Building materials group Adelaide Brighton could be the canary in the coal mine, revealing the toll of damages resulting from the turndown in residential construction, and the risks such a decline may pose to employment.
The company’s profit downgrade for the 2019 financial year took the market by surprise and infected other building materials companies – sending the share prices of Boral and CSR spiralling.
Immediately after the release of Adelaide Brighton’s revised earnings prospects its share price tanked 19 percent, CSR tumbled 6 percent while Boral investors watched the value of their holdings slump by 8 percent.
The building materials industry has been caught in the aftermath of a residential construction boom – that has flipped over into a bust.
On the back of a six year property construction boom fed by rising house prices and an under-supply of housing stock, the construction tap was turned off quite abruptly when prices for houses and apartments started to fall about 18 months ago.
For Adelaide Brighton, Wednesday’s earnings downgrade is its second over the past six months – suggesting that conditions have deteriorated faster than it expected when it issued its first warning back in May.
While some 40 percent of Adelaide Brighton’s profit downgrade is the result of company specific issues, the remainder reflects market based issues.
The company now expects full year net profit to come in at between $120 million and $130 million – a major decline on the $190 million it earned in full year 2018.
It looks to be brewing into a perfect storm for building materials companies who are being hit with the combination of lower demand in numerous geographical pockets, increased competition (which affects the prices received) and a hike in raw materials costs.
Equally disturbing was Adelaide Brighton’s announcement that it would take a writedown of up to $100 million in the value of its business.
As part of its exercise to shore up the balance sheet the cement maker has decided to withhold its 2019 second half dividend. The company also felt the need to assure investors that after any balance sheet impairments it would remain inside its banking covenants.
None of these building materials companies have yet reported results for the second half. But in the first half of 2019, Boral Australia delivered earnings before interest tax amortisation and depreciation of $271 million which was down 8 percent.
At the time, Boral Australia said growing infrastructure activity had offset residential construction.
Adelaide Brighton, however, noted on Wednesday that it had seen a further softening of conditions in residential and civil construction (infrastructure) markets.
(While infrastructure construction markets are considered to have held up relatively well – there have been signs of recent weakness which experts have put down to the timing of new projects rather than anything more sinister.)
The construction slump was outlined clearly in June economic statistics released this week which showed building approvals fell -1.2 percent to be 25.6 percent lower than a year ago. Trend approvals are now annualising 174,000 which is the lowest since June 2013.
Year on year building approvals for houses has fallen 14.5 percent while approvals for apartments have plunged 38 percent.
And given there is a backlog of property supply still sitting in the pipeline there is an expectation that the building approvals numbers will get worse before they get better.
Supply will get tighter as this backlog washes through the system but that will take some time – some economists suggest as long as two years.
In the meantime, building materials companies will wear the pain of operating during this cyclical low. According to UBS the outlook for local building materials remains mixed.
‘We estimate that the known decline in housing approvals will lead to 5 percent decrease in demand for concrete over the next 12 months. But surplus capacity will not just be limited to cement companies. In our view, over the past five years the building materials industry as a whole has built itself around a 225,000 approvals rate.’
A note to investors JP Morgan issued on Tuesday ( before the Adelaide Brighton announcement) warned that CSR and Adelaide Brighton were most exposed to residential construction activity – accounting for 53 percent and 32 percent of group revenue, respectively.
It seems that not only is the construction party over – the hangover looks to be more severe.
The typical Australian household is actually worse off now than during the global financial crisis, with disposable incomes falling between 2009 and 2017.
That’s according to the 2019 Household Income and Labour Dynamics in Australia report, which has been tracking 17,500 people across 9500 households since 2001.
Real median household annual disposable income was $80,595 in 2017, $542 lower than it was in 2009 at $80,637, having fallen between 2009 and 2011, risen in 2012 and remained broadly unchanged after.
From 2009 to 2017, the average household income only grew by $3156 or 3.5 per cent.
“When we look at overall measures of household income, we see that the broad trend in terms of income levels is stagnation, that we’ve seen very little change in the median income,” Professor Roger Wilkins said in a statement.
“So the income of someone in the middle has basically remained unchanged since 2012. That was on the back of very substantial rises, particularly in the mid 2005 to 2009 range in particular, we saw very large increases in household incomes, but since 2012 there’s been basically no growth.”
Australian Council of Trade Unions secretary Sally McManus seized on the findings, saying working people “haven’t had a real pay rise since the Coalition government came to power”.
“This means living standards have not improved for a decade,” she said in a statement.
“This is a government who actively works to keep wages low. It has designed the system this way by making the job of unions, which is to make wages go up, as hard as possible while cutting penalty rates, opposing minimum wage rises and holding down the wages of their own staff.”
Ms McManus said the Morrison Government’s legacy would be “the worst period of economic stagnation for households in recent memory”.
Disposable incomes have fallen since 2009.Source:Supplied
The Northern Territory has the highest household incomes.Source:Supplied
Speaking during Question Time on Tuesday, Treasurer Josh Frydenberg said Australians were “certainly better off since 2013” and pointed out the HILDA survey was conducted to December 2017.
