Today’s top business headlines cover a diverse range of topics, from innovative investments in green technology and significant corporate tax debates to essential public policy shifts and market-driven actions impacting key industries in Australia. Here are the detailed stories shaping the market and policy landscape.
Rio Tinto Invests $215 Million in Low-Carbon Steel with New WA Facility
Rio Tinto is set to invest $215 million to accelerate its green steel ambitions by constructing a massive microwave facility in Rockingham, south of Perth. This facility, part of the “BioIron” project, marks a significant leap in the company’s efforts to decarbonise the steel industry.
Although still a research and development site, the Rockingham plant will be 10 times larger than its European predecessor, capable of producing 1 tonne of direct reduced iron (DRI) per hour. This investment is a major vote of confidence in BioIron, a project Rio Tinto has been developing for a decade to cut steelmaking emissions by up to 95%.
“Designed specifically for Pilbara iron ores,” explained Rio’s iron ore boss Simon Trott, “this project aims to ensure Pilbara iron ore remains a key player in green steel.”
BioIron uses briquettes made from Pilbara iron ore mixed with carbon-neutral biomass, such as agricultural waste. Instead of traditional blast furnaces fired by fossil fuels, these briquettes are heated using microwaves, which can be powered by renewable electricity.
Microwaves offer a more efficient and precise heating process, cooking the briquettes evenly from the inside out. This approach not only reduces carbon emissions but utilises waste products from the local agricultural industry.
WA Premier Roger Cook praised the initiative, highlighting that WA’s status as a leading iron ore producer aligns perfectly with ambitions for low-emission steelmaking. He noted that this move would create jobs, cut global carbon emissions, and strengthen the state's economy.
“Processing iron ore here in WA opens up massive economic opportunities, driving us towards a sustainable future,” said Cook.
As the world shifts towards greener industries, Rio Tinto's investment exemplifies how innovation and sustainability can go hand in hand.
Productivity Commission Pushes for Corporate Tax Cuts
Danielle Wood, head of the Productivity Commission, argues that Treasurer Jim Chalmers' $13.7 billion investment in critical minerals is not true tax reform. Wood suggests cutting Australia's 30% company tax rate to boost international competitiveness.
Wood's comments clash with Dr Chalmers, who has labelled the tax credits from last month's budget as significant tax reform. Chalmers has dismissed Industry Minister Ed Husic's call for a debate on reducing corporate tax rates, despite Husic's belief that it could help revive Australia's manufacturing sector.
Chalmers defended his stance in Parliament, pointing out that most of the $23 billion Future Made in Australia package focuses on production tax credits. This comes amidst reports from the Australian Bureau of Statistics that profits in manufacturing, wholesale trade, and transport sectors have declined over the past year. Economists expect the national accounts to reveal minimal economic growth, projecting just a 0.2% GDP increase for the March quarter.
Husic has urged discussions on cutting the 30% corporate tax rate to encourage investment. However, this is not aligned with Labor policy, and Chalmers has not supported Husic's view.
When questioned by Liberal Senator Dean Smith, Wood stated, "Reducing company tax will make us more internationally competitive." She acknowledged the complexity due to Australia's unique dividend imputation system.
In April, Wood criticised the Future Made in Australia Act, warning that it could create a dependency on subsidies among businesses. The production tax credits, set to start in 2027, are still under policy refinement.
Under scrutiny, Wood confirmed that neither Chalmers nor Husic sought her advice before announcing the plan. However, she had discussions with other government agencies and the Prime Minister’s department afterward.
Economists argue for broad company tax cuts over production credits to stimulate investment and attract foreign capital. Business investment as a share of GDP has declined over the past decade, contributing to weak GDP forecasts.
According to Commonwealth Bank economist Stephen Wu, the company accounts indicate potential downside risks, with GDP growth forecasted at just 0.1% for March. KPMG chief economist Brendan Rynne highlighted that the economy was close to a recession, stressing that even though the Reserve Bank might usually lower rates to boost activity, persistent inflation complicates this decision.
The dip in household spending has already affected profits for retailers like Baby Bunting, James Hardie, and Eagers Automotive.
South Australia Axes Stamp Duty for First Home Buyers
South Australia has scrapped stamp duty for first home buyers purchasing new homes, responding to rising house prices. Previously, homes worth up to $650,000 were eligible, but this cap has been removed to keep up with the market.
Treasurer Stephen Mullighan announced the change on Tuesday, ahead of Thursday’s state budget. He highlighted that scrapping the duty, which reached up to 5.5% for homes over $500,000, aims to assist an additional 1200 first-time buyers over the next four years.
“We needed to update the policy to reflect current market trends, removing the value cap for better alignment,” Mullighan said.
The policy applies to new builds and unsold existing homes and eliminates the cap for the state’s $15,000 first home owner grant. It can save buyers approximately $50,000 on a $750,000 purchase.
Adelaide’s housing market, the third strongest after Perth and Brisbane, saw a value increase of 14.4% over the year to May 31, with a median home price now at $757,448.
However, independent economist Saul Eslake warned that the measures, costing $30 million over four years, might increase builders' and developers' profit margins rather than reduce prices. He noted, "The measure won't solve the problem."
