As it happened: Huge spike in uninsured home borrowers, Cbus execs apologise to senate inquiry, Orica boss upbeat on Trump 2.0

This report from Reuter's Gabrielle Ng has sent a shiver up the spine of this West Aussie.

Iron ore futures prices retreated on Thursday as supply of the key steelmaking ingredient remained firm amid a weaker steel market outlook, although fresh stimulus for top consumer China's property sector limited losses.

The most-traded January iron ore contract on China's Dalian Commodity Exchange (DCE) ended morning trade 1.44% lower at 755.5 yuan ($104.32) a metric ton.

The benchmark December iron ore on the Singapore Exchange was 1.21% lower at $99.35 a ton, as of 1445 AEDT.

"Iron ore prices fell as supply continues to grow," said ANZ analysts in a note.

Shipments from Australia’s leading Port Hedland terminal totalled 45.6 million tons in October, bringing this year’s total to the highest level for this period in four years, said ANZ, adding that the Australian government expects exports to increase 1.9% to 908 million tons in 2024.

Australian shares ended higher on Thursday, led by the heavyweight bank stocks after the central bank governor's comments pointed towards higher-for-longer interest rates, while Xero led the technology index higher.

The S&P/ASX 200 index ended 0.4% higher at 8,224 points. It fell 0.8% on Wednesday.

Reserve Bank of Australia Governor Michelle Bullock showed no intent to ease borrowing rates until the country's inflation moves back to the central bank's target band.

Moreover, data showed that while employment growth slowed in October, the jobless rate stayed low and underlying trends remained relatively healthy, further hitting the case to cut rates.

Ryan Felsman, chief economist at CommSec, said Bullock's comments and the jobs data led to the rise in the rate-sensitive financials.

The bank index ended 1.4% higher. Commonwealth Bank of Australia, the country's top lender, hit a record high.

The other three major banks gained between 1% and 2.2%.

Information technology shares gained 1.8%, led by a 5.9% surge in Xero after the software services provider's upbeat earnings report.

"Impressive growth in operating revenue with solid free cash flow justifies today's gains," Junvum Kim, Asia Pacific senior sales trader at Saxo Markets, said on Xero's earnings.

Mining and energy stocks bucked the trend, closing 1.5% and 0.6% lower, respectively, on easing prices of iron-ore and oil.

Among individual stocks, James Hardie emerged as one of the top gainers after multiple brokerages upgraded their price targets on the building materials maker.

(via Reuters)

Following yesterday's announcement that WA lithium miner Mineral Resources would put it's Bald Hill mine into care and maintenance, CRU Group battery markets analyst Cameron Hughes has crunched the numbers on Aussie volumes for the coming year.

"The closure brings the total tally of mine capacity curtailments to almost 190 kt lithium carbonate equivalent (LCE) since late 2023 as a function of forecasted 2025 production.

"Delayed projects have also lowered our supply forecast by another 50 kt LCE for 2025.

"This has slashed 14% of supply from next year's forecast and carbonate prices in China have jumped almost 2.7% in trading today as a result.

"Australian supply will be lower by 30% in 2025 due to revised operational strategies linked to the fall in lithium prices.

"Today's rally in prices will be temporary — we still see a market in surplus next year given persistently weakening demand growth, although it has significantly tightened.

"There is still room for further curtailments, and a tighter market will bring volatility for prices in 2025.

"With strong procurement orders expected in March, a recovery in lithium chemical and concentrate prices is expected."

I've added a story I did on the sector a few months ago, Cameron's analysis is sounding like another trip is on the cards to see how things are going ...

Our friends at the Victorian Country Hour have received alarming news that bacon prices are on the rise.

Bacon was a cheap protein, but it's starting to push between $19 to $21 a kilogram at supermarkets, causing some shoppers to question why.

Bacon is one of the very few meats in Australia that is largely an imported industry because it's cooked, so it's allowed to be exported or imported into Australia.

Rural reporter Emma D'Agostino spoke with Australian Pork Limited's Margot Andre who says the narrowing cost of traditionally cheaper imported bacon with locally produced product could benefit Australian producers.

"So traditionally, the gap between buying Australian homegrown bacon versus imported bacon has been a lot bigger. But now what we're actually seeing is that gap is quite small. So people probably have a better choice or an easier choice to make on whether they support the Australian versus the imported product."

The boss of ASX-listed chemicals and explosives maker Orica says Donald Trump's US election victory is good for business.

I spoke to Sanjeev Gandhi after he announced the company's full-year profit, which jumped 77% to $525m helped by land sales in the period.

Shareholders will get a final dividend of $0.28 a share.

Orica has a big US presence, and I asked him the obvious question, how does he feel about a Trump victory?

 "The fact that they are business friendly, is supporting manufacturing in the country and you know Orica has significant manufacturing assets in the United States, I am optimistic," he says.

