We asked some Australian startups what they thought of the budget and how it might affect them. Here’s what they had to say. Michael Fox, CEO, Shoes of Prey: It's a challenge for tech startups raising capital in Australia and the temptation to move to the US where it's significantly easier to raise funding is high, and a lot of startups move for this reason. The IIF and CA were both designed to help fill this funding gap in the Australian market, so with both of them gone we'll lose a lot more Australian tech startups to the US. The reduction in the refundable percentage of the R&D tax credit will further exacerbate this. Alan Jones, head of marketing, BlueChilli: Support for the tech startup industry is not about handouts to lazy businesses, it's about arresting the innovation brain drain. In five years we can build a $50m tech startup with a team of 10 and a few laptops and mobiles. But unlike a manufacturer or a miner, that IP is highly mobile and can be based anywhere the industry support is greatest. This budget is the right step forward if what we want to do is create more Atlassians – creating most of its value for the US economy and paying most of its tax in the UK. Bosco Tan, co-founder, Pocketbook: The impact for early stage and fast growing startups is staggering. The pulling back of government support makes our companies immediately less competitive to economies like Singapore. The temporary R&D cutback conditions and the scrapping of CA & IIF to start a new program means that there will be at least one year where funding sources will be even tighter. In our world, all startups look for is a supportive and stable environment for us to compete globally. This also means a tax system around employee share schemes that actually works for companies of our size. It should be in our government’s interest to help build economic value and jobs like how Facebook and Google have contributed to the US economy. Damien Andreasen, co-founder, LawPath: Technology in Australia is a developing industry with the potential to create over half a million jobs in the next 2 decades*. Reducing funds available to support innovation and early stage tech businesses shows a lack of foresight. Reducing the R&D incentive by 1.5% will hurt startups like LawPath, we depend on the rebate to plan product development, staffing levels and even a slight reduction can have a big impact. The upside of the 1.5% reduction in company tax won't offset the R&D loss, most startups are yet to hit breakeven. The loss of the CA and IIF grants are regrettable but shouldn't stop Australian entrepreneurs getting on with the job of bringing innovative new tech business to life. Shane Greenup, co-founder, Rbutr: The largest companies in Australia are all mining, banking and supermarket conglomerates, and BHP has an annual revenue of $72 billion, followed by Rio Tinto at $59.8 billion and Wesfarmers at $58 billion. Then you look at the tech giants in the USA: Microsoft’s revenue is $77.8 billion; Google is $59.8 billion; and Apple is $170 billion. There is really no reason why companies as large and successful as these couldn't be founded in Australia and grown here. Tech doesn't require resources like mining does, and isn't limited to the local Australian market like supermarkets tend to be. You would think that investing in the development of companies like these would be a huge priority for any government.
Prime Minister Tony Abbott and Japanese Prime Minister Shinzo Abe have struck a bilateral trade agreement that will see tariffs cut on Australian agricultural exports. Under the agreement, Japan’s tariff on Australian beef will be cut from 38.5% to 19.5% and the duty-free quota for cheese will increase from 27,000 tonnes per year to 47,000. Exporters of fruit, vegetables, seafood, sugar and wine will also benefit from the agreement, although tariffs will remain on Australian rice exports to Japan. In return, Australian tariffs on consumer electronics and whitegoods will be lowered, while Japanese-made cars will be $1500 cheaper, on average, under the agreement. “This is the first time that Japan has negotiated a comprehensive economic partnership agreement or free trade agreement with a major economy, particularly a major economy with a strong agricultural sector,” Abbott said. Another seasonally adjusted boost to job ads There was a seasonally adjusted 1.4% increase in job ads during March, on top of a sharp 4.7% rise in February, according to the latest ANZ job ads series. The survey marks the fifth consecutive increase in job ads, which are seen as a good indicator of future movement in unemployment figures. “The trajectory of the pick-up in job advertising will be important for gauging the timing and pace of future interest rate rises,” ANZ's Australian chief economist Ivan Colhoun said. “ANZ continues to expect the cash rate will remain unchanged in 2014 and increase modestly by 1 percentage point to 3.5% over 2015.” Wesfarmers sells insurance business The parent company of supermarket giant Coles, Wesfarmers, has announced the $3 billion sale of its insurance business to global broking group Arthur J. Gallagher, following the sale of its insurance underwriting business in December. The company expects profits from the deal of between $310 million and $335 million, increasing the total profits from its insurance sell-off to over $1 billion. “It will either reduce debt or [we will] find a way of returning the proceeds to shareholders, or we'll find an investment. We're always looking at opportunities to invest, and we've got a track record of being very disciplined,” chief executive Richard Goyder said. “We're not going to sit on an undergeared balance sheet for too long either … we've got a track record of returning money to shareholders if we don't need it.” Overnight The Dow Jones Industrial Average is down to 16245.9. The Aussie dollar is down to US92.70 cents.