NEX Building Group, which operates Weeks Homes in SA, supported the change. Brett Lavaring, a spokesman, stated, "This decision will help young families enter the housing market."
The Property Council of Australia also praised the move but called for reduced red tape to boost housing development. Bruce Djite, SA executive director, said, "Demand-side measures are welcome, but it's crucial to improve supply-side policies to attract investment and unlock industry capacity."
The stamp duty change does not introduce a broad-based land tax, which other states have considered. Eslake pointed out that states are cautious about such reforms due to potential impacts on GST revenue.
“A proper tax reform needs coordination between federal and state governments,” Eslake added. “You can’t blame states for being wary of acting alone.”
Morgan Stanley and Goldman Sachs Launch $380 Million Xero Block Trade
In a major move, Morgan Stanley and Goldman Sachs have initiated a $380 million block trade in Xero Ltd’s shares after the market closed on Tuesday. This trade is part of delta hedging for a broader $850 million convertible notes deal.
Key Points:
- Discount Offer: Fund managers can buy Xero shares at a 2.5% to 4.5% discount from the last close price of $131.80.
- Block Trade Purpose: The trade arose from Xero’s new convertible notes issue. These notes, which rank as senior unsecured, will mature in seven years and yield a coupon of 1.375% to 1.875%. They will be listed on the Singapore Exchange.
- Buyback Plan: Xero plans to buy back $700 million of zero-coupon notes due next year.
Xero’s Performance:
Xero's shares have surged 16% this year under the leadership of new CEO Sukhinder Singh Cassidy. The company’s restructuring efforts, including shedding 750 roles and selling non-core businesses like Waddle, have paid off.
For the full financial year ending March 31, Xero reported an after-tax profit of $162 million, swinging from a loss of $113.5 million in the previous year. This profit outperformed the analysts' expectations of around $160 million.
Business Growth:
Xero, known for its payroll and accounting software for small and medium-sized businesses, added 419,000 subscribers this year despite price hikes. This brings its global subscriber base to 4.16 million.
With strategic financial moves and a strong market performance, Xero continues to show robust growth, making it a company to watch in the accounting software sector.
Northern Minerals Hit by Cyberattack Amid Forced Sell-Off
ASX-listed rare earths miner Northern Minerals has been struck by a cyberattack from the ransomware group BianLian. Sensitive data, including emails from the company's executives and shareholder details, has been posted on the dark web. This incident follows an order for China-linked investors to sell their stakes in the company.
Data Compromised
BianLian claims to have stolen extensive information, including operational, strategic, and financial data. The hacked data encompasses emails of former and current executives, employee personal information, and research data.
Government Response
National Cyber Security Coordinator Michelle McGuinness and other agencies are assisting Northern Minerals. The Home Affairs Minister’s office confirmed government awareness and engagement with the company.
Investor Fallout
On Monday, Treasurer Jim Chalmers directed Yuxiao Fund and four associates to offload their shares for national interest reasons. These investors had circumvented a prior ban and acquired nearly 20% of the company. Consequently, they must sell approximately 611 million shares, valued at around $24 million.
Affected Investors
- Yuxiao Fund: Must reduce its stake from 9.8% to 8.5%.
- Black Stone Resources (British Virgin Islands)
- Indian Ocean International Shipping and Service Company (UAE)
- Investors Ximei Liu and Xi Wang
Cyberattack Impact
Despite the severity of the breach, Northern Minerals reported no material impact on its operations. The company has since enhanced its cybersecurity measures.
Expert Insights
Digital forensics expert Josh Lemon indicated the hack's validity, suggesting it began before the government’s directive. Jeremy Kirk from Intel 471 inferred the cyberattack's financial motivation, using data publication as a coercion tactic.
Northern Minerals continues to cooperate with cybersecurity authorities while managing the fallout from both the cyberattack and the forced sell-off of shares.
Government May Need Billions for Wage Increases
The federal government might need to inject billions more into sectors like disability care, childcare, and healthcare following recent wage increase proposals.
The Fair Work Commission announced on Monday that it plans to review awards for roles predominantly filled by women, such as disability home care workers, childcare staff, and healthcare professionals. This is part of ACTU's push for a 4% interim wage increase, driven by Labor's new gender equity objective.
Employers warn that any wage increments must come with government funding to avoid financial strain on businesses and the community. Brent Ferguson, Director of Workplace Relations at the Australian Industry Group, noted that many employers in these fields lack the capacity to absorb additional wage costs. He emphasised the need for clear government support mechanisms and eligibility criteria.
The May budget already includes funding for aged care and early childhood education workers under a $60 billion contingency reserve, addressing their ongoing wage negotiations. Pay hikes of 2-14% for aged care workers have been introduced due to historical gender undervaluation.
Conversely, there are no budgeted wage increases for NDIS workers. This discrepancy has prompted Health Services Union (HSU) National Secretary Lloyd Williams to highlight the resulting wage gap between aged care workers and other health sector workers.
Williams argues that many roles, including medical imaging, social work, and physiotherapy, remain undervalued due to gender biases and deserve wage increases. While government-funding supports many disability workers, most health professionals, like dental technicians and radiographers, operate in the private sector.
