Monthly Archives: May 2019

Abbott adviser warns on national income

Maurice Newman, Tony Abbott’s pick as head of his Business Advisory Council. Photo: Rob HomerTony Abbott’s pick as the head of his Business Advisory Council says Australia faces a collapse in the growth of national income so severe it will feel ”like hitting a brick wall”.
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Maurice Newman was until 2012 chairman of the ABC and is a former chairman of the Australian Stock Exchange.

Addressing the Committee for the Economic Development of Australia in Sydney on Monday night, he spoke of losing his ”political virginity” by throwing his lot in with the Coalition after years having ”voted for and worked for both sides”.

”Openly declaring support for one side before an election shows clearly where your sympathy lies,” he said. ”However having watched five long years of reckless spending, economic waste, class warfare particularly aimed at business and the mindless destruction of Australia’s international competitiveness, I thought I had a civic duty to stand up.”

”I have seen and heard nothing since the election to question that judgment,” he said. ”Indeed I am shocked that so much economic damage can be inflicted in just six years.”

”Labor’s commitments to its ‘better schools’ plan and the national disability insurance scheme were made in the clear knowledge of a budget already under serious and continuing pressure.”

Mr Newman said growth in real gross national income was about to collapse. ”Having become accustomed to better than 2 per cent annual growth for 22 consecutive years, we are now facing the prospect of growth with a zero in front of it. That will feel like hitting a brick wall,” he said.

Australia could no longer afford corporate welfare in the form of support to the car industry and ailing food processors. ”Giving taxpayer subsidies to ailing companies has proved to be like giving aspirin to the terminally ill. It temporarily relieves the pain but does nothing to combat the underlying disease of being uncompetitive.”

But Australia should consider relaxing competition laws in order to allow Australian companies to ”acquire the necessary critical mass” to become national champions winning business abroad.

Industrial relations should be reformed, even if the idea brings forth ”screams of outrage and the spectre of WorkChoices”.

”We cannot hide from the fact that Australian wage rates are very high by international standards, and our system is dogged by rigidities,” he said.

Mr Newman said he was speaking in a personal capacity.

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ASIC probes DJ directors’ share buys

David Jones has engaged heavyweight law firm Herbert Smith Freehills to handle its dealings with the corporate regulator, which has confirmed it is examining share acquisitions by two directors of the retailer’s shares just before the release of its quarterly sales.
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One of the law firm’s senior partners, Philippa Stone, is a director of David Jones but she is not one of the two directors whose share buying is the focus of the Australian Securities and Investments Commission’s attention.

ASIC is taking its microscope to the share purchases by Steve Vamos and Leigh Clapham, who were both sanctioned by David Jones chairman Peter Mason.

Mason has stated publicly he does not think the quarterly sales data was price-sensitive.

However, this view has been questioned by several shareholders and will be examined by the regulator.

While the transactions were undertaken within the trading window allowed by David Jones’ internal rules, these are trumped by companies law that does not

allow trading by parties with knowledge of price-sensitive information.

So it comes down to a judgment around whether the quarterly sales numbers are price-sensitive.

Mason, Vamos and Clapham need look no further than the company’s own announcement to the ASX. All David Jones’ quarterly sales announcements have a price-sensitive symbol attached to them.

The share price rose more than 6 per cent when the sales numbers were released because they were better than the market had expected.

Vamos and Clapham followed corporate procedure to the letter and sounded out the chairman. It was only after the issue caused a stir in the media that Mason approached the regulator.

It is not clear whether Stone – a heavy hitter inside the law firm – assisted the chairman in dealing with ASIC. She is on the Law Council of Australia’s corporations law committee and ASIC’s equity offerings liaison committee. She is also a member of the Australian Securities Exchange listing appeals tribunal.

Mason said: ”Andrew Eastwood of Herbert Smith Freehills is assisting the company.”

The other recent David Jones ASX statement that had a price-sensitive tag alongside it was chief executive Paul Zahra’s intention to announce his resignation.

