Fears over the growing stockpile of zombie companies


This is on top of temporary rules put in place in March and extended in September for another six months, including relief for directors from any personal liability for trading while insolvent.

Those temporary rules also included a provision that made it harder to issue a statutory demand for unpaid bills. The threshold was increased from $2000 to $20,000 and debtors were given six months instead of 21 days to respond to a statutory demand. Despite concerns back in June about the growing stockpile of non-viable businesses, these protections were extended in September  until the end of this year. That extension was a bad idea according to the head of the credit managers’ peak body and will lengthen the economic shock, while small business representatives applauded the move.

“These necessary measures give otherwise viable small businesses more time to recover,
preventing a wave of unnecessary insolvencies,” the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, says.

“While we support this temporary relief for financially distressed businesses, there will also be a number of zombie businesses kept artificially afloat as a consequence.”

In a normal year, Australia sees about 8000 companies go through the liquidation process with about 15 per cent of insolvencies, or 1200, initiated by the ATO.

According to the latest data published by the Australian Securities and Investments Commission, so far this year only 6398 businesses have been wound up, a decline of 21 per cent. But the difference is getting worse as time passes: in August, court applications to wind up a company and administrations fell 65 per cent compared to August 2019. In the first week of September just 44 companies went into administration, down 75 per cent from the same week in 2020. Most were voluntary winding up applications.

Frydenberg said in September the extension would “help to prevent a further wave of failures before businesses have had the opportunity to recover”.

ARTIA chief executive John Winter says supporting bad businesses will end up hurting the good ones as well.

But the insolvency industry worries company debts could keep growing while protections remain in place. And that the sector could be swamped next year with Deloitte Access economics estimating up to 240,000 companies could fail due to COVID-19, a nearly 3000 per cent increase on a normal year.

Chief executive of the Australian Institute of Credit Management, Nick Pilavidis, says the government should not have extended the insolvency protections in September, saying his 2600 members could tell the difference between a zombie and a struggling-yet-viable business.

“Definitely the extension, we feel, was unnecessary and has a bigger potential downside,’’ he says.

“One of the issues is that any payments that our members recover [now], could be later clawed back through the insolvency process.

“While [insolvency] numbers are down, the risks are not down.’’

His members were now reporting longer payment times and lower cash receipts, he says.

As debt builds, this increases the likelihood that small businesses could end up losing assets used in loan collateral, such as the family home, he warned.

The longer a non-viable company trades, the deeper it goes into debt. This leaves nothing behind for unsecured creditors and spreads the impact of collapse.

The longer a non-viable company trades, the deeper it goes into debt. This leaves nothing behind for unsecured creditors and spreads the impact of collapse. Credit:Fairfax

Chief executive of the Australian Restructuring Insolvency and Turnaround Association, John Winter, worries the insolvency industry won’t be able to handle next year’s stockpile. All the relief designed to help businesses stay frozen meant work for insolvency firms had ”evaporated” and about half Australia’s insolvency firms were currently using JobKeeper assistance themselves, he says. There was also a risk debts could could outweigh assets if insolvency went on for too long.

“By the time an insolvency practitioner is appointed to close that business down, there is less than nothing left. There is no chance to recover anything for any creditors, there’s certainly no chance to save the business and the liquidator is unlikely to even get paid themselves,’’ Winter says.

“If a bad business is being propped up and they are not paying good businesses, what they do is place that good business at risk itself.

“If you want to come out of this recession, you want good businesses protected, not the bad ones.’’

Asked why the government couldn’t just create a mass grave for 2020’s failed companies and move on, Winter says creditors would be left out of pocket.

“If nobody goes and looks at what has happened to those businesses that have failed we are going to see the amount of phoenixing in this country absolutely explode,’’ he said.

He suggests the federal government increase the funding the Assetless Administration Fund that was designed to clean up phoenixing. However, he added it needs about $80 million to clean up 2020’s mess, 10 times what is currently available.

Director of international insolvency firm Rodgers Reidy, Brent Morgan, says he has not seen any applications from the ATO to wind up a Victorian-based business over unpaid taxes since March. He suspects the tax office was now sitting on a stockpile of statutory demands that could be released in the first half of 2021.

Banks and landlords have also been lenient to businesses forced to close by COVID-19 restrictions. And coupled with JobKeeper the ”pressure points” that normally force un-viable companies to the wall had disappeared.

