By Dan Hadley >>

AS AUSTRALIANS ARGUE AND FIGHT in shopping aisles over packets of toilet paper, other nations have focused on more serious matters in regard to COVID-19.

Loosely referred to as ‘coronavirus’, the pandemic has spread to almost every country according to the World Health Organization (WHO).

Originating in Wuhan, China, it seems the virus will inevitably reach every corner of the world.

At the time of publishing this article, the coronavirus has officially infected nearly 170,000 people globally and killed over 6,500.

In the face of government controls, lockdowns, isolate on and blockades, markets and economies have met a calamity that may have a fallout greater than the 2009 Global Financial Crisis. 

Markets falling…

Shares across all markets have taken a dive in the wake of WHO announcements and ever-growing statistical reports of coronavirus spreading. The Dow Jones has taken a 9.5 percent hit over two months since January 2020 with the Nikkei down 10.6 percdent and the FTSE down 14.6 percent (Bloomberg).

Market confidence continues to fall, and investors are clearly very conservative in the face of mass reductions in economic activity and spending.

Bloomberg indicated last week that the coronavirus may cost the global economy up to $2.7 trillion USD equivalent.

[Editor's note: March 16 saw the largest single day drop in the value of the Australian Stock Market since the crash of 1987: The All Ordinaries dropped 9.5 percent and the ASX 200 dropped 9.7 percent for a day of overall losses in the A$165 billion range. Later in the day in New York, the industrials-heavy Dow Jones index dropped 2,998 points – 12.9 percent – in what has been described as its day of heaviest falls since the 1987 Black Monday crash. The S&P 500 dropped by 12 percent and the tech-stock Nasdaq fell 12.3 percent.

[According to the US CBS News, more than 3,700 people have now tested positive for the new COVID-19 disease in the US and, as of March 16, 74 had died. CBS said globally, the death toll was just over 6,500 on Monday. The previous weekend had seen a spike in fatalities in European nations grappling with aggressive outbreaks. More than 170,000 people had caught the virus around the world, almost half had already recovered, and yet the vast majority of cases remain mild medically.].

Market growth down significantly…

Projections for 2020 market growth are already well down compared with 2019 figures. Expected OECD economic growth forecast sees a reduction from nearly 3 percent in 2019 down to 2.4 percent with some countries seeing a greater projected reduction, particularly Japan, Italy, Germany and the UK.

These countries are looking at a reduction of 50 percent or more in projected year on year growth and this has the capacity to stall those economies.

Not forgetting the lives that have been lost and those deaths that are sure to come, the coronavirus has the potential to be the biggest economic meteor to hit Earth in recorded economic history.

Global travel down, airlines struggling and tourism dropping …

The international and domestic travel sector comes with immense overheads.

Reductions in travel, bought on by the fear factor and travel restrictions, means overall demand is down and tourism has ground to a halt in many tourist hot spots throughout the world.

This is also heightened by the number of travel-bans now in effect globally with more likely to follow.

Not just limited to China or Asia, this reduction is having an effect on both large companies as well as millions of small business providers within this sector.

Many nations rely heavily on tourism to maintain adequate income and GDP and this reduction may equate to billions of dollars for markets.

Factories in China grind to a halt, clearing pollution …

One of the few good things to come out of the coronavirus in China is the massive reduction in pollution.

With factories closed pending coronavirus containment and minimal numbers of cars on streets, the skies have begun to clear.

Unfortunately, this shutdown of production is having a major impact on the Chinese economy as well as the global market.

Importers of Chinese made goods are struggling to source adequate stock in many instances and, as millions go into containment, China itself is not importing foreign made goods. This will have an extensive flow-on effect to other economies and sectors.

The strain on health systems globally …

Hospitals in Wuhan are well known to be full and bursting at the seams. Health professionals work round the clock to help those infected.

Similar scenes are arising in Italy as well as other places and even those countries with minimal infection numbers have begun to mobilize health teams and resources.

This is costly and national budgets will be thrown out of whack, even in the face of the impact we have seen today.

Australia’s response …

Prime Minister Scott Morrison recently addressed the public at the AFR Summit in Sydney with respect to the coronavirus issue.

With a stimulus and support package announced so far and expected to be worth in excess of A$17.6 billion, the Australian Government is proceeding seriously.

There is already talk less than a week after that announcement that the Federal Government is prepared to spend more on resolving this crisis than it did during the GFC: potentially more than A$50 billion.

"When the economy bounces back, our budget will also bounce back. The stronger the recovery, the stronger the economy, the stronger the budget,” Mr Morrison said.