While these two issues might seen unrelated, they intersect in some respects. The departure of Zahra has prompted closer examination of the company and its corporate governance practices, including disclosure.

When Zahra’s decision to exit was initially announced, the market was told it was an amicable decision and he was just tired. But over subsequent weeks, information has dribbled out that the chairman and two directors under the spotlight were at loggerheads with Zahra.

It seems the directors wanted to show support for the company in the wake of Zahra’s departure announcement and bought stock, which also happened to be a couple of days after the quarter books were ruled off but before the release was made public.

ASIC is understood to have already begun interviewing some David Jones directors and examining emails between the directors and the chairman.

At best, the three men are potentially guilty of an error of judgment and a lack of an understanding of the industry and what factors can move a retailer’s share price. It is understood all David Jones directors receive weekly updates on sales.

Zahra’s relationship with Mason and a couple of other directors appears to have been the main cause of his decision to announce his resignation. The major shareholders want Zahra to stay and have voiced their support publicly for his strategy, which has started to get traction and is reflected in the full-year results and sales for the first quarter.

It is understood the root of the tension between Zahra and the three board members is around what has been described as interference in management matters.

The issue apparently came to a head at a board meeting on October 21 at which Zahra registered his protest.

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New toll road to fame and fortune?

Just over a year into the top job, Transurban boss Scott Charlton has put excitement back into listed toll roads by positioning the company as the next owner of Sydney’s Cross City Tunnel and flagging interest in buying the $4 billion-plus Queensland Motorways.
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If Charlton can pull off both deals he will have created the most efficient toll road operator in the world and in the process achieved world dominance in the listed toll road operator space. It now owns all or part of nine toll roads in Sydney, Melbourne and the US.

He has also shown that the owner and operator model for toll roads can work, in sharp contrast to the litany of disasters over the past few years with traffic forecasts for toll roads by third parties inflated, resulting in several toll roads being placed in receivership, costing investors and banks billions of dollars.

In the case of the Cross City Tunnel, which was put into receivership in September for a second time in seven years, Charlton has pulled off a master stroke with the purchase of Royal Bank of Scotland’s debt exposure to the toll road for $475 million, a significant discount to its estimated $612 million face value.

It was a smart deal on both sides because RBS is keen to reduce its debt before a December 31 calendar balance date and had decided that the Cross City Tunnel was one headache too many. RBS called in the receivers in September with a view to selling the asset and getting repaid.

Transurban has made no secret it would like to buy Cross City Tunnel – at the right price. The tunnel connects with Transurban’s 75 per cent-owned Eastern Distributor motorway, which, combined with its ownership of key Sydney Motorway Network concessions such as the Eastern Distributor and the M5 South West motorway, gives it further advantages to leverage – and may present new opportunities to innovate around delivery.

Charlton’s decision to go direct to RBS and negotiate to buy the debt at a discount to face value, puts it in the box seat to do what nobody else has been able to do: make money out of Cross City Tunnel.

As the secured creditor Transurban can either cut a deal with the receiver to swap the debt for the asset or, if another party makes an offer that is higher than the face value of the debt, Transurban can outbid it or earn a bucket load of cash. If it chooses the latter it could make more than $100 million in profit.

In a statement to the Australian Securities Exchange, Transurban said it would also pay an additional fee of up to $27.5 million over four years to RBS if traffic numbers on the Cross City Tunnel picked up relative to Transurban’s assumptions.

This isn’t the first time Charlton has woven his magic. He did it this year when he managed to pull off funding from the state and federal governments by lodging an unsolicited proposal to build an eight-kilometre toll road between the F3 and M2 roads in northern Sydney. The cost of building the new motorway link is $2.65 billion.

But the jewel in the crown for Transurban would be buying Queensland Motorways, which owns the tolling rights to five Queensland roads. At $4 billion-plus it wouldn’t bid alone but with a consortium of superannuation funds, maybe including Uni Super.

