there's record
Speaker 2: Australian investment into America, not just from our companies but
Speaker 2: also from superannuation fund and other investors as well. Now
Speaker 2: one of those investors perhaps affected is Katrina Burns, who
Speaker 2: was the lead portfolio manager at Wayam Global, who joins me.
Speaker 1: Now, thank you so much for your time.
Speaker 2: As always, Katrina, your own sense on this, you'd have
Speaker 2: read it, you'd have looked at this is going to
Speaker 2: have an impact or not.
Speaker 5: Look, let's see where early days. Obviously it's gone through
Speaker 5: the House, still needs to go through the Senate, and
Speaker 5: even the House and Senate in terms of what's being proposed,
Speaker 5: they need to be reconciled. So there's differences there that
Speaker 5: need to see reconciliation before they can even go to Trump. Importantly,
Speaker 5: this isn't affecting capital gains unlike Labour's policies here, which
Speaker 5: you know we Wilson Asset Management very much against. So
Speaker 5: this is not capital gains. It is, as you said,
Speaker 5: dividends and income. So there's a difference there. But look,
Speaker 5: let's see still early days, but not a positive direction
Speaker 5: of travel, but much more water under the bridge still
Speaker 5: to come.
Speaker 2: Okay, So Australian capital going to the United States is
Speaker 2: taking advantage of high returns there as compared with in Australia.
Speaker 2: Now that is true for super funds who find a
Speaker 2: lack of opportunities here to invest in. There's simply too big,
Speaker 2: so they've got to put money overseas.
Speaker 1: But it also goes to companies.
Speaker 2: Many of those chief executives when we speak with here,
Speaker 2: simply say, look, sorry, we can't make enough money on
Speaker 2: our capital here in Australia.
Speaker 1: We have to go to America. So from your point of.
Speaker 2: View as an investor, you're seeking an opportunity. So anything
Speaker 2: that taxes the more, is it this incentive?
Speaker 1: Yeah, it does.
Speaker 5: If it's to go through both the House and the Senate,
Speaker 5: it would disincentivize investment in the US, that is right,
Speaker 5: and it would cap reduce the gains that can potentially
Speaker 5: be made from investing in the US. All right, and
Speaker 5: I guess the other point the point in terms of
Speaker 5: the will still what still has to occur, and in
Speaker 5: terms of the dividend and income component though like you
Speaker 5: still yeah, there is still much more that has to
Speaker 5: be reconciled. So it absolutely would disincentivize and incentivize actually
Speaker 5: going to other countries are more so you know, you
Speaker 5: would be incentivized to invest less in the US and
Speaker 5: go more towards Europe, Asia, et cetera. So that is correct.
Speaker 2: Okay, So then you sit there and go that this
Speaker 2: is part of something that is much bigger. The One Big,
Speaker 2: Beautiful Bill is designed to bring down US taxes. What
Speaker 2: I wonder whether it's also a bargaining chip by Donald
Speaker 2: Trump and his administration to change the disincentives that we
Speaker 2: put in place in Australia against American companies. I'm thinking
Speaker 2: of Google taxes, I'm thinking of, say, the PBS system
Speaker 2: for our drugs. These are all things that Americans in
Speaker 2: the past have protested.
Speaker 5: Again, absolutely, and that could be a deal that is
Speaker 5: done that we give up some of the penalties that
Speaker 5: we're potentially putting on the tech companies, for example, in
Speaker 5: exchange for walking back the penalties that will would be
Speaker 5: put on Australia. So there's absolutely negotiation that will still
Speaker 5: likely go on, and we could come to a much
Speaker 5: more favorable resolution than what is being proposed at this point.
Speaker 2: Okay, But given even those taxes that may come as
Speaker 2: a result of this bill, does it still make it
Speaker 2: more attractive to invest in the United States, especially given
Speaker 2: future capital gains as compared with moving your money to
Speaker 2: Asia or moving into Europe or leaving it in Australia.