Wesfarmers chief executive Richard Goyder has warned that negative chatter risked harming consumer confidence, in stark contrast to the good news coming from the World Economic Forum in Davos. “In January I left Davos feeling really good about the world, having been there for a week and people were talking up the US economy, being pretty satisfied where Europe was and satisfied where the rest of the world was, and I've come back to Australia to incredibly pessimistic sentiment and I can't reconcile the two, to be frank,” Goyder says. “I think consumer sentiment is still somewhat fragile and I think we all need to be careful that we don't inadvertently, or otherwise, talk it down when the bottom line is, I think, Australia is still very well placed economically. “You have got superannuation funds that will be performing well, people's wealth increasing as housing prices move up, employment is still generally strong, interest rates are low and we all have to be careful we don't get ourselves into a downward spiral … it's not helpful.” Abbott pushed for wage cuts at SPC Ardmona The federal government pushed SPC Ardmona to slash employee wages by up to 40% in order to receive a bailout package, with some staff at the Shepparton plant seeing wages slashed by $20,000 to $30,000 a year, according to a Fairfax report. While Industry Minister Ian Macfarlane did not directly address the claims, he did stress the importance of boosting productivity in reducing labour costs. “I do want to reduce labour costs but it's not necessarily reducing wages,” Macfarlane says. “If we boost our productivity, if we increase the number of units that a person produces, then wages can remain stable but we do have to have competitive working conditions and we do have to make sure that some of the things that have happened in industry in Australia in the past are addressed.” Sensis slashing 800 jobs Sensis has announced it is cutting 800 jobs, with 330 jobs to go in Victoria and 400 in NSW, as part of a restructuring plan, with half of the positions being sent to the Philippines. “These changes are designed to support our growing digital business, respond to competition and deliver improvements in the service we provide to our customers,” Sensis managing director John Allan says. “As a leader in digital marketing services and print directories serving Australian businesses, Sensis needs to remain responsive to the changing media landscape. While these decisions are difficult, they are necessary to ensure Sensis maintains its competitive position.” Overnight The Dow Jones Industrial Average is down to 16,066.3 points. The Aussie dollar is down to US90.02 cents.
Federal government ministers have been warned to expect deep budget cuts early next year, with deficits likely to surpass $120 billion over the next four years. The Australian reports that spending growth is running at almost twice the rate claimed as early as May. It says ministers have said that budget savings measures were being put off until the government’s razor gang could consider cuts proposed by its Commission of Audit. Wesfarmers sells insurance underwriting business for $1.85 billion Wesfarmers, the conglomerate that owns supermarket chain Coles, has sold off its insurance underwriting business to Insurance Australia Group for $1.85 billion. The deal, if approved by competition regulators, will make IAG the largest insurance provider in Australia and New Zealand. Wesfarmers chief executive Richard Goyder says exiting the insurance business will de-risk Wesfarmers’ portfolio of companies. Toyota seeks to cut worker entitlements Car maker Toyota is seeking to cut nearly 30 employee benefits at its Victorian plant to help pay for wage rises due next year. Toyota has been prevented by the Federal Court from holding a vote of workers on the proposed changes. The changes include cutting double-time-and-a-half pay on Sundays, extra payments for work considered “unusually dirty or offensive”, four-hour paid leave for employees who donate blood, and lowering the number of training days. The company has warned it faces “unprecedented pressure” to continue to make cars in Australia following the decision of GM Holden to stop making cars locally by 2017. The Dow Jones Industrial Average is up 0.8% at 15,886.46 points, while the Australian dollar is down at 89.5 US cents.