*“Since then, the unemployment rate has come down from 5.6 per cent to 5.2 per cent, the wage price index has increased from 2.1 per cent to 2.3 per cent,” Mr Frydenberg said.
“Real wages have increased, the participation rate has increased and the ABS household income and wealth survey, released earlier this month, which takes into account the full 2017-18 year, shows that real median household disposable incomes have increased by over $2000 per year compared to 2007-08.”
Mr Frydenberg said the Coalition had created the conditions that helped generate more than 1.4 million new jobs. *
“Lower taxes have ensured that Australians can earn more and keep more of what they earn,” he said.
“I will tell you what will lead to worse outcomes for the Australian people, lower household incomes and a lower standard of living, and that’s $387 billion of higher taxes.”
*CAAN: Not so according to this Report: Professor: Migrants take three quarters of Australian jobs
TheHILDA report also broke down incomes by state and territory, finding that households in the Northern Territory have now overtaken those in the Australian Capital Territory to take the top spot.
Between 2012-13 and 2016-17, the median household equivalised income — a measure of material living standards obtained by adjusting household disposable income for the household’s “needs” — increased by 8.8 per cent in the NT to $67,061.
The ACT fell by 11 per cent over the same period to $66,230, Sydney increased 1.6 per cent to $48,569, Melbourne increased 4.1 per cent to $51,448, Brisbane increased 1.1 per cent to $51,652, Adelaide fell 1 per cent to $46,993, Perth fell 5.2 per cent to $53,392 and Tasmania increased 0.4 per cent to $41,172.
“After rapid growth between 2006 and 2011, the median income in the ACT fell considerably between 2012 and 2015 and has not since recovered, although it remained around equal-highest with the Northern Territory at the end of the 2001 to 2017 period,” the report said.
“Among the mainland capital cities, Adelaide consistently has the lowest median income, while in recent years Perth has had the highest median income despite experiencing a substantial decline towards the end of the period.
“Aside from the ACT, Western Australia — both Perth and the rest of the state — has fared worst since 2012-2013. Non-Sydney New South Wales and Adelaide have also experienced declines in median incomes since 2012 to 2013.”
Rising childcare costs, increasing commute times and growing rates of depression and anxiety were also highlighted in the report, as was a worrying uptick in poverty after a long-term downward trend.
“The HILDA survey is showing substantial increases in diagnosed depression and anxiety, and we’ve seen particularly large increases amongst young women,” Prof Wilkins said.
“For example, amongst women aged 15 to 34, we had approximately 13 per cent reporting being diagnosed with depression or anxiety in 2009. In 2017, that was up to 20 per cent, so one in five women in that age range has actually been diagnosed with the condition.”
The average weekly commute time since 2002 has ballooned from 3.7 hours to four-and-a-half hours or 66 minutes per day. Sydneysiders have the longest commutes at around 71 minutes a day.
The change has been blamed on poor infrastructure and public transport investment, soaring house prices and rapid population growth. “There are massive gender differences in commuting time,” Dr Inga Lass said in a statement.
“Men usually spend longer on commutes than women, and especially fathers with two children are the ones who have longest commutes, but women tend to commute less when they have children
“The people who have long commutes, who spend more than two hours a day travelling to and from work, they are also less satisfied with their working hours, with the flexibility to balance work and life, and they’re even less satisfied with their pay.”
The slump in Australian construction is starting to hurt the major companies that operate in the industry.
Developer Ralan Group has called in administrators and owes an estimated $500m to creditors
Building materials group Adelaide Brighton says its profit may be 37pc down on last year — its shares plunged 18pc
Residential building approvals are down by more than a quarter on last year’s high levels
One of the nation’s largest property developers, Ralan Group, has gone into voluntary administration, leaving billions of dollars worth of apartment projects in doubt and around $500 million owing to creditors.
Furthermore, cement manufacturer Adelaide Brighton has scrapped its interim dividend, in addition to a severe profit downgrade, sending its shares tumbling 18.3 per cent to $3.53.
Its shock profit warning also caused investors to dump their shareholdings in rival companies Boral (-7.8pc) and CSR (-6.1pc), which are subject to similar economic pressures.
All this occurred a day after building approvals plummeted by 25.6 per cent since last year, according to the latest figures from the Bureau of Statistics (ABS).
Adelaide Brighton’s ‘vicious cocktail’
Adelaide Brighton warned its underlying net profit would fall to $120-130 million this calendar year — a 37 per cent drop compared to the $190.1 million profit it earned last year.
In a statement to the ASX, the company blamed “further softening of conditions in the residential and civil construction markets” as the main reason for its earnings downgrade.
It also pointed the figure at “continued competitive pressure” in Queensland and South Australia and “sustained increase in raw material costs”.
This was the second profit downgrade from Adelaide Brighton in less than three months.
In early May, the company told investors to temper their expectations, as this year’s profit was likely to be 10-15 per cent lower than last year’s $190.1 million.