The former Bligh government shocked the investment community in November 2010 when it abandoned the sale of Queensland Motorways and instead offloaded it in an off-market transaction to the state’s investment arm Queensland Investment Corporation (QIC) at a discount of at least $1 billion despite private sector interest. At the time several companies, including Transurban, had completed some preparatory work for a bid, only to find the government had pulled the plug. Not surprisingly it attracted a great deal of criticism.

Three years on QIC is looking at offloading the toll road business. There is speculation it will try to structure a sale that enables it to hang on to the lucrative management rights – and fat fees – by introducing a passive investor.

The feeling is that QIC is overexposed to infrastructure assets, particularly toll roads. But there will be a long list of interested parties, including Industry Funds Management and the Canadian pension funds.

”We think Queensland Motorways is a great asset … We don’t know what the process that QIC is proposing yet. We could play various different roles as operator, owner, back office and potentially working with partners,” Charlton told a news conference on Monday.

Transurban’s shares have jumped more than 16 per cent in the past year to $7 a share as the market has renewed its interest in the dwindling number of listed infrastructure assets. Most of them came a cropper during the global financial crisis, either blowing up, being restructured or taken out. Transurban is one of the few survivors after deleveraging itself and ignoring an unsolicited takeover offer by two foreign pension funds at $5.25 a share in November 2009.

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Putting free into freelance

At The New York Times, they boast of ”all the news that’s fit to print”, but at Eric Beecher’s Private Media it seems more a case of ”all the news that’s free to print”.
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Freelance art hacks have the Yves Klein blues over an edict from the media mogulette that they are not to be paid for work on the empire’s latest website, the Daily Review.

A bespoke-pitchfork wielding mob of high-profile yartz writers led by Byron Bache have signed a group letter vowing not to work free of charge for the website, to be launched on Monday.

Many of the signatories already blog for Private’s flagship site, Crikey, on a kinda-paid basis. Beecher, who owns a $2.1 million terrace house in Melbourne’s nicest inner suburb, Carlton, doesn’t deign to pay for blog entries unless they rake in a certain number of hits.

The pay scales were published on Bache’s blog but removed at Crikey’s request. However, because nothing is deleted forever on the internet, CBD can reveal how the system works. Blog entries that get 25,000 page views a month earned a ”bonus” of $193.50, those with 50,000 hits $387 and so on, with the system topping out at $4000 for a post ticking past the 500,000 mark.

However, the writers complained they would receive nothing for blogposts republished on the new website.

Those signing the letter include Crikey literary blogger Bethanie Blanchard, Crikey TV critic Laurence Barber and novelist and Fairfax contributor John Birmingham. Former Crikey stars in the shape of reporter Amber Jamieson and web editor Ruth Brown have also signed the stinging missive.

Beecher courageously hid behind the skirts of Crikey editor Jason Whittaker on Monday, as did Daily Review editor Ray Gill.

Whittaker said he could ”only support writers who are trying to earn a living in this game”, so CBD was curious to know how he was going to do this by not paying them.

Alas, his response did not answer the question. Rather, he said, Private Media’s investment in Gill and a junior to run the site was ”a big spend for us”.

He also failed to answer questions about who exactly would be writing for the site, given that those signing the letter represent most of Crikey’s existing arts team. Nor would he say how the no-pay scheme fitted with Crikey’s coverage of treatment of freelancers elsewhere, including at BusinessDay publisher Fairfax Media.

However, he did deny being embarrassed that Jamieson and Brown had signed on to the protest. So that’s OK then.Ten’s billionaires

With Bruce Gordon, James Packer and Lachlan Murdoch unable to vote their combined 33 per cent stake in Ten on the debt guarantee deal at next month’s AGM, they will be reliant on Her Roy Hill Highness Gina Rinehart to set an example for plebeian shareholders who might be wary of a deal that could give the billionaire trio security over all the company’s assets.

But, if Rinehart goes rogue, there is always another billionaire on the register who might set the right example for other investors. Documents released on Monday confirm Kerry Stokes’ Seven empire has a 2.4 per cent stake.