RBA deputy governor Philip Lowe is warning business investment outside the mining sector remains at its lowest levels since the 1990s recession, due to the lingering effects of the global financial crisis. “While recently we have seen some return to risk-taking in financial markets, potential owners of real capital in the developed economies have not yet been prepared to step forward in significant numbers and take a risk,” Lowe says. “Consumer demand has been soft and businesses have wanted to wait and to see what happens … this change in corporate attitudes is, I suspect, one of the enduring but underappreciated consequences of the financial crisis.” Wesfarmers chief says post-election boost was a temporary blip Wesfarmers chief executive Richard Goyder says sales in the retail sector remain sluggish, dashing hopes of a post-election bounce. “In the last two to three weeks prior to the election there was some impact, probably in discretionary more than non-discretionary,” Goyder says. “The week after the election was very strong for us, but it went back to normal pretty quickly. “Australians continue to save, and there seems to be… a fair amount of cash sitting around, so hopefully people will bring their wallets out in the next couple of months.” 123 jobs squeezed out by Golden Circle Golden Circle has announced it is closing its Mill Park factory, in Melbourne’s outer-northern suburbs, with 123 jobs set to go in March next year. The company announced it will move its food production to an existing factory in Northgate, Queensland. “This is in no way reflective of the performance of the Golden Circle team at Mill Park,” Golden Circle marketing general manager Simon Leonard says. “The site is small and the capital investment required makes it too costly to continue to operate.” Overnight The Dow Jones Industrial Average is up 0.62% to 15509.21. The Aussie dollar is at US96.26 cents.
Coles’ parent company, Wesfarmers, has reported a full year profit of $2.26 billion for the year to June, with chief executive Richard Goyder defending fuel dockets in the face of an ACCC investigation. Coles reported a 13.1% increase in earnings before interest and tax to $1.53 billion, with revenues up 4.8% to $35.78 billion. Goyder also defends the use of shopper docket discounts on fuel in the face of criticism the practice harms smaller retailers. “We try to give our customers what they want, and clearly they have a strong desire for these dockets at a time when they are under significant cost pressures in their daily lives,” Goyder says. Packer hopes Japan will be the next jewel in the Crown Crown executive chairman James Packer has expressed interest in bidding for a gaming licence in Japan if Japanese Prime Minister Shinzo Abe's Liberal Democratic Party goes ahead with granting licences for a Singapore-style casino resort. “If Japan comes on it will be the second-biggest gaming market in the world. It has 100 million people who are all mad gamblers but they are all doing it through horse racing and pachinko. Japan is looking at the Singapore story," Packer says. "Japan is two to three years before it all gets serious, which is perfect for us because we will have Macau Studio City open and the Philippines open. "Crown Perth will be finished and Crown Sydney should be well underway, approvals pending. It is just going through the political process at the moment in Japan." Dell reports 72% drop in quarterly earnings as PC sales crash Dell has reported net income for the second quarter of $US204 million, down a massive 72% from $US732 million year-on-year. “It was predictably bad. It's not a big surprise that margins compressed to the degree that they did, when they're prioritizing sales volume over profitability," Morningstar analyst Carr Lanphier told Reuters. The news comes as founder Michael Dell battles prominent investor Carl Icahn over the company’s future, with Dell hoping to take the company he founded private. Overnight The Dow Jones Industrial Average is down 1.47% to 15112.2. The Aussie dollar is up to US91.41 cents.