That led to Citi’s building materials analyst Daniel Kang downgrading Adelaide Brighton’s stock to “sell” two months ago.
“A vicious cocktail of an accelerating housing downturn, intensifying competition and higher raw material costs” triggered the company’s profit warning, Mr Kang said.
“With competitive pressures unlikely to ease any time soon, we believe earnings risk remains to the downside.”
Ralan Group collapses
Administrators Grant Thornton said it would undertake an “urgent financial assessment” into Ralan Group and shortly hold a first creditors meeting.
The Ralan Group specialises in developing, marketing and managing property — residential and commercial — in Sydney and the Gold Coast.
In a statement, the administrators said Ralan has a “development pipeline of over 3,000 residential units which are in the construction or pre-sale stage as well as operating accommodation assets comprising over 600 rooms“.
“The total value of creditors is still to be confirmed but initial indications are around $500 million owed across the group.”
One of its high-profile developments is the four-tower Ruby Collection hotel on the Gold Coast, worth $1.4 billion.
The annualised results were more downbeat, with the total number of dwellings receiving construction approval falling 25.6 per cent since the previous year.
Within that figure, approvals for houses were down 14.8 per cent over the 12-month period.
However, the result for apartment approvals was far worse, plunging 39.3 per cent since June 2018.
In addition, trend approvals are now at 174,000 over the year, the lowest level in six years.
Morgan Stanley economist Chris Read is pessimistic about the construction industry’s future.
“We expect further declines in building approvals in the coming months, given the elevated level of new supply coming to market and still tight credit conditions,” Mr Read said.
His sentiments were shared by UBS chief economist George Tharenou who “forecast[s] no recovery, with dwelling commencements to drop to 170,000 this year”.
“Hence, as the still near record pipeline of activity completes, GDP-basis dwelling investment will likely still decline for at least a year, and probably slump by around 10 per cent year-over-year, dragging down construction jobs,” Mr Tharenou said.
“Indeed our tracking of construction job ads is consistent with about 100,000 jobs losses ahead.”
However, BIS Oxford Economics was more upbeat about the prospects of a construction rebound.
“Australia’s dwelling stock deficiency will grow once again as rising undersupplies in Victoria, Queensland and Tasmania develop by 2020/21,” said BIS managing director Robert Mellor earlier this week.
“We anticipate this pressure to facilitate growth in house prices and rents, helping create a renewed upswing in residential building starts through the early to mid-2020s.”
“The downturn has further to run with an additional 8 per cent decline forecast for 2019/20, with the fall in residential building outweighing the growth expected in the non-residential sector.”
Chinese billionaire and Crown high roller Huang Xiangmo’s relationship with former NSW Labor party boss Jamie Clements and ex-state MP, Ernest Wong, will be the focus of fresh corruption commission hearings next month.
The Independent Commission Against Corruption will examine serious allegations of subversion of state election donation laws. Also of “significant public interest” to the corruption watchdog is possible foreign influence on the NSW electoral process by Chinese business figures, some of whom are understood to have close ties with the Chinese government.
Leaked Crown documents, part of an ongoing investigation by The Sydney Morning Herald and The Age, can also reveal how Mr Huang dealt with powerful former Labor party operatives working for Crown Casino, even after ASIO warned Labor and the Coalition about him in August 2015.
Mr Huang was expelled from Australia by ASIO over his foreign influence activities.
As the fallout from this investigation continued, the federal government on Tuesday ordered a national integrity watchdog examine a string of allegations about the conduct of Commonwealth officials linked to Crown’s casino operations.
Details of the ICAC investigation came to light after NSW Labor registered a formal complaint about ICAC executing a search warrant at its headquarters last December.
An investigation was undertaken by the independent inspector of ICAC, Bruce McClintock, SC.
His report into the ALP’s complaint, tabled in parliament recently, contained extraordinary details surrounding the complexity and seriousness of the ICAC inquiry.
Targets of the inquiry were revealed to be ALP officials, members of Chinese Friends of Labor and political donors, who may have allegedly evaded donation laws, which the report suggests can attract jail terms of up to 10 years.
The report revealed the ICAC was investigating concerns those parties “entered into a scheme to evade the prohibitions and requirements of [the electoral funding act] relating to political donations”.
Sources have told the Herald that of particular interest to the inquiry are donations made by Mr Huang, who was stranded in Hong Kong earlier this year after he was refused re-entry to Australia.
When contacted on Tuesday, Mr Wong said he “expected to be called” to the inquiry given he was the patron of the Chinese Friends of Labor organisation.
In 2013 Mr Wong, a close confidant of Mr Huang, was given an Upper House seat by Labor party officials. He succeeded former treasurer Eric Roozendaal who, upon quitting parliament, went to work for Mr Huang’s prominent property development company, Yuhu.
Asked if he had been summoned to appear, Mr Clements declined to comment.
In 2017 Mr Clements, who was general secretary from 2013 to 2016, was convicted of unlawfully accessing the electoral roll after he sought confidential details about a voter for a union boss. He was fined $4000.
