Business Australia News brings you the latest updates on the financial health of Australia's private hospital sector, bilateral trade and climate talks between Australia and China, real estate investments in Sydney, regulatory hurdles for the Chemist Warehouse-Sigma merger, housing affordability, and much more.
St John of God Warns Australian Public Health System at Risk
St John of God, one of Australia's largest Catholic hospital groups, has raised alarms over the country's public health system. The $22 billion private hospital sector is under severe financial pressure due to rising labour costs and stagnant revenue.
Financial Health Check for Private Hospitals
A "financial health check" led by senior health officials Brian Kelleher, Emily Lancsar, and former Independent Hospital Pricing Authority CEO James Downie, aims to address these challenges. St John of God Health Care Group CEO Bryan Pyne supports the review.
"The sector is under unprecedented financial strain, and current funding from private health insurers doesn't cover operational costs," Pyne told The Australian Financial Review. "This situation is unsustainable, and without a strong private sector, public hospitals will be overwhelmed."
Calls for Broader Review
Healthcare expert Terry Barnes argues that the internal financial workings of private hospitals shouldn't concern the government. He calls for a larger review focused on the relationships between operators and insurers, suggesting urgent reforms such as default benefit protections.
"Minister Butler has missed the main issue. This reflects the department's limited enthusiasm for private hospitals and insurance," Barnes said.
Regional Impact and Sustainability
Health Minister Butler acknowledged the review's importance and concerns about private hospitals' sustainability, especially in regional areas where they are vital to local communities.
"Private hospitals are an essential part of our health system and partner with public services," said Butler.
Insurance Premiums and Sector Changes
Private health insurance premiums increased by 3.03% on April 1, the largest since 2019 but still modest historically. Coverage remains high at 54.6%, or 14.8 million Australians, slightly down from 55% last year.
Matthew Koce, CEO of the Members Health Fund Alliance, dismissed collapse fears, noting over 30 new hospitals and day surgeries opened in the past two years. "The private hospital landscape is changing with innovations like telehealth and day surgery facilities becoming more common," Koce said.
Australia-China CEOs to Discuss Climate Cooperation and Trade
Business leaders from China and Australia are set to discuss climate change cooperation during Chinese Premier Li Qiang's visit. The talks are part of the seventh Australia-China CEO Roundtable in Perth on Tuesday.
Strengthening Key Sectors
Top executives will focus on enhancing ties in mining, energy, agriculture, and services. The roundtable, organised by the Business Council of Australia (BCA), will feature 12 leading companies from each nation.
Notable Australian CEOs attending include:
- Kellie Parker (Rio Tinto)
- Rob Scott (Wesfarmers)
- Andrew Forrest (Fortescue)
- Paul Digney (Qube)
Key Discussion Points
Key agenda items include creating a competitive business environment and enhancing innovation and supply chains. These efforts aim to tackle global challenges, including climate change.
BCA chief executive Brendan Black highlighted the importance of strong business relationships in strengthening bilateral ties. "This roundtable provides a chance for businesses to enhance linkages," he said. "China is vital for our economy and jobs, accounting for a quarter of our $320 billion trade last year."
Diplomatic Context
Premier Li will arrive in Adelaide on Saturday. Last week in New Zealand, he and Prime Minister Christopher Luxon signed agreements to boost business ties. Discussed topics included Chinese foreign interference, human rights, and geopolitical issues like the South China Sea and Taiwan.
In related news, Deputy US Secretary of State Kurt Campbell announced that Prime Minister Albanese will attend the NATO leaders summit next month in Washington. Leaders from Japan, South Korea, and New Zealand are also expected to attend.
Chemist Warehouse May Need to Sell Stores Amid Sigma Merger Concerns
Chemist Warehouse might be forced to sell parts of its network to get Australian Competition and Consumer Commission (ACCC) approval for its $8.8 billion merger with Sigma Healthcare. The ACCC is worried the merger could harm competition, especially affecting smaller pharmacies supported by Sigma.
ACCC Concerns
The ACCC views the merger as a significant change in the pharmacy market. They fear the new company may favour Chemist Warehouse stores, potentially raising costs for other pharmacies. Stephen Ridgeway from the ACCC highlighted the risk of less competitive terms for non-Chemist Warehouse stores, possibly leading to higher prices and reduced service quality.
Stakeholder Reactions
The Pharmacy Guild shares ACCC’s concerns, urging state governments to scrutinise business models like Chemist Warehouse’s. Conversely, Terry Barnes, an expert on pharmacy sector reviews, believes the merger won't reduce market competitiveness and has significantly disrupted the market dominated by the Pharmacy Guild.
Transaction Details
Announced in December, the merger would list Chemist Warehouse on the ASX through Sigma, combining 864 outlets under several brands and a large wholesale business. Sigma would acquire Chemist Warehouse for shares and $700 million in cash.