“They [the insolvencies] might all happen at the same time, which is probably going to be early next year,’’ Morgan says.

A spokesperson for the ATO says it has no ‘’formal moratorium’’ on submitting winding up applications, but was “mindful of taking actions which may unnecessarily cause further financial difficulties at a time when the community continues to experience the health and economic impacts of COVID-19”. They would not say when the ATO would start issuing statutory demands again.

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Daniel Andrews tells hotel quarantine inquiry he does not know who made private security decision – as it happened | Australia news






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Qantas boss Alan Joyce is likely to be called before a parliamentary inquiry into wage theft to be grilled over the company’s use of jobkeeper payments.

Labor senator Tony Sheldon wrote to the chairman of the economics reference committee, fellow ALP senator Alex Gallacher, today to ask for Joyce to front the committee.

Sheldon, a former Transport Workers’ Union boss, is angry about Qantas’s practice of not passing on the full jobkeeper payment to workers owed overtime money for work done in a previous fortnight.

Qantas lost a federal court case over the issue yesterday.

Gallacher told Guardian Australia he would invite Joyce to give evidence – subject to the approval of the committee at a meeting next week.

Labor senator Tony Sheldon.

Labor senator Tony Sheldon. Photograph: Dan Himbrechts/AAP

“I think it’s a matter of public interest,” he said.

He was particularly interested in whether Qantas sought ATO advice over the practice and what the ATO said in response.

Committee approval appears all but certain because crossbencher Rex Patrick, who holds the crucial swing vote on the committee, will support the move.

“I would support any call for the committee to invite Mr Joyce to appear,” he said.

Patrick said he hoped Joyce would accept any such invitation, but left open forcing Joyce to appear if necessary.

“We would deal with the issue of subpoena down track, if necessary,” he said.

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The Senate inquiry into the Coalition’s jobs-ready graduate package has concluded – and unsurprisingly the government wants the bill passed and Labor, the Greens and independent Rex Patrick oppose it.

If Pauline Hanson’s One Nation votes with the Coalition, Jacqui Lambie and Centre Alliance’s Stirling Griff are the swing votes on this bill – but neither took part in the Senate education committee inquiry.

Jacqui Lambie and Centre Alliance’s Stirling Griff look like being the swing votes on the government’s jobs-ready graduate package bill.

Jacqui Lambie and Centre Alliance’s Stirling Griff look like being the swing votes on the government’s jobs-ready graduate package bill. Photograph: Mick Tsikas/AAP

But Patrick used his dissenting report (titled Debt Ready Graduates) to pile pressure on his former Centre Alliance colleague to reject the bill.

He said:


The University of Adelaide articulated its concerns well in its submission with the bill assessed to deliver: … a 9% increase in Hecs charges [for the students] … a 15% reduction in federal support [for the university] … a very significant cut to core funding for university research. This bill is bad for students, bad for universities, bad for research, bad for South Australia and bad for Australia.

As we reported in September, Centre Alliance is negotiating with the government for more favourable treatment for South Australian unis.

But Rex isn’t having a bar of it:


The South Australian vice chancellors all agreed that the granting of regional status to their universities would be better, but overall would be a case of three steps backwards, two steps forward. Any amendments to the bill which addressed some funding issues would not solve the problems with student costs and the reduction in research funding.

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Daniel Andrews tells hotel quarantine inquiry: I am sorry

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Malcolm Turnbull has popped up on a webinar titled “A Deep Dive into the Unthinkable”.

Former prime minister Malcolm Turnbull.

Former prime minister Malcolm Turnbull. Photograph: Mick Tsikas/AAP

Among other things, the former prime minister has spoken about tensions in the region, including between the US and China. He told his host, Peter Coroneos:


We don’t want there to be conflict in the region between anybody let alone between China and the United States, and I don’t think it’s at all inevitable – I think that’s quite misconceived, frankly. The important thing is that people keep cool heads and respect the sovereignty and the autonomy of other countries. That’s the critical thing.

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Q&A: An ethical approach to babyware


This week we chat to Elysia Hansen, founder of Melbourne-based brand and online destination for linen essentials and nursery décor, Wildflower & Oak. Spotting a gap in the market, Elysia set up the venture in 2017 to combine consumers’ refreshed loved for linen with the booming world of artisanal babyware.