Speaker 5: I think it depends on ultimately on what the investment
Speaker 5: opportunities are. Still the US is an incredible place for innovation,
Speaker 5: and when you look at the companies, particularly in the
Speaker 5: tech space, for example, that are in America, there's still
Speaker 5: some wonderful businesses to invest in. Some of the best
Speaker 5: businesses in the world are in the US. So even
Speaker 5: with this potentially capping the returns that you can generate
Speaker 5: out of investing in the US, it still may well
Speaker 5: be the best place to invest. Even thinking about that
Speaker 5: the extra penalties we're getting here, and importantly, it may
Speaker 5: incentivize that companies that you invest in in the US
Speaker 5: to actually give more back to investors in the form
Speaker 5: of buybacks rather than dividends. And in many cases, in
Speaker 5: terms of tech companies, for example, in the US, they
Speaker 5: don't really pay much in the way of dividends anyway.
Speaker 5: So it actually in that case, if you're investing in
Speaker 5: a tech company in the US that doesn't really generate
Speaker 5: like pay out income and either does buybacks or doesn't
Speaker 5: even pay dividends, which is very often the case, there
Speaker 5: will be limited impact. So I think it really depends
Speaker 5: on what type of investments that you are making in
Speaker 5: the US.
Speaker 2: Trina, I've got to leave with them any thanks for
Speaker 2: your time, Portfolio manager at Wham Global. But looks section
Speaker 2: night nine nine hasn't stopped the New Zealand accounting software
Speaker 2: company Zero from making a huge bit in America.
Speaker 1: It'll spend three point nine billion dollars to acquire the platform.
Speaker 2: Millio shares started trading this morning after an institutional placement
Speaker 2: at a discounted share price.
Speaker 1: You can say that were down five percent.
Speaker 2: Eight Boyd put up with the Zero chief executives so
Speaker 2: kinda sing cassidy as they're doing this deal.
Speaker 6: Well, when you think about Zero, our ambitions are global,
Speaker 6: as we've talked about, and we play in many critical markets.
Speaker 6: One of those is certainly the United States, and it
Speaker 6: is one of the largest SMB markets in the world,
Speaker 6: so it's no surprise there we have we would say,
Speaker 6: loved accounting software and the opportunity to take many more
Speaker 6: customers and increase our share. But in order to do that,
Speaker 6: we really feel like we need a value proposition which
Speaker 6: is even richer and fuller, and we often talk about
Speaker 6: our strategies being what we call the three by three accounting,
Speaker 6: payroll and payments together in an into platform. We have
Speaker 6: that here in Australia, but in the United States we
Speaker 6: really wanted to anchor that value proposition with bolstering our
Speaker 6: accounting software with a big payments player, and thus we
Speaker 6: acquired Milio, which really manages workflow for small businesses and
Speaker 6: accounting and payables.
Speaker 3: How long have you been in the US market for
Speaker 3: Is it a really tough market to cracking too?
Speaker 6: Well, you know, look, it's a market worth cracking into.
Speaker 6: It's one of the largest sm B markets in the world.
Speaker 6: Of course, many people who know Zero. No, we started
Speaker 6: there almost ten years ago. I think we have been
Speaker 6: building our presence. Today we have about four hundred thousand
Speaker 6: subscribers in North America, but there is no doubt that
Speaker 6: we are playing for more and I think thus the
Speaker 6: acquisition of Melio, which is a leading bill pay providing
Speaker 6: the United States, attaching that software. It is zero software,
Speaker 6: so customer can come in and do both accountings invoicing
Speaker 6: bill pay on the zero platform. Certainly we believe is
Speaker 6: a step function in our US value proposition.
Speaker 3: What attracted you today, Ladyship team.
Speaker 6: Well, first of all, you've got serial entrepreneurs who have exited,
Speaker 6: built and exited tech companies to some large global players.
Speaker 6: Maton bar built his first payment software company and makes
Speaker 6: it did to PayPal, and then stayed there for six
Speaker 6: years and built a leading consumer peer to peer payments platform.
Speaker 6: So he brings all that knowledge to Melio, which he
Speaker 6: spent the last seven years building, because, as he would say,
Speaker 6: small business workflows they're just not great in the US.
Speaker 6: There's no workflow software that makes it easy to manage bills,
Speaker 6: schedule bills, choose which ways to pay and get paid,
Speaker 6: then of course process the payment, and then on the
Speaker 6: other side, reconcile it to things like your accounting software.
Speaker 6: And I think it was on that vision that he
Speaker 6: built Melio.