Shareholders will also be asked to approve an executive incentive share plan that will see chief executive Hamish McLennan awarded up to $1.48 million a year of ”loan-funded shares” in Ten. He is to be issued shares each year based on factors including share price on the issue date and ”potential volatility of the company’s shares over the life of the loan”. Luckily, the ratings of new brekky show Wake Up are not part of the calculation.Packer takes a trip

Slim Jim Packer is in Sri Lanka this week. Entirely coincidentally, legislation enabling his Crown to open a casino is due back before Sri Lanka’s parliament next month.

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Wallabies can’t hide from scrums under new laws, says Wood

No place to hide: A young Stephen Moore prepares to pack down at hooker for the Wallabies against Ireland back in 2008. They meet again on Saturday. Photo: Cameron SpencerLegendary former Ireland hooker Keith Wood says the Wallabies have been forced to confront their set-piece demons after running a mile from scrummaging for many years.
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Wood, still the highest-scoring hooker of all time a decade after his retirement from Test rugby, believes the evolution of scrummaging laws during the past decade helped the Wallabies avoid the tough stuff at scrum time.

The 63-Test former Ireland captain said new “soft-engagement” rules, which reduced the importance of the “hit” and put more emphasis on wrestling, had forced the Wallabies to front up.

“I have always thought Australia was trying to get away from scrummaging, that they didn’t want to do it too much,” Wood said.

“A lot of the law changes that happened have helped that, but it’s different now, there is no hiding.”

The Wallabies pack survived the challenge against Italy at the weekend after being annihilated by England on opposition ball a week earlier.

Wood said Australia were hard done-by at Twickenham under referee George Clancy but showed their mettle by turning it around in Turin. He singled out starting hooker Stephen Moore for praise.

“I think he is maturing incredibly well, he is an incredibly consistent performer,” he said. “You could see when things don’t go well for them at scrum time [in England] he was absolutely angry. That’s a good thing.”

Ireland loom as a huge threat to Australia’s burgeoning confidence. Big wins against Argentina and Italy, where the Wallabies attack was given the time and space to wreak havoc, have been interspersed with tighter, high-pressure affairs with which the team has not coped.

A second-string Ireland had a field day after warming up against Samoa on Saturday. But Wood believes the home side was just whetting its appetites for higher profile clashes with Australia and New Zealand over the coming fortnight.

New coach Joe Schmidt, whose recent promotion from provincial powerhouse Leinster to the Test role mirrors the trajectory of Ewen McKenzie from the Reds, will have the full complement of Ireland veterans at his disposal, including captain Paul O’Connell, Sean O’Brien and Brian O’Driscoll.

“Nobody has any real idea what he’s going to be like [as a coach] apart from the players,” Wood said of Schmidt.

“I have spoken to a few of them, and the non-Leinster guys are a little bit taken aback by his attention to detail. He is remarkably precise, and there may be a level of adjustment they all have to go through.

“But it’s a great thing for them that they feel challenged almost immediately. O’Driscoll [who plays for Leinster] says he’s the best coach he’s ever played under, he feels he is learning something all the time.”

The last time the countries met was in the 2011 World Cup, when Ireland shocked the Wallabies with a 15-6 win in the pool stages.

Despite that loss and a fairly even ledger during the past seven years, there still exists a widespread expectation in Australia that a Test against Ireland is a “should-win”.

“I don’t think that’s fair any more,” said Wood, who played the Wallabies 10 times between 1994 and 2003, winning just one of those encounters.

“When I look at Australia from an Irish perspective, I would say we can win. Not that we should, but certainly that we can win. And if we play to the very top of our ability I would say that we both can and should.”

Wood is intrigued with the Wallabies’ flagging fortunes under McKenzie, and thinks Ireland could be well placed to test the tourists’ character at Aviva Stadium on Saturday.

“The Wallabies have foundered this year,” he said. “They are in a better place than they were at the start of the season but it is also the end of a long year.

“Ireland are playing at home, they would have to take the hope that they can win, but they will need to start the game with a high level of aggression, be incredibly accurate and incredibly effective.

“You can’t afford to make a lot of mistakes against Australia, they are always close, no matter who they are playing against.”

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