ISB: What was the inspiration behind you setting up Wildflower & Oak?

EH: I was searching for neutral swaddles during my second pregnancy and
felt underwhelmed. I felt there was a gap for something better in this space,
beyond the traditional baby blue and pastel pink. I thought these items could
be luxurious, high enough in quality that you would pass them down from baby to
baby. I felt linen was the perfect fit. And, so, Wildflower & Oak was born.

ISB: What was the biggest challenge you faced in getting the enterprise
up and running?

EH: My work had previously been in digital marketing so I entered into
the manufacturing process very, very green. Finding ethically minded
manufacturers from afar was one of our biggest challenges as there are far
fewer in the marketplace and the majority aren’t featured in the same channels
that many brands use as a resource.

ISB: How does your determination to use only ethical products manifest
itself in the business?

EH: We have chosen to work with ethically minded manufacturers in the
production of our products. We seek out partners that take care of their staff
and are mindful of their environmental impact in the manufacturing process. We
like to keep that consciousness going through the POS with our donation to
Midwives for Haiti for each item sold.

ISB: What is the motivation behind you reinvesting a proportion of your income
to a midwives’ organisation in Haiti?

EH: My husband and I spent time working for an NGO in Haiti before we

had kids and the challenges facing women and in particular mothers there never
left me. There are severe shortages of doctors and midwives in Haiti and access
to medical facilities particularly in the rural areas is limited. As a result,
Haiti has the highest infant and maternal mortality rate of anywhere in the
Western Hemisphere.

Many women give birth with the support of what is known as a “matwòn” or
a traditional birth attendant. Often these men and women will have many years
of experience but very little (if any) medical training. Midwives For Haiti
work carefully within local customs to teach safe birthing practices. As part
of their training program they distribute clean birth kits with essential
sterile equipment which is what we help to fund.

ISB: What is your vision for the development of Wildflower & Oak in
the next couple of years?

EH: I’m excited to keep expanding our product line
to give mums around the world beautiful versions of things they need.
Essentials with meaning. Our next collection is currently in production with a
fresh palette and the same beautiful fabric our customers have grown to love.

We have also been collaborating with fellow makers
around the world to bring limited edition nursery pieces to the store which has
brought a fun new dimension to the business.

ISB: And, finally, what is the number one piece of advice you’d share
with others looking to start their own ethics-based business?

EH: Stay the course. It may take a little longer to find the right
partnerships and to get to the final product to completion but the result and
the story you can share with pride to your audience will be worth everything
you put into it’s creation.





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Italy’s economic chance of a lifetime may be wasted


The fiscal windfall that Italy’s governing class is about to sink its teeth into is staggering. Gone are the days of haggling over 0.1 per cent budget deviations with Brussels officials concerned about burgeoning borrowings that are now well on the way to exceed 150 per cent of gross domestic product.

The country stands ready to receive as much as $US248 billion ($351 billion) in EU aid funded by jointly issued debt to help its post-coronavirus reconstruction.

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Further bolstering its public finances are European Central Bank efforts to keep borrowing costs low. That help allowed Conte to spend €100 billion ($165 billion) in stimulus on a battered economy that analysts anticipate may contract as much as 10 per cent this year. The yield on Italian 10-year bonds has more than halved since the peak of the pandemic in mid-March.

Thirty-year yields reached and all time low on Wednesday as investors snapped up securities following regional elections in which the governing coalition staved off a challenge from Matteo Salvini’s League party.

“Italy will have billions in its pockets,” said Paolo Pizzoli, a senior economist at ING Bank. The government “needs to show it is not only able to access European Union funds, but also to focus spending effectively to ultimately boost growth.”

With strict strings attached to E.U. money, officials intend to use it to boost growth to at least 1.6 per cent a year and increase employment by 10 percentage points from the 2019 tally of 63.5 per cent to bridge the gap with regional peers, according to draft guidelines seen by Bloomberg.

In Italy, too many people think that any kind of public expenditure can boost output. This increases the risk that recovery-fund money is not used properly and efficiently.

Riccardo Puglisi, economics professor at the University of Pavia

The plan is to invest in digitalisation, a unified ultra-broadband network, innovation, education, more efficient infrastructure, a green economy, and also reforms of the judicial system and state bureaucracy.