A landmark 2012 equal remuneration order for community service workers, requiring $2.8 billion from the Gillard government, did not include disability home support workers. The HSU, together with the Australian Education Union, is pushing multi-employer agreements for regional NDIS providers in Victoria, a move resisted by all providers.
Paul Healey, Secretary of the Health and Community Services Union Victoria, stated that the wage claims aim to ensure better wages, conditions, and allowances. A Level 2 disability support worker currently earns $1223 weekly, significantly lower than the average full-time adult wage of $1838.
Ferguson concluded by stating that employers need certainty and must not be forced into contentious multi-employer agreements just to secure additional funding.
Regional WA Businesses Face Housing Crisis
Location: Northam, WA - Regional businesses are struggling to recruit staff due to a severe housing shortage. Many employers and community groups are now considering building their own worker accommodation to attract and retain employees.
In Northam, just 100 km east of Perth, there were only five rental properties available in May, with prices soaring up to $560 per week, according to the Real Estate Institute of Western Australia (REIWA). Some employers, like Avon Valley Toyota, are taking matters into their own hands. Dealer principal Leonie Knipe has started investigating building staff housing to address the issue.
"Housing has now become a 'business owners’ business'," Ms Knipe explained. "In the past, staff would just find rentals or buy homes, but now we need to provide accommodation to keep up with demand."
Regional businesses are urging the state government to invest in worker housing to alleviate the pressure on the local rental market. Ms Knipe suggested, “We need the government to go back to building homes for their workers instead of relying on the tight retail housing market.”
Elsewhere, in Collie, the medicinal cannabis company Cannaponics took an innovative approach by purchasing a hotel to accommodate their workers. Founder Rod Zakostelsky bought the Club Hotel Collie for about $550,000, seeing it as a more sustainable investment than short-term rentals.
Avon Community Development Foundation (ACDF) has also stepped up, developing Mortlock Gardens, an 18-villa project to house local workers. The success of the first stage has led to plans for a second phase, adding 20 more units.
ACDF Chair Phil Eaton emphasised, “Investing in worker housing benefits the entire Wheatbelt region by integrating workers more deeply into the community.”
The state government recently lifted a caveat that had delayed the expansion of Mortlock Gardens, allowing stage two to move forward. Four new villas are expected to be completed by the end of 2024.
Embrace Bold Environmental Goals Despite Greenwashing Concerns, Experts Say
Businesses should not halt their environmental goals due to fears of greenwashing accusations, Treasury and legal experts advise.
Amid increasing scrutiny on green claims, some companies are reducing or hiding their environmental pledges, a trend known as "green hushing." However, experts argue that firms should remain transparent and action-oriented.
Alex Heath, First Assistant Secretary of Treasury’s Climate Division, said on Tuesday, "Honesty about your actions and acknowledging uncertainties is key. Businesses should be transparent about the scenarios considered."
Despite greenwashing fears, firms should not avoid setting ambitious targets. They need to provide a clear roadmap and disclose the assumptions behind their goals. Mark Smyth, a litigation partner at Herbert Smith Freehills, acknowledged the "green hushing" phenomenon and highlighted the need for authenticity and clear disclosure.
A survey by South Pole revealed that 23% of 1200 companies prefer not to publicly detail their net-zero commitments. This reticence follows regulatory actions against misleading claims. For instance, Mercer recently settled with the corporate watchdog over misleading sustainability claims in its investments.
Regulators have stressed the importance of genuine efforts towards meeting green targets. Companies could face fines exceeding $50 million for overstating green credentials.
Ms Heath encouraged businesses to showcase solid plans backing their targets rather than avoid making commitments. This includes revising goals due to technological or regulatory changes to ensure they remain achievable.
For example, cement giant Boral revised its climate targets last year due to delays, emphasising the need to adjust rather than abandon environmental goals.
In summary, businesses should stay committed to their environmental promises, support them with transparent actions, and be prepared to adjust as needed to avoid greenwashing.
ASX Diversity Reporting: New Proposals Spark Debate
Leading ASX board members are sceptical about the value of disclosing directors' sexuality, age, ethnicity, and disabilities, citing potential privacy concerns. These disclosures are recommended by the ASX Corporate Governance Council to enhance diversity reporting beyond gender, a move inspired by similar regulations in the UK and the US.
The Council also proposes raising the gender target for women on boards from 30% to 40% and auditing board skill sets. Companies are expected to report against these new principles by July 2025.
Currently, Woodside is the only ASX200 company disclosing such personal characteristics of its board members. As of December 2023, Woodside's board comprises 36% females, 9% LGBTQIA+, 9% Asians, 9% Indigenous Australians, and 82% white/Caucasian.
Andrew Stevens, a Stockland director and sustainability committee chairman, expressed openness to disclosing more personal information but questioned its value. He told the Australian Financial Review ESG Summit that opinions on these disclosures vary widely.
Anne Templeman-Jones, director at Commonwealth Bank, supports meaningful full disclosure but cautions against box-ticking. "Disclosure should align with our purpose and values without becoming a competition for headlines," she said.