Speaker 3: How are you going to be able to merge the
Speaker 3: two platforms together. How long is that process going to take?
Speaker 1: Well, you know it won't.
Speaker 6: Take that long. Milio is built as a very extensible platform.
Speaker 6: In fact, they don't only run their own site, but
Speaker 6: they already embed their software in leading sites in the US,
Speaker 6: like leading bank sites, Shopify, Gusto, and so embedding their
Speaker 6: technology on zero is relatively seamless. Now we still imagine.
Speaker 6: Of course, we want to create a great user experience,
Speaker 6: so we'll take some months to do that. But we've
Speaker 6: talked to the market about integrating within the first year
Speaker 6: and then being able to drive accelerated growth off the
Speaker 6: combined platform.
Speaker 3: How big a risk is this for you guys at
Speaker 3: zero taking this big punt?
Speaker 6: Well, look, I think you always when you make an
Speaker 6: M and a move of this size, as you know
Speaker 6: it's a several billion dollar transaction. On the one hand,
Speaker 6: you want to do it thoughtfully and wisely because it's
Speaker 6: all in the execution. On the other hand, when we
Speaker 6: look at the tam of the US market, when we
Speaker 6: look at our starting position with great accounting software, when
Speaker 6: we look at the traction Melios built and it's loved
Speaker 6: positioned by customers, and then we look at the I
Speaker 6: would say, the big tailwinds in digitizing payments in the US,
Speaker 6: I would say, we feel like it's an acceptable level
Speaker 6: of risk for the outsized opportunity and reward.
Speaker 3: Has the economical business risk environment changed much in America
Speaker 3: since the Trump administration started. It think's a little bit
Speaker 3: more unpredictable now than they were before.
Speaker 6: Yes, Look, I think I think one can say in
Speaker 6: the US, you can see kind of the volatility i'd say,
Speaker 6: of moves, whether it's tariffs or other things, reflecting some
Speaker 6: of the macro volatility around the Trump administration. But let's
Speaker 6: come back to that core thesis, which is, regardless of
Speaker 6: the administration, small businesses need help managing their cash flow.
Speaker 6: They're already thirty two million small businesses in the United States.
Speaker 6: So and zero has always been a macro resilient business resilient,
Speaker 6: you know, things like COVID, geopolitics. Look, our job is
Speaker 6: not to predict where an administration is going. It's to
Speaker 6: serve our customers.
Speaker 3: One thing our treasurer spoke to Scott Besson about yesterday
Speaker 3: was Section eight nine to nine, a potential revenge tack
Speaker 3: on tax on Australian companies in America. You worried about
Speaker 3: potentially paying higher taxes on your earnings and revenue coming
Speaker 3: out of the United States.
Speaker 6: Well, first of all, I think I am not our
Speaker 6: CFO admittedly, but you have to remember we're a New
Speaker 6: Zealand headquartered company. We definitely have different jurisdictions where we
Speaker 6: have different subsidiaries, tax losses, places where profitable or not,
Speaker 6: and I count on our very smart team to figure
Speaker 6: out how we optimize any tax we know, tax burner
Speaker 6: we might face in any of our acquisitions or organically.
Speaker 3: Where do you say that the economic risks right now
Speaker 3: in the United States?
Speaker 6: Look, I think in the United States, you know, it's
Speaker 6: and I think this is continued as tariffs have shown up.
Speaker 6: I think what you see as an environment of uncertainty,
Speaker 6: but the signals from the market on unemployment, on small
Speaker 6: business productivity are still relatively healthy. So I think what
Speaker 6: one can say is it's an uncertain environment more than
Speaker 6: it's a taxing environment. But you know it's taxing for
Speaker 6: small businesses uncertainty, so our job is to help them
Speaker 6: manage that.
Speaker 3: And how confident a small business is right now in America?
Speaker 6: You know, I would say that small businesses throughout the world,
Speaker 6: as I said, our data shows and the small business
Speaker 6: Sentiment Index in the US, would would say that uncertainty
Speaker 6: is high. But again, the actual signals labor productivity are solid.
Speaker 1: Secindi, sen Cassidy, thanks so much for you toan thank you.
Speaker 1: That's it for today. We'll see tomorrow.