“It’s a once-in-a-lifetime opportunity to exit a long period of stagnation,” Gualtieri told lawmakers last week.

That ambitious growth agenda is pulling in one direction, while the government’s own spending plans for the rest of its budget are pulling in another. Conte’s coalition of the left-wing Democratic Party and the populist Five Star Movement – newly emboldened after holding its ground in local elections this week – is increasingly tending toward state aid and government intervention.

The premier has pushed for the creation of a single broadband network company, halting the sale by Telecom Italia SpA of a minority stake in its network. He has also pressured the Benetton family’s Atlantia holding company to sell its 88 per cent stake in toll road operator Autostrade per l’Italia. Meanwhile Gualtieri has publicly favoured a sale of the Italian Stock Exchange and its MTS bond market to a European company.

Italy’s Finance Minister Roberto Gualtieri and Prime Minister Giuseppe Conte have a big responsibility on their hands.Credit:AP

The government wants the state-backed lender, Cassa Depositi e Prestiti, to take stakes in all three enterprises, and it has also set up a new publicly controlled company to run failed airline Alitalia SpA. Italy has seen such measures before, but not for a while.

“The successful Italian economy of the 1950s, which was a mixed system – with strong government involvement in companies through a vehicle called IRI – worked for a time but degenerated quickly into cronyism and wasting public funds,” said Giovanni Orsina head of LUISS University’s School of Government in Rome. “Regenerating that system for all the wrong reasons is not the solution.”

The Institute for Industrial Reconstruction – known as IRI – was a state company established by the fascists in 1933. It helped rebuilding after the war, constructing roads and the phone network, and was once Italy’s biggest employer.

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If Cassa Depositi becomes a revamped version of that, it would ultimately turn back the clock, reversing decades of economic policy since IRI was dissolved during a sell-off of assets in the 1990s.

“We hope the government will use the funds to boost competitiveness with a market approach rather than acting as a nanny state,” said Paolo Magni, partner at Alpha Group, a private equity fund with €2 billion of assets under management in Italy.

For Orsina, such an outcome would prolong Italy’s history of failing to deliver on economic reforms, hampered by special interests and a political cycle with frequent elections.

“Politicians gain very little from long-term planning and very much from spending on solutions that increase their power and popularity,” he said. “The country is condemned to short-termism.”

Bloomberg

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It is not wise to bet against Elon Musk


If history is any guide, Musk is not a man to bet against.

True to form, Tesla’s announcement was big on bold claims but short on the kind of nitty-gritty details that would have helped shore up confidence in the plan, which is one reason why shares in the firm slumped sharply afterwards.

Tesla’s strategy makes sense but there are big risks attached to it. It means Tesla is set to become a far more complex beast, requiring management focus on new areas where it currently has little or zero experience.

Tesla said it was going to slash the cost of its electric cars to $US25,000 – about one third less than the current cheapest model – with a series of incremental advances in everything from its basic manufacturing process to the material science of building better and more efficient batteries. They make up about one third of the cost of an electric car.

Tesla aims to switch to cylindrical batteries, which it will manufacture in-house using new alloys and combinations of metallurgical silicon and nickel.

Musk also said Tesla was going to start mining and refining some of the raw materials itself with the purchase of a 10,000-acre lithium clay deposit in Nevada and the construction of a new cathode plant.

Details, however, were sketchy and the new discount model would take three years to produce at any scale.

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In essence, the long-term vision was to cut costs through economies of scale and the creation of a much more vertically integrated manufacturing model – so Tesla no longer has to rely on thousands of other firms for its highly complex supply chain. One possible loser could be Panasonic, the Japanese firm that currently builds many of Tesla’s battery cells.

Tesla’s strategy makes sense but there are big risks attached to it. It means Tesla is set to become a far more complex beast, requiring management focus on new areas where it currently has little or zero experience.

Then again, with such a rich valuation, Tesla can afford to buy in expertise or simply acquire companies in some of these niche areas if it needs to.

In the past, Musk has demonstrated no shortage of ingenuity. But there is no question it opens up potential hazards for a business that is already overstretched and running close to full tilt.

It is worth remembering that Tesla and others have already come a long way in reducing costs.