The Prime Minister went further to indicate the importance the Federal Government was placing on the safety and wealthfare of Australians:

“We now have one goal in 2020: to protect the health, wellbeing and livelihoods of Australians through this global crisis, and to ensure that when the recovery comes, and it will, we are well-positioned to bounce back strongly on the other side.

"It is important to remember the problem is only a temporal one, not structural, and learn the lessons of the global financial crisis", Mr Morrison said.

WHO to listen to about the virus…?

The Director-General of the World Health Organization (WHO) released a statement on March 9 that matched sensible strategy with hope against fear.

In the media announcement, Dr Tedros Adhanom Ghebreyesus announced:

“We are not at the mercy of this virus.

“All countries must aim to stop transmission and prevent the spread of COVID-19, whether they face no cases, sporadic cases, clusters or community transmission.

“Let hope be the antidote to fear.

“Let solidarity be the antidote to blame. Let our shared humanity be the antidote to our shared threat."

 The economic prognosis…

COVID-19 has the potential to cause greater financial damage than the 2009 Global Financial Crisis (GFC).

Markets may take such a tumble that we will see massive changes in the economic landscape.

Those companies reliant upon consumer spending, confidence, retail spending or tourism may struggle to survive if trends of the coronavirus continue as they have.

Not forgetting the lives that have been lost and those deaths that are sure to come, the coronavirus has the potential to be the biggest economic meteor to hit Earth in recorded economic history. 

For now, communities must stick together, act with caution but work in earnest to maintain our economies safely while those on the front line fight the virus. 

 

Dan Hadley is a British/Australian economist and business management consultant for JLB based in Adelaide, South Australia. 

By Dan Hadley >>

SOME EVENTS cannot be quantified completely in just economic terms or numbers. The Australian bushfire crisis that has impacted the country since September 2019 is a prime example.

Milton Friedman, the Nobel Prize-winning Economist, advocated the idea that almost anything can indeed have an assigned cost – even pollution or devastation en masse.

That seems a tough pill to swallow in the face of thousands of razed homes, lost human lives, millions of perished beautiful animals and over 10 million hectares of land, including national protected parklands, lost. 

As an economist with close friends in the Adelaide Hills who lost everything but the clothes on their back, it becomes a difficult task to even broadly quantify the ‘economic’ impacts of this crisis, let alone the emotional fallout.

With smoke from these fires reaching as far as South America and help from other countries pouring in by way of donations and firefighting volunteers, it could easily be argued that the economic impact of these fires is global.

In the face of such an overwhelming blow of devastation, this economist has focused on what it means here at home.

 

REDUCTION IN GROSS GDP

The bushfires will undoubtedly have an impact on the Gross Domestic Product (GDP) of Australia, that is, the business activity we produce this year.

When natural disasters occur, this can be somewhat offset in the following months by rebuilding efforts. Out of destruction, comes the need to rebuild when the devastation is over.

This means activity for building and civil construction companies as well as clean up crews and all of the industries that supply down the line to these projects. Overall there has already been, and will continue to be, a reduction in national GDP for some time. That levels out over the long term.

 

REDUCTION IN TOURISM ACTIVITY

Many of the affected areas rely heavily on tourism as part of their local economies.

There are two types of tourism – domestic and foreign. Overall, foreign tourism levels in Australia may be reduced as people decide to go elsewhere, scared of the nationwide fires we are suffering.

The land size lost in fires is the equivalent to the entire nation of Burma or Ethiopia and almost as large as Germany. It is no surprise that travellers may look towards other places that appear safer.

Domestic tourism makes up much of the tourist numbers into regional Australia. With some areas completely devasted and razed by fires, there is little to no aesthetic appeal for tourists to attend such sites for some time.

Indeed, some sites may be unsafe with charred and smokey remains as well as crumbling infrastructure for quite a while.

Here in South Australia, with half of Kangaroo Island burned, much tourist infrastructure is lost and this will cause a devastating blow to the number of visitors coming to the island each month spending their money.

 

INCREASING FOOD PRICES

Food prices have already been affected in the wake of these fires.

Many parts of regional Australia contain agricultural farmland. Crops have been lost and livestock has died.

This leads to a lower supply of food and, in turn, raises the price for the consumer. Much of regional New South Wales and South Australia has seen the loss of entire wine vineyards, leaving ageing stock in storage and this year’s vine yield lost forever.

Both of these states are proud wine providers and economically rely on wine sales and export as part of state GDP.

 

DECLINE IN RETAIL SPENDING, CONSUMER CONFIDENCE

Though not significant compared with other economic sector losses, these events do bring with them a decline in retail spending.