Of specific interest to ICAC is a March 2015 Chinese Friends of Labor dinner, where $100,000 was raised for the party.
Jonathan Yee, the former head of Chinese Friends of Labor, is understood to have played a key role in rounding up the donors.
A Labor source said there had been discussions within head office as to whether ALP officials would have their legal fees covered by the party in relation to “further developments” in the matter.
“There is clearly movement at the station on that matter,” the source said of the ICAC inquiry which is scheduled to start on Monday, 26 August.
They described the decision for Labor to lodge the complaint with ICAC, which resulted in key details and seriousness of the matter being made public, as “a fuck up”.
Former Senator and onetime General Secretary of NSW Labor Sam Dastyari resigned from Federal parliament after it was revealed that he had tipped off Mr Huang that his phone was being monitored.
In February, Mr Dastyari said his first encounter with Mr Huang should have sparked “warning bells” after he met him at a private restaurant in Sydney’s Chinatown.
“He had just booked out an entire restaurant to have dinner with me. I was vain. Arrogant. Thought I was special,” he told The Daily Telegraph.
“There is an arms race for donations between the parties. And when you’ve got individuals like Huang who are prepared to fork out millions of dollars they get listened to,” the former in NSW Senator said.
The Senator had previously found himself in strife when, during the 2016 Federal election campaign, he stood beside Mr Huang at a Chinese-media press conference, supporting the Chinese party’s position on the South China Sea, which was contrary to the ALP’s stated position.
Nick McKenzie is an investigative reporter for The Age. He’s won seven Walkley awards and covers politics, business, foreign affairs and defence, human rights issues, the criminal justice system and social affairs.
IT is all part of the Ponzi Scheme … the origins of which date back to the 457 Visa being introduced after John Howard took office …
Search CAAN Website ‘Visa Manipulation’ Category to learn more …
From ‘The Comments’ …
-the real question no-one has answered is how many of these “new” migrant jobs are as a result of Australians’ jobs disappearing? What’s the net net? I’ve little doubt the job creation figures would look a whole lot less rosy…
-good on them. These cheap workers are providing a valuable service to Australia – enabling business owners employing them to steal their wages (simply pay them less than a local and keep the difference for themselves) to raise their own wages and take on more debt to grow the economy with!
-now I know why Melbourne has 25% youth unemployment
-how many of those jobs are Real Estate agents? How many are baristas? How many are other “service” or BS jobs?
-what jobs have been created vs which jobs have been destroyed I wonder? If wages growth is super low, it can’t be highly skilled jobs they are creating / taking surely? How many are uber drivers?
-the government is going with the path of least resistance – building up a service economy, which can be done by simply importing more consumers and low-wage workers
-building a productive economy, where we build products that the world wants, is too hard
-22 year-old son, recent graduate, could not get any form of job for several months after graduation. Finally secured a job by doing his security licence …
… HIGH IMMIGRATION ‘instead of providing jobs, it is undercutting wages, crush-loading our cities, and forcing people to live in smaller and more expensive housing’
Professor: Migrants take three-quarters of Australian jobs
Last year, the Australian Treasury released a propaganda report, entitled Shaping a Nation, which admitted that the lion’s share of Australian jobs growth has gone to migrants:
*Recent migrants accounted for two-thirds (64.5 per cent) of the approximately 850,000 net jobs created in the past five years.
*For full-time employment, the impact is even more pronounced, with recent migrants accounting for 72.4 per cent of new jobs created.
Then at a Senate Estimates hearing in May, the Department of Home Affairs confirmed that migrants have taken the majority of new jobs:
Assistant secretary in the Home Affairs statistics and information branch, Jason Russo, said it was likely that “more than 50%” of the 1 million jobs created in five years were a result of immigration.
Home affairs secretary Michael Pezzullo clarified that this was likely because immigration’s contribution to population growth in Australia was running higher than 50%…
*In Estimates, officials could not definitively break down the number of permanent and temporary migrants that made up the total figure, but said that the 457 temporary skilled visa program accounted for around approximately 500,000 of the 850,000 of the jobs created in the time the report examined (which ended in 2016, well before the government reached 1 million jobs created).
Today, we have received further confirmation that migrants have taken most Australian jobs via Melbourne University demographer,Professor Peter McDonald:
“In recent times, about 75 per cent of employment growth in Australia can be attributed to recent immigrants”.
*A 2017 research paper by Professor McDonald published in the Australian Population Studies Journal examined the impact of immigration on Australia’s employment growth after the Global Financial Crisis (July 2011 to July 2016).
*It found that in the five-year period, employment in Australia increased by 738,800, with immigrants accounting for 613,400 of these jobs.
“Research indicates that immigration provides major benefits to the Australian economy,” his report concluded.
*Here is more evidence that the mass immigration ‘Big Australia’ policy is failing to benefit the incumbent population.
Instead of providing jobs, it is undercutting wages, crush-loading our cities, and forcing people to live in smaller and more expensive housing.