Musk pledged to manufacture 20 million electric cars per year by 2030, a figure almost double the volume produced by Volkswagen – currently the world’s biggest carmaker.Credit:Bloomberg

Electric car batteries currently stand at about $US147 per kWh, down from $US381 per kWh in 2015 and over $US1,000 per kWh in 2010, according to Bloomberg New Energy Finance. Tesla believes that in order to compete directly with traditional internal combustion engine vehicles, this figure needs to be cut to under $US100.

That won’t be easy but it does look achievable. A ready market certainly exists if he can succeed in building cars that truly compete on price.

Either way, if Musk really does come anywhere near building 20 million cars a year, one big challenge will be the availability of the essential materials.

Experts warn of a shortage of capacity to produce and refine lithium and nickel at the sort of scale required to meet demand.

There is also likely to be growing scrutiny of the environmental impact. As the world fights to end its addiction to fossil fuels, the ecological cost of mining the metals required to achieve that goal is becoming a big environmental problem in its own right.

Mining for lithium, for example, requires huge volumes of water and can cause pollution unless very carefully managed.

Although Musk may have stolen the limelight, it was another announcement from Xi Jinping, China’s president, on Tuesday (China time) that may be bigger news in the long-term.

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In a speech to the United Nations General Assembly, he pledged China would turn carbon neutral by 2060 and its greenhouse gas emissions would peak within the next decade.

The economic implications of that announcement are likely to be profound. They are likely to intensify a global scramble for these materials, which could last for decades and could reshape the geopolitical map. Tesla and others will have to battle hard to secure them.

Telegraph, London

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Farmers push back on Coalition’s gas plan saying quality of land and water takes priority | Australia news


The National Farmers Federation has urged the Morrison government to tread carefully with its “gas-led recovery”, declaring farmers need to be in control of their land use, and the security of groundwater needs to be paramount.

While the gas push was crafted in part by the Coalition’s business advisers, and business has largely welcomed the government’s signalling about increasing the supply of gas for domestic use, the NFF will lobby the government to make sure the plan does not involve a significant expansion of coal seam gas projects.

The NFF’s chief executive, Tony Mahar, told Guardian Australia “farmers should have choice in determining his or her own priority with how private land is used through a respectful and transparent process”.

“Farmers have and will continue to advocate that any extractive development must not impede on quality of agricultural resource, whether land or water,” Mahar said.

“Any development must recognise the importance of local community buy-in, noting their deep knowledge of issues, challenges and opportunities for prospective projects.”

Mahar said security of groundwater and other water sources, and protection of prime agricultural land remained of “paramount importance to farmers and there are major concerns with any activity that could pose a risk to the precious Great Artesian Basin, to locally important aquifers and other water sources”.

Renewed pressure from farmers could revive tensions between the Liberals and the Nationals. NSW Farmers has already voiced its opposition to the controversial Narrabri coal seam gas project, which the Morrison government is championing on the basis that it will increase the supply of gas in the state, and lower prices.

The state affiliate of the NFF says Narrabri poses an “unacceptable risk to the water resources, soil and air quality, local food and fibre production and rural communities in western New South Wales”.

Morrison has listed Narrabri as one of 15 projects of national significance, promising an accelerated assessment under federal environment laws and the energy and emissions reduction minister, Angus Taylor, has suggested it will reduce energy costs for consumers. But coal seam gas developments remain controversial on the ground, creating divisions in regional communities.

Mahar said farmers were not opposed to gas as a transitional fuel. He noted that gas could be used to firm power generation from renewable sources “particularly as coal-powered generation goes offline”.

But the NFF chief also noted that gas was not the only firming solution on offer. There were viable alternatives, such as battery storage, pumped hydro, and in the future, hydrogen.

Mahar noted that farming was currently heavily reliant on liquid fuels, such as diesel, and he said gas would help with the transition to electrification and hydrogen-based energy systems for rural and remote places.

The NFF, with other business groups, has signed on a net zero target by 2050, and Mahar said anyone who was “serious” about net zero emissions needed to create a pathway to replace liquid fuels.

“The cost and availability of gas is also important for regional energy costs, particularly for our regional manufacturers and processors,” he said.

“Gas is a very important input into the production of farm inputs, such as fertilisers and is a crucial factor in value adding and competitiveness of Australia’s food and fibre supply chains.”