This was seen in the wake of the 2011 Queensland floods and the 1983 Victorian and South Australian Ash Wednesday fires.

With this comes the decline in consumer confidence, now hitting a four-year low, spurred on by the fires.

This reduction gradually returns to its normal pattern, however, as infrastructure is rebuilt and lives begin returning to normal.

 

INSURANCE PREMIUMS UP

It will come as no surprise to Australians, when insurance renewal notices come out this year, that premiums have increased.

There will be millions of dollars of payments on policies across Australia and insurance companies will seek to mitigate the possibility of fires in the future and recoup losses from the 2019/2020 devastation.

This represents an immediate economic loss to Insurance companies and an ongoing expense to Australians.

 

MEDICAL, EMERGENCY SERVICES COSTS

With an increased use of emergency services comes a significant cost increase.

The Australian Government has called in the military and this costs millions of dollars per day to provide manpower, equipment and transport to complete key rescue and clean up objectives.

Although this cost may come out of a Federal Emergency budget pool, it represents a major economic spend on the part of the government to rapidly curtail the crisis.

The increased use of police, fire fighters, ambulance and hospital staff also represents a strain on State economies as they grapple with the situation.

 

EMPLOYMENT LOWS AND HIGHS

Loss of infrastructure, businesses and roads means a loss of jobs in the short term. Put simply, some workplaces no longer exist for people to go to and continue their jobs.

It may take months, if not years to rebuild some businesses, even with government assistance and insurance payouts.

This reduction has been shown on the face of it – against some other types of natural disaster – to be relatively short lived, however, as employment levels begin to rise in the face of rebuilding and reconstruction efforts.

Although this doesn’t mean those who have directly lost their jobs immediately find another, it represents the overall employment rate.

From devastation comes opportunity for others to work and toil, rebuilding what was once lost.

 

ON A PERSONAL NOTE …

I cannot help but be reminded of Dorothy Mackellar’s second stanza in her 1908 poem, My Country:

I love a sunburnt country,
A land of sweeping plains,
Of ragged mountain ranges,
Of drought and flooding rains.
I love her far horizons,
I love her jewel-sea,
Her beauty and her terror –
The wide brown land for me!

Our country indeed possesses all that Dorothy described. The end of 2019 and the beginning of 2020 have shown us her beauty, her terror and luckily – in very recent days – her flooding rains.

Now a land charred and razed, sweeping and smoky, we begin repairing that which was damaged and lost.

The cost truly immeasurable. We, the people of Australia, will grow stronger, build our towns more resilient, and restore our regional economies once again.

I love a sunburnt country through all of the good times and through the hard. 

 

Dan Hadley is a British/Australian economist and business management consultant for JLB based in Adelaide, South Australia.  

AN ENDURING PIONEER of the Brisbane catering industry, Cuisine on Cue has spent 25 years wining, dining, feeding and entertaining Brisbane – an achievement the team will celebrate at a new purpose-built facility in Brisbane’s inner west.

“It’s been a fast, furious, constantly evolving, constantly changing 25-year ride,” owner and chef, Rob Morrow said.

Indeed, from humble beginnings servicing the government sector, the Cuisine on Cue business has pivoted from strength to strength.

The addition of managing director (and Rob’s now wife), Anna in 2009 brought the company into a new era, diversifying the brand’s offering and introducing an impressive venue portfolio with exclusive catering agreements in place.

“Anna’s strong background in corporate communications helped to solidify our future” Mr Morrow said.

“She was able to seek out new avenues for the business and establish longstanding relationships – many of which are still in place today.”

These avenues travel an impressive list of venues including Room Three Sixty, Old Government House, White Chapel Kalbar, Newstead House and Walkabout Creek.

Now with a rebrand and new look, Cuisine on Cue is set to take on 2020 and beyond with renewed vigour.

As part of their vision, owners Rob and Anna Morrow are also firmly focused on giving back, with the duo humbly philanthropic.

“Rob is an incredibly generous operator” Ms Morrow said. “Many of the charities he supports are industry based, given his intimate knowledge of the stresses and strains of being a chef as well as owning your own business.

“Additionally, we are committed as a company to giving back and are passionate about social responsibility,” she said. 

The company’s volunteer work at present focuses on supporting young people and children in foster care.

Whether an event be for a charitable endeavour, intimate private dinner or gala ball, the caterer is renowned for providing consistency in unsurpassed customer service and attention to detail – a trait which Rob Morrow is certain has assisted their longevity in the industry.

“Working hard, staying humble and constantly striving to improve – that’s the backbone of Cuisine on Cue and the business traits we’re very proud of,” Mr Morrow said.

www.cusisineoncue.com

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THE Council of Small Business Organisations Australia (COSBOA) has announced it will support the Australian Taxation Office (ATO) and the Federal Government in pursuit of people and organisations "that deliberately scam the tax system".