He said the policies under a Trump administration are likely to focus on renewing and investing in infrastructure and that's positive for Orica's business.

"All of those projects need a lot of resources, both civil resources and mining resources and you know that's where Orica plays"

Sanjeev Gandhi says this makes the US a much more attractive investment option than Australia.

You can watch the full interview on The Business at 8:45pm AEDT on the ABC News Channel tonight. It will also be on iView of course!

Andrew Hall from industry lobby the Insurance Council of Australia says governments need to be spending a lot more on climate change mitigation to minimise the risk of natural disasters and make insurance premiums more affordable.

"I love to remind everybody that the state governments are collecting around about $8 billion every year in taxes off insurance premiums at the moment," he says.

"And I challenge you to find $8 billion that's going into either resilience, mitigation, house raisings or buybacks.

"So state governments enjoy quite a lazy tax with stamp duty on insurance products."

Friend of the blog, senior business correspondent Peter Ryan, has been keeping an eye on this morning's Senate hearing for The World Today.

Chief executive Kristian Fok made a last-minute appearance before a Senate committee that is putting Australia's $3.9 trillion superannuation system under the microscope.

Senator Andrew Bragg questioned the role of Cbus Chairman Wayne Swan and his relationship with Treasurer Jim Chalmers, given the CBUS plan to provide $500 million or thereabouts to the Australian Housing Future Fund, and whether there's a link to a federal government policy and the use of members' funds.

Kristian Fok made it clear that this $500 million would be subject to normal due diligence that CBUS undertakes.

We heard from consumer groups about the risks to individuals from having to drop their insurance coverage, but there's also some pretty worrying modelling on the risks to the banking sector from Sharanjit Paddam, an actuary and the principal of Finity Consulting.

He says house insurance is now unaffordable for around 15% of households, a 30% increase in just one year.

"Our latest figures show that 1.6 million households in Australia have unaffordable insurance, and we define that as being where the insurance would cost them more than a month of gross household income, which we think is unaffordable," he observes.

"People with lower incomes can only afford cheaper houses, and cheaper houses are often in flood plains, they're on the edge of the cities and therefore exposed to bush fires. They're not necessarily the highest quality household in terms of building standards, and all of these things get exacerbated.

"So we're taking our most vulnerable people from a socioeconomic perspective and putting them in our most vulnerable houses from a disaster perspective, and it's the combination of those two things that's driving the problem."

So how does this affect the Australian banking system? Paddam explains just how big this is relative to the banks' entire mortgage books.

"So one thing else we know about this 1.6 million households, is that about 10% or 11% of them, so 118,000 households, have a mortgage, have a home loan, and potentially are not buying insurance because we don't think they can afford it, and putting the banking system at risk, we've estimated that.

"We think it's about nearly $60 billion in lending from the banks that's at risk in this way, that's about 3% of all lending.

"To put that 3% in context, at the worst of the GFC in the US, the delinquency rate on the home loans in the US, the worst it got, was 9.3%.

"And what I'm saying in Australia is we're at 3% of people in the bank lending system that [if] we have another year of really bad disasters, those banks are going to be at risk."

Julia Davis from the Financial Rights Legal Centre says there's been a decline in the number of insured people, mainly lower-income households.

"There's been a decline of 3% of insured risk just in the last nine months," she says.

"So, I promise you, those aren't people like us. Those are people at the lower end of the income spectrum who have reached their breaking point.

"And I promise you, if someone is in severe mortgage stress, they are probably not paying for their insurance anymore. We know that people prioritise home loans. We know that people prioritise their rents over anything else."

Davis says this can have dire consequences, such as putting people in breach of their home loan terms and other housing contracts.

"One terrifying element, as we head into summer, is that research has shown the adequacy of a person's level of insurance has an important effect on the risks they're prepared to take when defending their home in a bush fire," she says.

"We also know that insurance is almost always a term of the mortgage contract, so even if you're opting out of flood, you would likely in breach of your home loan.

"We know that in a lot of states, land lease communities require you to have insurance. So we're talking about people living in caravan parks, which tend to be built in very high risk areas. Those are very expensive policies for people with very little income, and they are now in breach of their land lease contract.

"We know in every state, building insurance is required for body corporates."

Matt Comyn draws a hearty laugh from the audience with a semi-joke about why CBA invested in buy now pay later service Klarna and the bank's hope for more regulation of quasi credit providers.

"One of the reasons why we made an investment in Klarna, which was back in 2019 after we watched Afterpay grow like a weed, and good for them, trying to work out, like, what was the relevance for us," he says.

"One of the aspects of that case to put the investment in, is nothing will see a product be regulated faster than the Commonwealth Bank providing it.

"Imagine my surprise when five years later it's still not regulated."

It's one area where the banks and consumer groups are aligned, in seeing a broader definition of credit so that things like BNPL face similar regulations to traditional credit providers, like banks.