“Gas also plays a key role in the establishment of a hydrogen supply chain. If we are genuine about a net zero emissions target, hydrogen is going to be the key enabler to transition away from liquid fuels such as diesel.”

The Morrison government this week unveiled its technology roadmap, which is the Coalition’s new policy framework for long-term emissions reduction. One of the technologies the government is championing is hydrogen.

Labor has dubbed the roadmap the “road to nowhere” because it is a long-term emissions reduction strategy without concrete emissions reduction targets after 2030.

The Morrison government is continuing to resist pressure to sign up to a target of net zero emissions by 2050 – a concrete and increasingly uncontroversial abatement target that is supported by business and community groups, and is consistent with the obligations the government adopted under the Paris agreement.





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Cultural shift: dealing with the HR challenges posed by COVID-19


Our recent history is full of examples of global events causing change at an almost incomprehensible rate. These are invariably challenging times. However, once the dust has settled there can be many positive outcomes.

The trauma of
the First World War resulted in huge mechanical and technological advancements,
while the Second preceded mass labour participation by married women.

Today, the unforeseen crisis of the COVID-19 pandemic is creating many challenges to manage – and opportunities to experiment – for societies and businesses across the world.

COVID-19 hit us almost overnight and homes and workplaces have had to rapidly adjust daily routines to keep pace with the development of the pandemic.

One major change
has been the rise of flexible working, something which was previously
under-appreciated in the majority of workplaces, which were largely rigid by nature.

Now, however,
flexible working has become more accepted as business face an existential
threat with employers given no option but to allow their employees to work from
home during lockdown.

For business
owners, especially smaller companies which may lack the resources to implement
cultural change during such a stressful period, the challenge will be how to
create arrangements which offer, for example, better work-life balance for
working fathers.

For those who
travelled for work this has created an opportunity to work flexibly, to spend
time with their family and perhaps play a more active role in their children’s
development, without the fear of being frowned upon by the business. This is a
truly seismic societal change which I believe will have long-lasting and
positive repercussions.

For those parents
who do the majority of childcare, having their partner working from home has
bought its own insights and challenges. Home schooling while remote working has
posed never-ending challenges, even without the constant threat of kids and
pets video bombing online meetings and compromising your perceived

professionalism.

In general, however,
the benefits are there for all to see. We are reconnecting with our local
communities, so may well see that personal and local services are given more
prominence and value than was perhaps the case previously.

As I mentioned
previously, these changes have happened fast and are widespread, so companies
will need to adapt accordingly. The challenges posed by employing millennial
workers were already real for business owners. Now they have the additional challenge
of meeting new expectations of their existing workforce while maintaining trust
in that relationship and ensuring the productivity remains high.

Not all
workplaces have adapted to remote working arrangements as freely as others and there
are some industries where flexible work arrangements are not practicable.

Still, with the
stigma of flexible working now gone, most businesses will need to consider how
to absorb flexible working arrangements into their structures.

Productivity may
be better managed by setting agreed tasks or project milestone goals in remote
settings rather than managing employees over their shoulder.

Whether it is
through focusing on key deliverables or developing pathways to deliver tangible
outcomes, employers will have to quickly adapt their management practices, so
that businesses can continue effectively and to ensure that management goals
remain achievable.

One thing is for
certain, the workplace has changed as we once knew it and for those who are
fortunate enough to embrace the opportunity flexible working arrangements
presents, it could mean a change for the better. As ever, communication is key
and discussions with your workforce, to ensure a collective and collaborative
route forward, are likely to pay dividends for your business in the long run.

Pia Engstrom, The HR Dept Western Suburbs Perth





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The NBN upgrade isn’t a backflip, it’s a forward roll


To the extent there is a flip, it is from the original “build it and they will come” approach of Kevin Rudd and Stephen Conroy to the “build it once they’ve shown they need it and are prepared to pay for it” philosophy that underpins NBN Co’s announcement.

Conroy dismissed criticism of the lack of a cost-benefit analysis for the original NBN because the future demand for broadband and the applications that might emerge were unforeseeable.

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We now know a lot more about the demand, and the applications, and it is quite evident that until relatively recently – in the past three years or so – most Australians didn’t need, and weren’t prepared to pay for, the higher speeds an all-fibre network would have offered.