Market Impact
Investment analysts are not surprised by the ACCC's cautious stance but remain optimistic about the deal’s approval. Divestments in specific areas might be needed to proceed. David Stanton from Jefferies predicts any required store sales will be minor. Sigma’s market share in Pharmaceutical Benefits Scheme wholesaling could rise from 19% to 30%, while Chemist Warehouse’s 27% retail share would remain stable.
Regulatory Outlook
Ridgeway noted the deal’s structural significance but stated the main issue isn’t Chemist Warehouse’s business model but its potential competitive impact. The ACCC expects to make a final decision by September, though similar cases have faced delays.
Market Response
Sigma shares dropped to $1.16 following the ACCC’s initial concerns. Both companies believe the merger won’t harm competition and aim to address any regulatory worries.
Chemist Warehouse, founded in Melbourne by Sam and Jack Gance in 1972, has grown into a major player. This merger could significantly alter the Australian pharmacy landscape, pending ACCC’s final decision.
Sydney, Melbourne, and Adelaide: “Impossibly Unaffordable”
Sydney, Melbourne, and Adelaide have earned the label “impossibly unaffordable” in the latest Demographia International Housing Affordability report. Homebuyers now need to spend a median of nine or more times their annual household income to afford a median-priced home in these cities.
Sydney Ranks Second-Worst Globally
Sydney is the second-most unaffordable city globally, with its price-to-income ratio climbing to 13.8 from 13.3 last year. Melbourne moved from ninth to seventh-worst, despite a minor improvement in its ratio to 9.8 from 9.9. Adelaide made the top 10, worsening to 9.7 from 8.2.
Unaffordability Across Australia
Brisbane rose to 15th place with a ratio of 8.1, up from 17th the previous year. Perth saw a significant jump to 20th place with a ratio of 6.8, up from 45th (5.4) last year.
Middle-Class Crisis
The term “impossible” highlights the extreme challenges middle-income families face in affording homes. Three decades ago, housing was more affordable, typically around three times annual income. The current trend poses a risk to the middle class, threatening its stability and opportunity for lower-income households.
Need for Policy Changes
The report calls for changes to planning rules that encourage urban density while addressing land supply issues. As land has become rationed to curb urban sprawl, prices have increased dramatically.
Brian Haratsis of MacroPlan suggests that Melbourne’s target of 80,000 new homes per year may be unrealistic. He recommends a focus on building 60,000 dwellings annually, with a third being units or apartments.
Population Growth
The Australian Bureau of Statistics has reported a 2.5% population increase to 26.97 million in 2023, underscoring the need for policy changes to boost housing supply.
Housing Industry Association chief economist Tim Reardon stresses that while increasing density is crucial, it shouldn’t come at the expense of greenfield development. He points out that brownfield projects should be more cost-effective due to existing infrastructure but often are not.
Global Comparisons
In contrast, Singapore is considered “moderately unaffordable” with a price-to-income ratio of 3.8.
Housing affordability remains a critical issue in Australia. Policy shifts and innovative approaches are essential to address these challenges and ensure housing remains within reach for future generations.
Snack Food Tycoon Snags $25m Palm Beach Weekender
Forget investment banking; the latest property move in Sydney is fuelled by salty snacks. Lenka Dransfield, owner of CAL Marketing, has snapped up a $25 million luxury waterfront home in Palm Beach, previously owned by waste management magnate Ian Malouf.
Dransfield’s CAL Marketing offers an eclectic mix of snack products, including dried Shiitake mushrooms and ready-to-eat wild abalone. Her products are sold locally through Woolworths, Harris Farm and Costco, and internationally via Amazon and Costco through her US-based wholesaler, Alli & Rose.
Dransfield purchased one of Malouf’s neighbouring properties on Snappermans Beach. The seven-bedroom, four-bathroom home boasts contemporary white interiors and panoramic views of Pittwater, Lion Island, and Ku-ring-gai National Park. The sale, handled by LJ Hooker's David and BJ Edwards, saw no official comments.
Malouf acquired the property in 2021 for about $20 million from Joanna McNiven, widow of bond dealer John McNiven. Alongside stunning waterfront views, it’s the only three-storey home on the exclusive strip, which boosts its value significantly.
Malouf, who sold his waste management empire in a $578 million deal, has been making high-profile property moves, including a $60 million penthouse in ANZ tower and $70 million in harbourside residences in Double Bay.
Dransfield’s Palm Beach purchase brings her property portfolio to an impressive $50 million. She already owns a $22 million ocean-view home in North Bondi and properties worth millions in Bondi Beach and Potts Point. Additionally, she holds over 1.1 hectares of industrial land in Camden and Smeaton Grange.
Meanwhile, Dominic Roche is also investing heavily in Palm Beach, having recently acquired a $16 million holiday shack next to his Phillip Fox-designed retreat, Palm Haven, purchased for $20.5 million in 2019.