Speaking on behalf of COSBOA, CEO Peter Strong said the release of the tax gap for small business (12.5 percent) and stated that small business people need complexity removed for better tax compliance.

“Small business people make up more than 99 percent of Australian businesses, pay more than $76 billion in income tax annually, add $380 billion to the economy and provide an income to around five million people, but it’s the few that do the wrong thing who get an unfair advantage in competition and let down the rest of their industry and the small business sector," COSBOA CEO Peter Strong said.

"As a member of the Black Economy Board, we work closely with all government agencies to help catch the bad people while ensuring the honest people, the great majority, are given a less complicated system and the capacity to run a successful business that provides opportunity for revenue for other people,” Mr Strong said. 

A member of COSBOA, The Australian Hairdressing Council, is a good example of an organisation that works closely with the ATO and the Fair Work Ombudsman to ensure home-based hairdressers comply with rules and contribute to their industry, Mr Strong said. He said COSBOA recognised that the majority of hairdressers "do the right thing and are often angry at having to compete with those who rip off the taxpayer".

“There are many things that make business more difficult than it needs to be," Mr Strong said. "Recently, we have seen a report that wants to punish small business people who don’t deal with mental health to the level of a qualified mental health practitioner, and yet the same report ignores the mental health of the self-employed. All unnecessary and poorly developed compliance adds to the stress of running a business and employing staff.

“Our National Small Business Summit later this week in Melbourne will focus on real issues with our regulators, our policy makers and our business leaders in attendance. Australia has a good record globally when it comes to compliance and we can improve that record by reducing complexity,” Mr Strong said.

COSBOA and its members will work with the government to make the tax system less complicated and less onerous for the great majority who want to do the right thing, he affirmed.
 
COSBOA National Small Business Summit information: https://www.cosboansbs.com.au/

By Leon Gettler >>

EVERY industry will be hit by robotics

Dan Ternes, Blue Prism’s chief technology officer (CTO) for Asia-Pacific and Japan, said this is inevitable. Blue Prism is an international company that develops Robotic Process Automation (RPA) software for businesses.

“Whatever your business happens to be, there’s an HR department that on-boarding staff and doing time-off requests and there’s a finance department that’s paying salaries, and paying expenses and issuing POs and paying invoices and all of those sort of tasks and all those ancillary functions of business are suited to RPA,” Mr Ternes told Talking Business. 

“Any type of business that relies on data and information, the collection of that information, the collation of that information, evaluation, dissemination, if your core business relies upon that, then RPA represents a fantastic opportunity for you.”

He said it was of particular interest to financial services, telcos, government and retail with its supply chain and logistics networks were all very suited to RPA. However, it was also attracting other industries such as transport and mining.

Mr Ternes said it did not necessarily represent an apocalypse for employees as it could create new career paths.

“The history of IT is automation, that has disrupted jobs and changed jobs and ever was it thus,” he said.

“For every organisation that is reducing headcount because of RPA, I reckon there is 20 of them who are saying this is not about headcount reduction. This is about preparing for growth, enabling us to grow the business without increasing our cost base and also about redeploying that talent to things they are better at.”

He said this was more prevalent than job losses.

MAKING THE TRANSITION

Mr Ternes said companies need to think through how they make the transition, as there are aspects that are cultural and aspects that need to be considered.

The organisation also needs to undergo a process of education for its workforce and management.

“As we talk about redeploying humans to things they are better suited to and things that leverage human talents with higher order skills of judgment and empathy, you start to ask: ‘If I didn’t have my humans doing X, Y and Z, instead they could be doing A,B and C. And A, B and C are more valuable to me, and is there a D,E and F that they could be doing that no-one does today that adds even more value.”

Mr Ternes said organisations need to start planning for those higher order roles and start training people for that.

This meant doing an audit of the skills the organisation requires in the future and the direction it is heading in.

www.blueprism.com

www.leongettler.com

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

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CLOSE TO 170 people from across regional, rural and remote Australia will converge on the Cobram Barooga border region of rural Victoria and New South Wales this week for the 23rd Sustainable Economic Growth for Regional Australia (SEGRA) conference.

“SEGRA is Australia’s most credible independent voice on issues affecting regional Australia,” SEGRA Conference convenor, Kate Charters said.

She said the industry forum in the Cobram Barooga region has attracted a record number of registrants reflecting the interest of all of Australia in the future of agricultural regions. 

