The business landscape in Australia sees significant regulatory moves, corporate restructurings, investment shifts, and market trends. Read on to explore the most impactful stories of the day.
RBA Reviews Payments Regulation, Targets BNPL Costs
Expanded Powers and New Legislation
The Reserve Bank of Australia (RBA) is poised to review payments regulation, with a laser focus on the Buy Now, Pay Later (BNPL) sector. New legislation is anticipated to grant the RBA stronger oversight over digital wallets like Apple Pay and BNPL services.
Following Apple’s announcement to transfer BNPL financing to a new subsidiary, the global trend of regulating BNPL as credit is gaining momentum. This aligns with the RBA’s intention to expand its oversight under the Payment Systems Regulation Act (PSRA).
BNPL Fees Under Scrutiny
Ellis Connolly, head of RBA's payments policy, highlighted that BNPL transactions, which hit $20 billion in 2023, often charge retailers an average fee of 3.5%, significantly higher than debit and credit card fees. The RBA is considering removing bans on merchant surcharges for BNPL services to allow retailers to pass on costs to consumers.
Expanding Powers to Regulate Payment Networks
The RBA aims to bring more transparency to fees charged by major US card networks like Mastercard and Visa. These networks earned $1.9 billion from Australian banks in the past year. Talks are underway to ensure fee transparency and compliance with cost routing standards.
Mobile Wallet and E-commerce Concerns
The RBA is also examining restrictions imposed by Apple on iPhone payment chip access and is in talks with both Apple and Google to introduce “least-cost routing” for cheaper transactions. E-commerce platforms like Shopify and WooCommerce are also under scrutiny for competition issues. The RBA is pushing for more standardisation in online card payment tokenisation.
Future Actions
Potential formal regulations may be introduced to comply with least-cost routing requirements and target high cross-border payment fees. The RBA’s broader strategy aims to foster fair competition, transparent fees, and enhance security in the dynamic payments landscape.
Beach Energy Slashes Costs, Jobs to Boost Returns
Beach Energy is undertaking a significant restructuring aimed at reverting years of underperformance. Announced by CEO Brett Woods, the strategic overhaul intends to slash over $150 million in annual costs, involving cuts in jobs and operating expenses.
Beach plans to bring new gas supplies online and explore gas prospects in offshore Victoria and Western Australia, potentially expanding into gas peaking power generation and storage. Despite recent losses and reserve downgrades, analyst Saul Kavonic predicts an optimistic turnaround for Beach under Woods’ leadership.
Cost-Cutting Measures
Beach expects to reduce capital expenditure by 20% to under $450 million and lower operating costs by 30% to achieve break-even at oil prices below $US30 per barrel. Minimum return rates are set at 12% for gas projects and 15% for oil.
Market Reactions
Beach Energy’s shares recently closed at $1.565, down significantly from peak levels in early 2020. Despite this, investors remain hopeful about the company’s recovery under new leadership.
Hard Assets Surge Fuels ASX Stocks
Wall Street's Shift to Hard Assets
Capital expenditure supercycles yet again spotlight Wall Street's shift towards hard assets. UBS strategist Richard Schellbach outlines how critical factors, like federal infrastructure spending and energy transitions, are setting the stage for growth in hard asset sectors.
Australia’s Unique Opportunity
With the backdrop of rising costs, Australia's stock market is witnessing opportunities in hard asset sectors such as infrastructure, renewable energy projects, supply chain onshoring, defence spending, and AI and automation.
ASX Winners in the Supercycle
Companies poised to benefit include Monadelphous, Graincorp, Ridley, Worley, BlueScope, Goodman Group, and Centuria Industrial REIT, among others. Defence projects will benefit Downer EDI, Lendlease, and PWR Holdings. AI-driven demand spikes will favour companies like NextDC, Telstra, WiseTech Global, and Nine Entertainment Co.
Gold and Bitcoin ETFs Gain Popularity Amid Economic Uncertainty
Amid heightened economic uncertainty, ETFs tracking gold and bitcoin are drawing increasing interest from retail investors. Australia's $200 billion sovereign wealth fund, Future Fund, along with other investors, are seeking safe havens amid rising geopolitical risks.
Choose Low-Fee ETFs
Bitcoin ETFs are gaining traction, with new listings on the ASX and Cboe. VanEck Bitcoin ETF and Monochrome Asset Management are among those launching products catered to retail investors. Fees range from VanEck’s 0.59% to Monochrome’s 0.98%.
Bitcoin versus Gold
With retail investors seeking both gold and bitcoin ETFs as hedges, experts like Jeff Yew emphasise "true bitcoin exposure" through direct asset holdings.
City Chic Plans $25 Million Equity Raise and Divestment of Avenue Brand
The specialty women's wear retailer City Chic is raising $25 million through equity to fortify its financial position. Canaccord Genuity is managing the equity raise, while City Chic plans to divest its American brand, Avenue, to focus on premium markets.
The company's stock has experienced a significant decline recently, but the funds raised are expected to strengthen its balance sheet for future growth.
Tamboran Resources Denies Health Risks, Plans Major LNG Expansion
Tamboran Resources is preparing for a major LNG expansion, planning to raise $200 million for new gas wells. Despite dismissal of health risk studies linked to gas industry activities, regulatory scrutiny continues. The federal government has pledged $1.5 billion to develop the Middle Arm Industrial Precinct, despite criticisms from environmental advocates.
Health and Environmental Debates
CEO Joel Riddle defends against health risk claims, amidst independent studies linking increased fracking to health issues. The Northern Territory EPA’s environmental oversight also faces scrutiny regarding its handling of emission monitoring.
Government Investment and Future Plans
The federal government's large investment in the Precinct aims to establish it as a multi-industry hub, even as debates over health risks continue. Tamboran anticipates commencing its operations by 2026.
Investing in Australian Tech: A Hidden Gem
The Australian tech sector, although small in market share, presents significant investment opportunities with companies like WiseTech, REA Group, Xero, CAR Group, Pro Medicus, and Megaport. These firms have shown impressive returns, significantly outperforming the broader market indexes.
Despite being volatile high-growth stocks, Australian tech companies offer substantial long-term potential. Investors should consider the high risk and low dividend yields associated with these growth stocks.
Betashares Secures $300 Million from Temasek to Fuel Expansion
Betashares, Australia’s second-largest ETF provider, has secured a $300 million investment from Temasek, highlighting the continued interest in passive investment vehicles. Temasek's investment aims to bolster Betashares' expansion into superannuation, retirement, and retail wealth management sectors.
Betashares is pushing for more innovation in these sectors to cater to shifting investment needs in Australia’s financial landscape.
Sydney Landlord Blocks Brisbane Development to Protect Profits, Developer Claims
A dispute between Sydney landlord Dexus and Brisbane developer Seymour Group centers around the 15-storey Newstead Green development. Dexus claims the project will damage neighbourhood character and increase traffic, while Seymour Group accuses Dexus of attempting to block competition.
The Queensland Planning and Environment Court is poised to review the case, which could have significant implications for future urban development and competition in Brisbane.