Since Old Taskmaster was knee-high to a grasshopper, the clowns in Canberra have been stifling small business owners with red tape and regulation. While many business regulations are created with multinationals like BHP Billiton and Wesfarmers in mind, the same compliance hoops and taxes are also forced onto sole traders, small businesses and start-ups with far fewer resources. Unfortunately, despite the fact small businesses are the backbone of the Australian economy, the message just doesn’t seem to be getting through. Until now, that is. Thanks to Council of Small Business of Australia executive director Peter Strong – with a little help from YouTube – that message is now going viral. In fact, earlier this morning, the clip was doing the rounds here at Taskmaster Towers. Strong recorded a rap music video on behalf of small business owners and entrepreneurs across the nation, telling Kevin Rudd to start keeping it real on red tape. It’s a battle rap against bureaucracy. While it probably won’t force the likes of Snoop Dogg, Dr Dre or Kanye West to update their CVs just yet, the clip turned out better than you might imagine. If it hasn’t shown up in your email or on your Twitter feed yet, here’s the video everyone’s talking about: Now, you might think it’s a little silly. But it’s novelty value that causes videos to go viral on social media sites, including YouTube. So Old Taskmaster says it’s time to take a leaf out of Peter Strong’s book. If you use YouTube as one of your social media channels, don’t just upload a boring old ad. Instead, create a video with some novelty value to it and have some fun with it! Get it done – and bust a funky lyric!
THE NEWS WRAP: Coles looks to extend “approved” field agent program to convenience stores and liquor7:36PM | Sunday, 7 July
Wesfarmers-owned supermarket giant Coles is examining the possibility of extending its proposed ‘licenced’ field agent plan to its Coles Express convenience stores and liquor store chains, including Liquorland, First Choice and Vintage Cellars. Under the proposal, independent “field agents”, who currently act as representatives of suppliers, would need to be “approved” by the supermarket giant in a move expected to reduce fees. “Most of our large and medium suppliers maintain a significant field force to visit our stores on a weekly basis. Up to 30 field reps visit our stores in a day,” a leaked Coles tender document states. “To resolve all these issues, Coles is exploring options for creating a panel of third-party field force companies that could be used by our suppliers.” Mining industry urges end to “green tape” duplication The mining industry is urging the federal government to cut “green tape”, claiming the duplication of approvals processes between the federal and state governments delays projects and adds costs for little environmental benefit. “A study by the Australian National University shows that in the first 10 years of the operation of the commonwealth's project approval laws under the EPBC Act, an extra $820 million had been added to the cost of approvals for no extra environmental protection," said Minerals Council of Australia chief executive Mitch Hooke. "There is ongoing demand for Australia's resources but unless we dramatically improve our approvals system and policy settings more generally, we risk missing the boat.” Greece looks to secure next $10.4 billion bailout tranche Greece is in talks with representatives from the European Union, European Central Bank and International Monetary Fund in order to secure the next $10.4 billion tranche of its bailout package. While it is likely the negotiations will succeed successfully over the coming days, the bailout is subject to commitments to economic reforms, including a further 12,500 public servants being placed in a “mobility scheme” from which they will either be transferred or made redundant within a year. “The ball is in the Greek court and it depends on whether Greece is able to deliver the remaining elements of the milestones that have been agreed,” EU Economic and Monetary Affairs Commissioner Olli Rehn said. Overnight The Dow Jones Industrial Average closed up 1% to 15135.8. The Aussie dollar is down to US90.51 cents.
Grocery wholesaler Metcash has blamed the long federal election campaign for consumer uncertainty and the market power of rivals Coles and Woolworths for a weak result at its grocery division. The grocery division, which supplies IGA-branded supermarkets, were down 2.3% to $9.1 billion, with the company reporting its net profit was up to $206 million after tax for the year to April off stronger liquor, automotive and hardware revenues. “There continues to be very strong marketing activity in the food and grocery sector . . . so there's a greater need for extra marketing and advertising expenditure, and I don't think that's going to change,” chief executive Andrew Reitzer said. “All our businesses face fairly tough trading conditions because the consumer is super-value conscious and continuously shops for bargains and has absolutely no confidence.” Coles in trouble over supplier contracts Supermarket giant Coles has come under fire in a Four Corners investigation of the Bangladeshi garment trade, following the Rana Plaza factory collapse in April, which claimed around 1100 lives. In the reprot, the retail giant is accused of not paying enough to suppliers to obtain stock from a factory with reasonable working conditions. “Actually, if they want to do the business, they’ll have to go to the non-compliant factories, like you know you have seen the Savar tragedy. So many people died,” Gous Fashion managing director Anwarul Azim said. Coles’ parent company, Wesfarmers, has signed an accord to improve safety conditions at factories in Bangladesh since the collapse. AMP issues profit warning AMP has warned its life insurance payouts will be around $32 million higher than expected for the first five months of the year and its dividend could be cut, as the insurance giant downgraded its half-year profit. The company told investors it now expects a half-year profit to fall year-on-year from $491 million to between $415 million and $435 million. Overnight The Dow Jones Industrial Average fell 0.94% to 14659.56. The Aussie dollar is up slightly to US92.56 cents.