Until 2017, when NBN Co started discounting its 50 Mbps plans, most of the end-users were on 12 Mbps and 25 Mbps plans.

Even now, nearly a third of them are on those lower-speed plans and NBN Co expects that by 2024 there will still be only about 20 per cent of businesses and households on plans with 50 Mbps-plus speeds.

Today, even where there is fibre-to-the-premises, the take-up of plans with download speeds greater than 50 Mbps among those premises is in the mid-teens. There’d be a lot of very expensive and wasteful unused capacity if every premise in the network were connected to fibre.

It’s a demand-driven and commercial approach. The incremental investment will add, not just extra revenue, but profitable revenue to NBN Co.

Labor’s gold-plated network was originally expected to cost $44 billion, although Mr Turnbull’s strategic review estimated it would actually cost nearly $73 billion. Given what we now know – the cost of the multi-technology rollout has blown out from Mr Turnbull’s initial estimate of $29.5 billion to $51 billion – that $73 billion was probably wildly conservative, as would have been the completion date of 2021.

At the rate the rollout was going when Bill Morrow took over in 2014 – only 70,000 premises were using the network by mid-2013, four years after the build started and three years after the first customer was connected – it would probably have been the back half of this decade, if not later, before the build was completed.

As it happens the NBN was effectively completed – in June – just in time. The pandemic has seen demand for broadband and for higher speeds soar as work and education and health services have migrated from offices, schools and clinics to homes.

Some aspects of those changes are likely to be permanent – there will be a structural increase in demand beyond the 20 to 30 per cent per year compound rate at which demand had been increasing.

It is the completion of the network and that fundamental change in demand the pandemic will create that validate the new plans revealed by NBN Co chief executive Stephen Rue on Wednesday.

NBN Co will spend $3.5 billion to upgrade its fibre-to-the-node, fibre-to-the-curb and HFC networks, $700 million to support businesses and $1.5 billion to fund both the normal expansion of the network as well as increased investment in regional areas.

NBN CO chief executive, Stephen Rue, unveiled the new plans for the national broadband network in Canberra this week.Credit:Alex Ellinghausen

The core of the investment strategy isn’t to migrate to an all-fibre-to-the-premises network – the HFC network will still support about 2.5 million premises, or more than 20 per cent of users, for instance – but to bring fibre closer to premises so that those willing to pay for higher speeds can access them.

It’s a demand-driven and commercial approach. The incremental investment will add, not just extra revenue, but profitable revenue to NBN Co.

More to the point, it will be funded by NBN Co borrowing from private debt markets, not by increased taxpayer exposure. NBN Co is planning to repay the $19.5 billion of government funding it now has by mid-2024 and fund the new investments and its normal needs by borrowing $27.5 billion in those private markets.

NBN Co had expected to be cash flow-positive by the second half of the 2022 financial year. The new investment program and the cost of funding it probably pushes that moment back a little but will, if NBN Co executes the strategy effectively, subsequently add to its revenues, cashflows, earnings and value relative to where they might otherwise have been.

There is an assumption in the NBN Co’s new corporate plan that underscores what Mr Turnbull said back in 2014, that validates the multi-technology approach and the way Mr Morrow and then Mr Rue have executed it and that underwrites the new investment program.

When the NBN was first envisaged its sponsors plucked a figure – about 7 per cent – for the estimated internal rate of return (IRR) on the investment. That was modestly above the then Commonwealth Government 10-year bond rate of about 5.5 per cent, enabling the funding of the NBN to be kept off-budget. It was a useful fiction.

Subsequently, the IRR target for the NBN has tracked down to 3.2 per cent. Mr Rue now says that, after the additional investment and the returns NBN CO expects from it, the IRR will rise to 3.7 per cent, which is a very material uplift not just in the expected returns but in NBN Co’s value and the value of the $29.5 billion of equity (as opposed to debt) that taxpayers have invested in the NBN.

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Mr Rue and his team have hit most of their targets and reached them a little ahead of schedule. If they can continue to do so they will free up the debt capacity the Federal Government has tied up in the NBN and start adding value to the equity.

That makes this week, and the flipping of strategy and mindset from construction to growth a key and very positive moment in the previously contentious history of the NBN and something very different to a backflip and the embarrassing admission of error that would imply.

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