Keynote speakers travelling to Cobram Barooga include Dr Tom Measham of CSIRO, who will present on Strategic Foresight for Regional Australia: mega trends, scenarios and implications.

Dr Daniel Terrill of Deloitte Access Economics will be speaking about Drivers and Constraints to Regional Economic Development.

Professor Lee Pugalis of the University of Technology Sydney will be discussing Delivering Place-Based Regional Economic Development.

Jan Owen, the chief executive officer of the Foundation for Young Australians will be talking about Lifelong Learning and Employment in Australia.

Luke Wilson, Victoria’s Cross Border Commissioner, will be speaking with his NSW counterpart James McTavish about Releasing Opportunities at the Border.

“SEGRA is not ‘just another conference’,” convenor Ms Charters said. “It is renowned for its willingness to take up real challenges and propose actions that understand the true character of economic development in regional Australia.

“This is why we are branded ‘The think tank with tangible outcomes’,” Ms Charters said.

SEGRA has been speaking out for regional Australia for 23 years. It is a critical forum where regional development practitioners, industry, researchers and government bring together their combined knowledge and ideas on regional futures from across Australia.

The full conference program is on www.segra.com.au

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By Lynette Schultheis >>

IF ANYTHING is for sure in business, it’s that there will always be risks and crises to contend with.

Some of these risks are internal to our organisations, and some are external. The best we can do is to make sure that we’re as aware and prepared as we can be.

A resilient national business environment makes managing risks less daunting. Fortunately, Australia has some advantages in this regard.

The 2019 edition of FM Global’s Resilience Index confirms the strong resilience of the Australian business landscape, with Australia ranking 17th out of 130 countries. 

Among Australia’s strengths are the quality and enforcement of its building codes with respect to natural hazards, like floods and bushfires (ranked 15th) and strong fire risk management, due to the enforcement of building codes with respect to fire-based design (ranked 8th).

Higher control of corruption (ranked 14th) and supply chain visibility (ranked 22nd) also lift up the resilience of Australia’s overall business environment.

On the other hand, Australia’s inherent cyber risk (62nd) weighs on our ranking. This reinforces the need for business leaders to assess their level of cyber exposure as well as to develop clear, actionable steps to mitigate cyber risk and avoid business interruption.

BUSINESS BEYOND BORDERS

The reality is that enterprise resilience is dependent on the resilience of those you do business with. This is where the FM Global Resilience Index – the only global ranking of countries by the resilience of their business environments – causes pause for thought.

It’s easy to see why many Australian businesses have supply chains reaching into South East Asia. Relatively low labour costs – together with recent policies designed to attract foreign investment, improve infrastructure and expand access to export markets – make shifting lower-value manufacturing activities to these regional economies highly attractive.

With a population of 620 million and a combined economic output of about US$2.5 trillion, South East Asia is an increasingly important partner for Australian trade and investment. But these low costs are often accompanied by high risks.

FM Global’s 2019 Resilience Index shows that trading partners like Bangladesh (108), Cambodia (114), Vietnam (88), Sri Lanka (81) and Thailand (73) present a variety of risks. These include political, financial, legal and reputational factors.

China’s ranking varies wildly from one region to the next.

MAPPING, MANAGING VULNERABILITIES

As one of the largest commercial and property insurance providers, FM Global believes that too few Australian businesses have mapped the vulnerabilities in their supply chains.

Vulnerabilities may include supply chain visibility, corruption, infrastructure quality and corporate governance.

Some of Australia's regional trading partners are also highly exposed to natural hazards.

The three countries with the largest economic exposure to flooding are Laos, Pakistan and Bangladesh, ranked 55, 88 and 112 respectively for exposure to natural hazards. Vietnam ranked lowest (130) for natural hazard risk quality, due to poorer quality and enforcement of building codes with respect to natural hazard design resistance.

On the positive side, Thailand (73) rose 16 spots this year. An Asian supply chain hub, Thailand showed significant improvement in supply chain visibility and corporate governance.

However, Thailand remains heavily exposed to extreme weather and could see an additional rise in its Index ranking by improving the quality of its natural hazard risk management.

There are significant opportunities in trading with our regional partners but FM Global’s experience indicates that a lack of resilience planning has far-reaching, long-lasting effects on business value and performance.

The key isn’t to retreat – but to engage mindfully.

Resilience is a choice. Make informed and considered decisions when choosing trading partners or site locations and implementing risk management strategies.

www.fmglobal.com.au

Lynette Schultheis is the operations manager for FM Global Australia. She sets FM Global’s strategic direction in Australia, executes corporate objectives and ensures compliance with local regulations – and is also responsible for underwriting, engineering, claims, finance and human resources.

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