Treasurer Wayne Swan has admitted the Australian economy appears to be losing momentum following the release of March quarter national accounts showing GDP growth slowed to 0.6% for the quarter, with businesses and households cutting spending. “We've come through the worst economic conditions in over 80 years with an economy that is 14% larger than it was at the end of 2007 and with an unemployment rate with a five in front of it. That is an incredible achievement," Swan said. “My overwhelming concern is that the economy is losing momentum; if not for the improvement in net exports the economy would be struggling quite significantly.” Simplot enters talks to save Devonport food factory Simplot Australia managing director Terry O’Brien has entered into talks with the Tasmanian government to help keep its Devonport vegetable processing plant viable, with Tasmanian Premier Lara Giddings not ruling out financial assistance. “If we're going to continue in vegetables in Australia we've got to have a business that's sustainable in its own right. The only thing we'd consider, or we think would make some sense from government, is assistance with things relating to energy savings or water savings that could give us some real returns,” O’Brien said. “We do not want to see Simplot close its doors, we want to see that company operating successfully here in Tasmania for the long term,” Giddings said. Another blow to Geelong as Target looks to cut 200 jobs Speculation is mounting that Wesfarmers-owned retail chain Target is looking to slash up to 200 back office jobs in Geelong as part of a bid to cut costs. The shake-up comes after Wesfarmers chief executive Richard Goyder warned of weaker second-half earnings before interest and tax at the variety store chain would fall somewhere between an $8 million loss and $12 million profit. “There have already been a number of team changes as part of this review and more changes are likely. However, we will work these through with the Target team and they will be kept informed of any changes that may arise,” a Target spokesperson said. Overnight The Dow Jones Industrial Average is down 1.4% to 14960.6. The Aussie dollar fell to a 20-month low of US95.11 cents.
Australian state and federal government deficits are set to reach 4% of GDP, or $60 billion in real terms, unless governments make tough cuts to “share the pain”, according to as assessment by the Grattan Institute. “Everyone will have to share the pain [in order to get the budget back into surplus]. Victoria's Kennett [government] showed what could happen in the early 1990s. It was explicit about saying that everybody was going to have to share in bringing the budget back into surplus.” The dire assessment comes after Treasurer Wayne Swan revealed $7.5 billion has been wiped off federal government revenues since October, striking a “sledgehammer blow” to the federal budget. "We have seen the terms of trade come down but the dollar didn't move. That's caused a hit, if you like a sledgehammer, to revenues in the budget since the mid-year update of something like $7.5 billion. And of course the impact won't just be in this financial year. It will also be across the forward estimates,” Swan said. Billabong to reveal its fate tomorrow Billabong is expected to make a major announcement tomorrow as it wraps up takeover negotiations with its former US head, Paul Naude, and private equity firm Sycamore Partners. At 60 cents a share, Naude’s bid falls well below both the $1.10 bid the consortium initially offered in December and the $3.30 a share bid from private equity firm TPG in February last year, which Billabong rejected. Earlier this month, Billabong announced it would give Naude and Sycamore Partners 10 days exclusive access to the company’s accounts for due diligence. Target pursuing Texan company over counterfeit MAC makeup Wesfarmers-owned retail chain Target is pursuing Mudd Puppy Cosmetics and its owner, Marcy Dickerson, through US courts in order to identify how the company obtained its MAC cosmetics range. The legal action comes after Target was forced to remove its MAC products from shelves after the cosmetics line’s owner, Estee Lauder, launched legal action against the retailer for allegedly selling counterfeit products. Overnight The Dow Jones Industrial Average closed up 0.07% on Friday to 14,547.51. The Aussie dollar is down to US102.59 cents.