Roche’s acquisition was completed in March from Melbourne-based vendors Kimiko Sumiyoshi and Peter Duncan.
Chanticleer’s 50th: Tales of Rogues and Reflection
Australia's influential business column, Chanticleer, celebrated its 50th anniversary with a lunch that packed suspense and nostalgia. Alan Kohler mesmerised the sold-out crowd by naming some of the biggest rogues he’s ever covered. Mark Alfred Clarkson, jailed in the 1980s for a fraud with Athena Permanent Building Society, was only a runner-up. The dubious honour went to Frank Nugan and Mike Hand, whose bank collapsed in 1980, leading Hand to mysteriously flee the country.
The event, held at the Fullerton Hotel in Sydney, was a rare gathering of all Chanticleer columnists. Names like Robert Gottliebsen, Malcolm Maiden, John Durie, Ivor Ries, Alan Jury, Tony Boyd, and Kohler himself reflected on half a century of Australian business trends and notable personalities.
Australia's past 50 years have seen impressive growth, driven by economic deregulation and the rise of blue-chip companies like BHP and the big banks. Market dynamics brought booms, busts, and occasional scandals, but the overarching story is one of growing prosperity.
However, the future isn't all rosy. Former columnist Malcolm Maiden warned that the next 50 years could undo many positive developments from the past. He cited declining population growth, re-regulation, and a shift away from democratic governance as looming challenges.
Challenges also extend to dealing with rapid technological change and geopolitical instability. John Mullen highlighted the difficulties for future business leaders navigating these issues, while questioning the balance between being responsible corporate citizens and pursuing shareholder returns.
Aidan Allen from Jarden noted that technological innovation is heating up competition in unexpected ways, challenging long-standing corporate giants. Yet, he expressed concern over increasing government interventions.
Despite these challenges, the celebration honoured the legacy of foundational figures like Robert Gottliebsen, who has mentored countless journalists and continues to pen daily columns, driven by a fascination with societal and business changes.
As Chanticleer prepares for another 50 years, the event was a timely reminder of the complexity and excitement that define Australian business. Here's to the Chook's continued insight and influence in the business community.
Winsome Resources Seeks $20M to Boost Quebec Lithium Project
Winsome Resources is making a $20 million cash call to investors to fund ongoing exploration at its flagship Adina project in Quebec.
The term sheet sent to fund managers indicates Winsome aims to raise C$12 million ($13.2 million) via a flow-through placement to Canadian investors at a 50 per cent premium. Following this, Winsome plans to secure an additional $8.8 million at 85¢ per share.
Additionally, Winsome is launching a $7 million institutional placement at the same share price to support further work on its Quebec lithium projects, particularly Adina.
Winsome has promoted Adina as a significant hard rock spodumene lithium project, ranking within the top five in Northern Australia and top 15 globally. Last month, Adina's resource estimate saw a 33 per cent increase, with another upgrade expected in the first quarter of 2025.
Euroz Hartleys is the joint lead manager for the capital raise, with Foster Stockbroking assisting as a co-manager.
Winsome debuted on the ASX in November 2021 after an $18 million IPO with shares priced at 20¢ each, led by Canaccord Genuity. Initially well-received, the company’s shares have dipped over 36 per cent over the past year. Before the raise, Winsome had a market capitalisation of $184 million and $24.6 million in cash as of May 31.
This capital influx aims to strengthen Winsome’s position in the expanding lithium market.
AGL Shifts Focus to Hydro, Gas, and Batteries
AGL Energy is steering away from new wind and solar investments, instead targeting hydro, gas, and batteries, said Chief Operating Officer Markus Brokhof.
Following Origin Energy's strategy to minimise solar and wind asset ownership, AGL is doubling down on "firming" assets like hydro. "From batteries to gas-fired power stations, we'll invest heavily," Brokhof stated.
Renewables are still in AGL's plans, but through power purchase agreements rather than ownership. "We don't need to own wind farms," Brokhof added, citing the challenges in synchronising solar generation with peak demand and the low revenues from wind.
Brokhof emphasised the value of hydro in the energy transition, noting its deep storage capabilities. However, he warned about the substantial costs of building hydro facilities and called for government support, although current terms and conditions remain unclear.
Australia's largest energy generators are rethinking their strategies as fossil fuels decline. This shift, sparked by profitability concerns from large-scale renewable projects, contrasts sharply with Brookfield's $30 billion renewable generation proposal if it acquired Origin Energy.
Macquarie Asset Management’s head of green investment, Lachlan Cresswell, highlighted ongoing investment opportunities in renewable generation, despite the challenges. He underscored the crucial role of electricity transmission investments, citing a global need for $21.7 trillion to achieve net-zero emissions by 2050.
EnergyAustralia's CEO, Mark Collette, cautioned that the Labor government’s Capacity Investment Scheme might be too slow to meet the renewable goal of 82% energy generation by 2030. He pointed out that renewable projects often offer lower returns compared to private debt investments.