The east coast's largest grain handler, GrainCorp, reported a big drop in profits when it released its full year results today.

It posted annual net profit after tax of $62 million, a 75.2% drop compared with $250 million last year

Managing director and CEO Robert Spurway attributed narrowing profit to mixed growing conditions in Australia and challenging operating environment

"Challenging growing conditions across northern parts of East Coast Australia (ECA) and in Western Australia were in sharp contrast to an excellent production environment in southern regions of ECA.

"Internationally, strong global crop production and reduced supply chain volatility impacted grower selling and customer purchasing behaviour, lowering margin opportunities."

Shares in explosives manufacturer Orica are down today, following the company's lower-than-expected revenue figures.

Its full-year revenue was down 4.4% year-on-year, at $7.66b.

However, the share price is still around 10 per cent higher than where it was this time last year.

And CEO Sanjeev Gandhi is upbeat about the future.

"We expect the demand for our blasting technology, specialty mining chemicals and digital solutions, to continue to increase as we partner with our customers to cater to their growing appetite for new technology and digital solutions."

You can catch Sanjeev Gandhi on The Business tonight.

The Commonwealth Bank's chief executive Matt Comyn is on a panel at the ASIC annual forum discussing access to financial services.

One issue that keeps coming up is the closure of bank branches and ATMs, making it harder for people to use cash.

However, Comyn denies it's a conspiracy by the banks to drive people towards electronic payments.

"Sometimes people talk about a conspiracy that the banks are trying to drive people towards electronic payments," he says.

"I mean, realistically, people are voting with their feet, and then the question is, or the choice, how do we balance that transition?

"We know the provision of cash services is incredibly important. We do, and we expect to, pay more than anyone else to be able to support that, [but] we don't want to be the only participant that's paying for cash distribution."

Comyn says there's still quite a lot of cash out there, but only a small part is being used for legitimate payments for goods and services.

"We distribute about $4 billion in cash per month," he says.

"There is $100 billion of cash currently in circulation, the highest ever in history. About 75% of that has been lost or hoarded.

"And, you know, I think 15% of that is used for legitimate purposes but the other 10% is used for illegitimate, including facilitating crime."

The value of the Aussie dollar has slumped this week, scraping close to three-month lows.

At the time of posting, the Australian Dollar was buying 0.65 US cents.

It's because the US dollar has been on a bullish run for the last few days — a few hours ago it hit a four-month high against the Japanese Yen.

Higher trade tariffs and tighter immigration under the incoming Trump administration are projected to fuel inflation, potentially slowing the Fed's rate-cutting cycle longer-term. Expectations for deeper deficit spending are lifting Treasury yields, providing the dollar with additional support.

The Aussie dollar, while weaker, isn't as low as it got in August, and expectations that the RBA won't move on rates until next year are keeping its value steady.

(with Reuters)

Friend of the blog David Taylor has some insight into today's job numbers from the ABS.

Here's David Chau's full interview with EY Oceania chief economist Cherelle Murphy:

A great question from panel moderator Michael Stutchbury to AFP commissioner Reece Kershaw, prefaced by former ASIC chair Greg Medcraft's comments many years ago that Australia was a "paradise" for white-collar crime.

"From your observations, Reece, do you think that white collar crime is on the is on the increase?"

With absolutely no hesitation, Mr Kershaw replied:

"Yes, definitely.

"And it's more sophisticated than ever before.

"I think, with the advent of crypto and other ways of hiding your illicit gains and setting up these structures offshore in particular and onshore, they know that then we struggle sometimes offshore with timeliness, and we have to work with other agencies on a police to police basis."

AFP Commissioner Reece Kershaw has a warning for cyber criminals hiding the proceeds of their crimes in cryptocurrencies.

"We were able to break into our first crypto wallet and actually seize $9 million," he reveals, he believes for the first time publicly.

"It was some very clever work from our crypto team.

"So we're getting smarter on that front as well, so that's a message to organised crime, and other criminal groups and counter terrorism financing people, and so on."

Australian Super has fronted the Senate Economics References Committee and answered questions about the impact of early release of super.

During the pandemic, the government allowed people to withdraw up to $20,000 of their super to get through.

Four hundred thousand members accessed their funds via the COVID early release scheme, and it cost them.

A total of about $4 billion was withdrawn.

"Most of whom were people who could least afford it. The average balance from a member who did not take early release was $70,000, the average who did was $41,000," she said.

"Fifty thousand members completely wiped out their accounts, their retirement savings will never recover."

"It will cost those members $11.3 billion through lost earnings at retirement. A person aged 30 — which was the median age of withdrawers — who withdrew the full $20,000 will retire with $90,000 less in superannuation.

And she said it will cost a 20-year-old member $3,000 in tax to top up the pensions of those who did take out money.