Federal Treasurer Josh Frydenberg and rookie Liberal MP Gladys Liu are facing a last-minute High Court challenge to their victories at this year’s federal election.
High court challenges have been lodged against election results in Kooyong and Chisholm
The seats were won by Liberal MPs Josh Frydenberg and Gladys Liu
The challenges centre on posters that appeared outside voting booths on election day
*Failed independent candidate Oliver Yates, who challenged Mr Frydenberg in the seat of Kooyong, has teamed up with a mysterious voter from Ms Liu’s seat of Chisholm to launch a legal bid to have the results in both electorates ruled invalid.
Documents filed to the High Court, sitting as the Court of Disputed Returns, claimed the posters imitated official Australian Electoral Commission (AEC) material and were therefore in breach of electoral laws that make misleading and deceptive conduct illegal.
*The posters, which featured the AEC’s distinctive purple and white colouring and were written in Chinese, instructed voters at polling stations that the “correct way to vote” was to place a “1” next to the name of the Liberal candidate on the ballot paper.
They were officially authorised by the Liberal Party’s Victorian state director in small text at the bottom of the poster.
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Mr Yatesflagged on Friday that he would begin the legal action this week, but a challenge to Ms Liu’s knife-edge victory in Chisholm appeared unlikely after Labor indicated it would not dispute the result in that seat.
But nowMs Liu has been swept into the proceedings after Mr Yate’s legal team began representing a Chisholm voter named Leslie Hall.
Marque Lawyers principal Michael Bradley, who is acting in both matters, would not go into detail about how Ms Hall became involved in the proceedings.
“She is a private citizen, she is an elector in Chisholm and she made the decision that she was sufficiently unhappy about the conduct of the Liberal Party on election day,” Mr Bradley told the ABC.
“Somebody — either a candidate or elector — has to stand up and be the petitioner and she’s decided that she is prepared to do that. She has no political axe to grind and nothing to gain out of it.”
*Ms Hall’s application also asks the court to make a declaration that Ms Liu, as well as acting Victorian Liberal Party director Simon Frost, committed illegal activity by authorising the posters.
*In a statement provided by her lawyers, Ms Hall said she was concerned the posters represented an “erosion of democracy”.
“I am concerned that the AEC allows deliberately misleading statements in a foreign language to be provided to people who may not have access to English and therefore to a full understanding of the electoral processes,” she said.
Butthe applications argued the posters were deceptive because they led voters to believe that “in order to cast a valid vote, the number ‘1’ had to be placed on the green ballot paper that was next to the Liberal candidate”.
Ms Hall’s application said the posters were particularly effective in Chisholm, which took in the suburbs of Box Hill, Blackburn and Mount Waverly, because of the high proportion of Chinese speakers in the electorate.
The 2016 Census found about 20 per cent of Chisholm residents spoke Mandarin or Cantonese at home, compared with a figure of less than 4 per cent nationally.
Ms Liu won her seat with an ultra-thin margin of just 1,090 votes. She is the first Chinese-Australian woman to win a federal seat in the Lower House.
Mr Bradley said the cases hinged on not only proving that the posters were invalid, but they influenced the outcome of the election.
“We have to convince the court that it was likely to have affected the result. In Chisholm [the result] was knife-edge,” he said.
Mr Frydenberg comfortably won Kooyong with a two-party preferred vote of 55.7 per cent.
The Greens candidate for Kooyong, Julian Burnside, who lost with 44.3 per cent of the two-party preferred vote, said the challenge should succeed.
“I think the challenge is correct. The signs were outrageous,” Mr Burnside told the ABC.
“They basically instructed people in Mandarin, they said ‘if you want to cast a valid vote you need to put a ‘1’ beside liberal’, and that’s misleading, deceptive and wrong.”
Mr Yates has launched a crowd-funding campaign for the legal action, which has so far raised more than $17,000.
In conclusion … ‘Any government that wants to clean up gambling has the tools to do it. Anintegrity investigation into Crown announced today by Attorney-General Christian Porter may help achieve some reform, especially around allegations of Crown’s involvement with criminals and money laundering. …
The exploitation of vulnerable people by gambling operators across the country needs its own inquiry, and governments need to find the will to regulate in the genuine interests of ordinary people.‘
The Crown allegations show the repeated failures of our gambling regulators
In 2017, the Victorian auditor-general pointed out that VCGLR’s capacity to regulate Crown (and other liquor and gambling venues it also regulates) was underwhelming.
In its conclusions, the Auditor observed:
There is a need for VCGLR to improve its oversight of the casino. VCGLR is not able to demonstrate that its casino supervision is efficient or effective as is required for best practice regulation of a major participant in Victoria’s gambling industry.
In2016-17, punters using Crown’s Melbourne casino lost $1.56 billion. The Victorian government’s share of this, via tax revenue, was $207.7 million. The Crown casino in Perth relieved its patrons of $622.8 million. The WA government got $61.9 million of this.
This revenue is important to cash-strapped state governments. With few sources to raise revenue, and many big-ticket items to fund, states need revenue.