Small business leaders around Australia are concerned the appointment of Gary Gray as the sixth small business minister under the current government creates further uncertainty about the direction of small business policy in Australia. Given Gray has also been handed responsibility of the resources, energy and tourism portfolios, SME advocates believe he will not be able to adequately dedicate his time to understanding the needs of small business. Council of Small Businesses of Australia executive director Peter Strong told SmartCompany he’s disappointed by the rate of turnover in the position. “We run on confidence, but it’s hard to be confident when we’re unsure of the future. There have been a lot of surveys done and uncertainty is the biggest problem,” he says. “I don’t know how much he understands, we’ll have to see if he understands the issues facing small business about competition law and consumer problems.” “He needs to sit down and give the industry confidence and set some policies.” Prior to his position in government, Gray worked with companies such as BHP Steelworks, Wesfarmers and as an advisor to Woodside Petroleum. Strong says when it comes to the small business minister, background is important. “If you have a background like [Opposition Small Business Spokesman] Bruce Billson does in small business, then you are more likely to understand the problems businesses face.” Without that, Strong says it comes down to the attitude Gray has and if he has the capacity to understand the fact we’re not just business we’re people,” he says. SmartCompany contacted Gray for comment but received no response prior to publication. Australian Retailers Association executive director Russel Zimmerman told SmartCompany Gray won’t have the time to develop an understanding of small businesses prior to the September election. “It would be nice to see a person allocated the role stay in it long enough to be able to get to understand small businesses.” “It’s going to be hard for him to get a grasp on the portfolio. If they are returned again, we hope they’ll bring some stability,” he says. Zimmerman says an election needs to be held because the government has recently become a “farce”. “I think there was a good reason for the government to go to the people because it’s become a farce,” he says. Zimmerman says he’s also concerned with the number of responsibilities Gray is taking on board. “Tourism and small business go hand and hand, but certainly his other role will not be necessarily associated with small business,” he says. Gray is yet to communicate with Zimmerman or Strong, but both industry representatives say they hope he will do so soon. Accounting group MYOB released a new report today which found SME dissatisfaction with the federal government remains high at 54%. MYOB chief executive Tim Reed told SmartCompany the number of recent small business ministers is “appalling”. “It’s a message which says government policies have not been well explained to small business owners,” he says. This story first appeared on SmartCompany.
Westfield joint chief executive Steven Lowy has told investors the global shopping centre giant would negotiate reductions of up to 5% on new leases, amid a weak retail market.
The Commonwealth Bank has announced it is on track to deliver a record $7 billion annual profit, off the back of strong growth from its retail business.
Boeing has warned of delays in deliveries of its 787 Dreamliner jumbo jets, with the aircraft grounded by air safety regulators in several countries as a result of overheating batteries.
Wesfarmers-owned retail giant Coles has recorded its 15th consecutive quarter of same-store sales growth, along with a 5% growth in second quarter sales to $7.71 billion.
THE NEWS WRAP: Australian manufacturing industry must embrace Asia, Federal Government taskforce says8:14AM | Friday, 17 August
Australia can maintain a sustainable manufacturing industry into the future, but only if it embraces the opportunities provided by Asia, according to a Federal Government taskforce.
Starting a business involves, as the old saying goes, 10% inspiration and 90% perspiration. But that doesn’t mean that innovation should take a back seat in your start-up. New ideas will keep your business fresh and ahead of the competition.
Businesses that have suffered due to the sky-high Australian dollar could be offered tax relief, Treasurer Wayne Swan has hinted.
Woolworths’ new hardware brand will be called ‘Masters’, the supermarket giant has revealed.