Even so, Crown’s contribution to Victoria’s revenue stream is modest. The 2018-19 state budget papers estimate a contribution of $237 million from the casino, compared to $1.119 billion from pokies in pubs and clubs, and $1.876 billion in total gambling taxes.
Does Crown get special treatment?
Yet, Crown has many advantages when compared to its rivals in the gambling business.
It operates monopoly casinos in both Victoria and WA, pays a low tax rate compared to its suburban rivals in Victoria (pub and club pokies pay about 37 per cent of gambling revenue to the state), and has far fewer constraints on its operations.
In the case of the proposed development at Barangaroo on Sydney Harbour, its unsolicited bid for a skyscraper with casino, luxury apartments and a hotel sailed through with support from both government and opposition.
Crown clearly enjoys beneficial access to decision makers. This also appears to extend to regulators.
Headline stories about suspected criminal involvement in casino operations are worrying, and demonstrate just how little apparent scrutiny regulators apply. But more worrying from a public health perspective are the regular breaches of “responsible gambling” principlesthat are supposed to govern legalised gambling in Australia.
For example, Australia’s largest pokie operator (and Woolworths subsidiary), ALH Pty Ltd, was caught (via whistleblowers) collecting information on patrons that could be used to encourage heavier gambling, and in some cases plying them with free drinks.
Regulators are supposed to be concerned with protecting vulnerable people and minimising harm. But evidence suggests that in this area, they have also failed.
The day-to-day exploitation of the ordinary gamblers who contribute most of the money that goes into gambling industry in Australia (about $24 billion every year) attracts less interest, but is arguably at least as important.
VCGLR has not adequately performed its compliance functions.Compliance activities are not sufficiently risk based and have been focused on meeting a target number of inspections, rather than on targeting inspections where noncompliance has a high risk or high potential for harm. This approach to compliance does not support the legislative objectives for harm minimisation.
The VCGLR can hardly be unaware of the extent of its failure to achieve compliance with regulatory requirements.
failures of governance and risk management, contributing to compliance slippages
a lack of innovation and progress regarding Crown’s approach to responsible gambling, such as might now be required of a world-leading operator to meet heightening community and regulatory expectations.
A lack of political will
It’s not just regulators who are at fault, of course.
Politicians have also demonstrated little appetite for much in the way of harm prevention.
Regulators may be wilfully ignorant in their selective vision, but they do so in the knowledge that few governments want gambling disrupted.
On the harm prevention front, public health experience in multiple areas (such as tobacco control, alcohol policy, and motor vehicle injury reduction) demonstrates that there is a great deal that can be done to minimise or prevent harm from inherently dangerous products.
Our recent report, published by the Victorian Responsible Gambling Foundation, pointed out 104 things that could be done to prevent or reduce gambling related harm.
Many of them would require better-equipped regulators, with more powers and stronger penalties at their disposal.
What we know from the whistleblowers and investigative journalists (and most pointedly not from regulatory activity) is that Australia’s biggest and most prominent gambling operators regularly flout regulation, and apparently get away with it.
Any government that wants to clean up gambling has the tools to do it. Anintegrity investigation into Crown announced today by Attorney-General Christian Porter may help achieve some reform, especially around allegations of Crown’s involvement with criminals and money laundering.
However, these are the tip of the iceberg.
The exploitation of vulnerable people by gambling operators across the country needs its own inquiry, and governments need to find the will to regulate in the genuine interests of ordinary people.
Charles Livingstone is an associate professor in the School of Public Health and Preventative Medicine at Monash University. This article first appeared on The Conversation.
Newstart recipient Karryn Smith, 58, considers herself “one of the lucky ones”, yet the former school teacher is living out of her car.
Every night, Ms Smith searches for somewhere safe to park, and with any luck, will find a spot near a public toilet that keeps its doors unlocked overnight.
Public showers are a “rare” find, so she’ll sometimes go without.
Finding a comfortable hotel, let alone a permanent rental, has been impossible on just $20 a day.
“At the moment, I don’t see a future. You hear of people they find dead and with nobody there, I sort of think, is that how I’m going to end up?” Ms Smith said.
“There’s nothing that you can look forward to, being in my situation. You just sort of exist I guess.”
Ms Smith shared her tragic story with The New Daily, as pressure continued to mount on the Morrison government to lift the dole payment by $75 a week amid evidence Newstart recipients are struggling to survive.
-the daigou business has exploded into a multi-billion dollar economic backchannel integrating retail, marketing, logistics
–daigou have become known for sinking the share price of companies overnight
–the daigou market is worth at least $2.5 billion in Australia
–reports of the major players — A2, Bellamy’s, Blackmores, Bubs: zero specifics how the daigou are involved or used
-daigou model: impossible to draw a line betw domestic v international sales if products bought locally and shipped privately
THE opaqueness has sparked controversy over whether domestic sales are actually serving Australians …
-daigou blog and livestream through We-Chat providing pre and after sales service
-daigou industry trying to rebrand itself as Cross-border E-commerce enterprise
-to tie in the whole network as one entity for mutual benefit
-ATO has no specific taxation rules!
-Angela pays gst; her income deposited into a Chinese bank account; taxed by Beijing
-many transactions take place on We-Chat; linked directly to Chinese bank accounts; off Aust Govt radar
MEANWHILE in Australia we have citizens:
-losing their homes to debt through job loss, illness …
-persecuted by Robodebt
-high youth unemployment and underemployment
-more than 600,000 international students swamping universities
AS the daigou model allows tax avoidance to run rife … not to mention the Daigou, the Proxy buying up Australian Real Estate …
The daigou channel — how a handful of Chinese shoppers turned into a billion-dollar industry
Whether it’s parents furious over baby formula shortages or military personnel loading boxes onto Chinese warships — chances are you’ve crossed paths with a trading phenomenon that’s shaken businesses around the country.
In 2008, China was rocked by a baby formula scandal that left as many as 300,000 infants sick and six dead — consumer confidence in locally-made products never fully recovered.
The crisis sparked a phenomenon here of personal shoppers in Australia sending products to China, which has often made headlines over the years with Australian parents furious about baby formula shortages and the daigou’s ability to influence share prices by having a preferred brand.
As China’s middle class grew over the last decade, so too did the appetite for Australian products, and the demand is increasingly being serviced by international students and new migrants.
*As a result, the daigou business exploded from a handful of personal shoppers with handbaskets into a multi-billion-dollar economic backchannel integrating retail, marketing, and logistics services across the country.
Melbourne University graduate Yaqiong Hu says her parents were initially opposed to her being a daigou because they didn’t believe it was a proper job, but changed their minds after seeing how much she earned.
“My parents thought working in an office with a set income were the standards for a proper job,” Yaqiong says.
“When they realised the income exceeded that of an office job, they started to see it as a career.”
Although the daigou industry was accelerated by the baby formula crisis, it has since expanded to include a vast range of Australian products — cosmetics, clothes, food, wine, vitamins, toys — pretty much anything a buyer might want.
Today, with the daigou channel in full swing, those involved in the trade say as many as half a million packages are sent to China every week.
This is how one of Angela’s orders makes its way from the shelves of inner-city Melbourne to a family in the city of Hangzhou, China.
Google Earth: Digital Globe
Angela takes orders and hands the items or pre-packaged parcels over to a local specialty store for processing.
Specialty stores are scattered throughout the country and funnel day-to-day orders on to logistics firms.
Some daigou logistics firms maintain industry-scale warehouses near Australian airports to facilitate processing.
EWE Global Express processes thousands of parcels through its Moorabbin warehouse every single day.
Parcels are flown 7,500km over South-East Asia to major Chinese trade hubs depending on which province they’re heading to.
Angela’s package was sent to Shanghai’s Free Trade Zone to be processed for distribution in Zhejiang province.
From there, Chinese postal services take over distribution to daigou customers across the country.
This package from Angela was delivered to the Shen family residence in Hangzhou city in the country’s south.
Four-year-old Anna Shen has been fed Australian baby formula since she was born.
A typical parcel might include A2 baby formula and Swisse and Blackmores vitamins, among other popular Australian products.
Like any parents, the Shens just want the best products for their daughter.
*“It’s convenient to buy through daigou because they can get us products not sold on big e-commerce platforms,” the family explains.
“But mostly, the daigou we buy from are friends that we trust.”
‘No matter how big or small, your company must embrace them’
While daigou is a global phenomenon, Australia has become a case study in terms of the scale and sophistication of the operation.
*It’s nearly impossible to put an exact dollar figure on the size of the industry, but daigou are massive business — a slew of publicly-listed companies in Australia rely so heavily on daigou sales that daigou have become known for sinking the share price of companies overnight.
Blackmores interim CEO Marcus Blackmore recently told the ABC following an overnight share drop that the daigou made up some 25 per cent of his business.
But analysts estimate that the daigou make up as much as 60 per cent of many businesses, while AuMake, a publicly-listed daigou specialty business, told the ABC that the daigou market is worth at least $2.5 billion in Australia.
*The ABC examined the financial reports of the major players — A2, Bellamy’s, Blackmores, Bubs — and while they contain reference after reference to “daigou channels” and “China channels” there are zero specifics about how the daigou are involved or used.
*All companies and media spokespersons declined requests for financial breakdowns and comment, with others saying that they actually just don’t know for sure.
*Part of this is because with the daigou model,it’s nearly impossible to draw a line between domestic versus international salesif the products are bought locally and shipped privately — the opaqueness has sparked controversy over whether domestic sales are actually serving Australians.
But if China is such big business, why don’t Australian companies simply increase their international quota and sell directly into China? Well, it’s not that easy.
Businesses who think they can get around the daigou by cutting costs or selling directly into China have found themselves in terrible positions.
“Bellamy’s were doing very well through the daigou channels, so they thought: ‘OK, we can just take this over[and sell directly to China and undercut them], because clearly everyone wants our product’,” strategic business management professor Stuart Orr told the ABC.
“But they completely misunderstood.”
That’s because the key to the daigou phenomenondoesn’t necessarily lie in the quality product, but how it’s marketed.
Daigou have direct rapport and personal trust with Chinese clients that Australian companies simply don’t have.
For example, by blogging and live-streaming her services through WeChat, Yaqiong Hu is able to provide invaluable personalised pre- and after-sales services.
Sometimes tens of thousands of people all across China are watching the sessions.
*It’s proof that the daigou bought the product from Australian retailers, but for the businesses, it’s outsourced marketing.
“We’re very dependent on the daigou in Australia,” Mr Blackmore told the ABC.
“They’ve made the point to us that they do a hell of a lot of the marketing and the sales for our product in China.”
At a recent daigou event in Melbourne, Blackmores CFO Aaron Canning said the daigou were “the single largest network of sales, people, ambassadors and influencers [in Australia]“.
“No matter how big or small your company is, you must embrace them,” he said.
‘Where the real concern lies’: Tax loopholes, WeChat and the future of daigou
*Since late last year, the daigou industry has been trying to rebrand itself as an Cross-Border E-Commerce (CBEC) enterprise in order to shake its reputation as an unofficial and unregulated channel.
*Under CBEC — which refers to all digital international trade like that done on eBay and Amazon — the daigou are hoping to tie in the whole network of individual shoppers, specialty shops, distributors, and logistics firms as one entity working together for mutual benefit.
*But while the daigou phenomenon continues to grow, a number of unanswered questions remain: such as whether these lucrative backchannels are creating tax loopholes, and whether it’s responsible for companies to rely on a marketing strategy they can’t control.
*The Australian Tax Office told the ABC that while there are “no specific taxation rules” for the daigou business, the expectation is that they would meet GST and income tax obligations, while noting that “some daigou participants may not be correctly registering business activities”.
*The fact that many daigou transactions take place on Chinese social media apps like WeChat and are directly linked to Chinese bank accounts, means that many operations are taking place off the Australian Government’s radar, making them hard to crack down on.
*At the same time, using a daigou channel effectively allows companies to sell into China and label it as domestic tradesince products are bought locally — in turn, it also allows customers in China to buy Australian products duty free.
*“Whether [those engaging the daigou] are meeting their corporate governance responsibilities in terms of actually understanding this channel — I think they’re not,” Professor Orr says.
*“I think they’re standing back and just allowing it to happen. I think that’s where the real concern lies.”
Yet despite these issues, Australian companies that benefit from the daigou are ploughing ahead in the hopes they’re effectively tapping into the lucrative industry.
Just this week, Bubs Australia said in a statement that “the rapid growth of the corporate daigou segment” contributed to our domestic sales, more than doubling that of the prior year, but refused to disclose the figure to the ABC.
“Our China route-to-market platform capability advanced significantly through new strategic partnerships with Beingmate, Alibaba and Kidswant,” Bubs CEO Kristy Carr said in the company’s quarterly report.
Even Australia Post — led by former Blackmores CEO Christine Holgate — is getting on board, having opened a handful of China Direct stores over the past year that are stocked with duty-free goods that can only be shipped directly to China.
The company and Ms Holgate declined to talk about their daigou strategy or provide a representative to speak on the record, but in a statement to the ABC simply said the enterprise was a trial concept aimed at capitalising on a $320 million daigou market, without providing details on how the market is calculated.
As Australia Post is government-owned, the ABC asked the Ministries of Finance and Communications for comment on how the China Direct stores were related to its principal function of providing postal services for Australians.
“A subsidiary function of Australia Post is to carry on — outside Australia — any business or activity relating to postal services [or] any business that is incidental to its principal and subsidiary functions,” a spokesperson for the Finance Minister said.
“Australia Post has flexibility and discretion in its operational and commercial decisions within the parameters of the Australian Postal Corporation Act 1989.
*“These stores operate in a highly competitive retail market and sales figures and parcel volumes are commercial in confidence.”
CAAN: Where have you heard that before??? ‘commercial in confidence’ ???
Back in Beijing, China is trying hard to rebuild trust in home-grown products in order to wean consumers off the reliance on imports, aiming to increase local production of baby formula to more than 60 per cent — domestic infant and toddler milk accounted for 43.7 per cent of the Chinese market in 2018.
*Beijing has also implemented e-commerce laws to ensure professional daigou are registered as businesses and pay tax on the products that they’re importing — there are reports some smaller daigou operators have already exited the market, but the laws will be relatively limited in effect as significant portions of the daigou tradetake place on platforms like WeChat.
“It will capture some people, it will generate some revenue,” Professor Orr says.
“But it’s not really going to dampen down anyone who seriously wants to continue the trade.”
In the meantime, the phenomenon continues to create such a frenzy that when Chinese warships unexpectedly rocked up in Sydney Harbour this year, some media outlets suggested they were stealth missions to collect baby formula after military personnel were seen loading boxes onto the ships.
Whether the billion-dollar industry can or will ever be assimilated into the mainstream economy is unclear — but for now, the daigou industry show no signs of slowing.