Do-not-call confusion… Retail sales up, interest rate rise likely… Eagle Boys sold… Broadband costs could fall
Monday, April 2, 2007/
Confusion over Do Not Call costs
Businesses urgently need education on the Do Not Call Register, due to launch next month, says Australian Direct Marketing Association chief executive Rob Edwards. The Federal Government has just released the proposed fees companies will pay to access the register being set up to block unsolicited telemarketing calls.
The Australian Communications and Media Authority has put forward two options, inviting comments on the proposed fees.
“It launches on May 27,” says Edwards, “and here we are in April and businesses don’t understand what the cost is and the details of the plan.”
Under the plan, companies will be allowed to submit 500 names a year for free to have checked against the Do Not Call Register. They will then be charged at a sliding scale: the more names they check, the more they pay. The two options looks at different fees for different years.
In other countries, the names of those who join the register are provided to the companies. But in Australia, companies will have to send their databases to Service Stream, which is in charge of the register. Edwards says it would make more sense to charge companies less the more names they used.
He says small companies will be caught out. “For example if someone bought a product three months ago and you have no reason to call them and they are on the Do Not Call Register, you can’t contact them.” He warns that if companies buy a list, they must also check that it has been through the Do Not Call Register.
Companies could face fines of up to $1.1 million. The fines will apply to people who continually ignore warnings. People that inadvertedly make a mistake won’t be fined, Edwards says.
– Amanda Gome
Mixed signals on interest rates
A slowing manufacturing sector set against steady growth in retail trade and a key inflation measure gives the Reserve Bank mixed economic signals to consider when it decides whether to increase interest rates tomorrow.
The TD Securities-Melbourne Institute Monthly Inflation Gauge headline rate lifted 0.5 % in March, contributing to an annual rate of 3.5%, well above the Reserve Bank’s target inflation band of 2% to 3%.
Retail trade grew of 0.5% in February, slightly above market expectations and in line with recent growth trends in the sector, according to Australian Bureau of Statistics figures released today.
Building approvals lifted in February by 0.6% in trend terms, with 4.6% growth in flats and apartments more than compensating for a 1.4% decline in housing approvals.
TD Securities senior analyst Joshua Williamson says the “strong” inflation gauge, retail trade and building figures cement his view that the Reserve Bank will increase interest rates by 0.25% to 6.50% when it meets tomorrow.
“The rate rise will continue to lift the currency which will affect our exports, particularly manufacturing exports already suffering against other cheaper substitute goods. The tourism industry may also be affected as it gets more expensive to holiday here compared to overseas,” Williamson says.
But, Williamson says, it is unlikely that a rate rise will have a big effect on the retail sector. “The data seems to be saying that consumers aren’t affected by higher interest rates – people are still happy to spend.”
Westpac chief economist Bill Evans says the strong figures this morning just reinforce his longstanding view that interest rates are set to rise.
“The speech by Malcolm Edey in March showed RBA is concerned about inflation, GDP had been week and wage trends turning down, but now that seems not to be the case, as they have strengthened the likelihood of an interest rate rise in April.”
But not all voices have joined the interest rate rise chorus, and now they can point to a decline in this morning’s Australian Industry Group/ PricewaterhouseCoopers Australian Performance of Manufacturing Index for March to bolster their case.
AiGroup chief executive, Heather Ridout, says significant economic risks are beginning to surface.
“Manufacturing production grew at a moderate rate in March, which is positive news. However, growth in new orders softened and export growth was down on the start of the year. The latter coupled with the recent sharp jump in the Australian dollar and oil prices makes a strong case for keeping interest rates on hold,” Ridout said.
St George Bank head of economic research Steven Milch says he can’t see any strong grounds for an interest rate rise given the “friendly” inflation outlook.
“An interest rate rise would just temper growth a bit and would be a bit of a set back for the housing market, which is just getting off its knees now,” Milch says.
Business SA chief executive Peter Vaughan agrees: “Another interest rate rise is likely to dampen consumer confidence and place an unnecessary burden on business.”
– Mike Preston
Eagle Boys Pizza franchise chain sold
Eagle Boys Pizza founder Tom Potter says he rejected offers from publicly listed companies for the pizza chain, because they did not offer a good cultural fit, before deciding to sell a majority interest in his chain to Queensland-based venture capital group NBC Capital. Potter says the sale, for an undisclosed sum, will enable the 200-store chain to grow “harder and faster”.
Under the deal, all staff and managers are retained and seven of Eagle Boys’ management staff have taken equity; general manager Tod Clayton will become chief executive. Potter, who had a 100% stake before the sale, retains a minority interest and a position as a consultant for a year. He is thinking of writing a memoir about “all the funny stuff that has happened over the last 20 years”.
Eagle Boys is NBC Capital’s first investment in a franchise. Potter was reluctant to comment on the chain’s future plans, but said that growth will focus on building more drive-through outlets. He says these have been very successful. “They were a turning point for the company.”
Potter says that Eagle Boys, which has stores in Queensland, regional NSW and Perth, turned over more than $100 million last year.
– Jacqui Walker
Labor promises “Stern” style report
Labor will commission a report on the costs and benefits of action to reduce greenhouse gas emissions, Opposition Leader Kevin Rudd announced at a Labor climate change summit held over the weekend.
Speaking after the conference, Opposition environment spokesman Peter Garrett said Labor would review its target of a 60% reduction in carbon emissions by 2050 in light of the report’s findings.
Rudd also announced at the summit that Labor will attempt to negotiate a climate change agreement with China and set up an office of climate change within the Prime Minister’s department.
In another sign of the growing business leadership on climate change, VECCI will hold a conference on climate change this week and has announced that it will convene a summit on environmental issues including climate change and water later this year. The conference will look at the merits of various market-based carbon trading systems.
– Mike Preston
Hawaii link could lower broadband prices
Telstra’s $300 million undersea internet link to Hawaii could result in cheaper broadband prices, telecommunications industry analysts and players say.
Independent analyst Paul Budde says competition between competing undersea internet links will keep prices down.
“This investment will help keep costs low – without this link broadband costs will go up because we won’t have enough capacity. That means there will be less service available and to limit that you will increase the price,” Budde says.
Bevan Slattery, chief executive of Pipe Networks, which is also considering constructing an undersea cable to the US via Guam, is surprised at how “little to no thought appears to be given to how providers are going to feed those pipes with content”.
“Unless we can get the price for international connectivity significantly lower, then the current debate surrounding access technologies for consumers is pointless. It’s no use upgrading to a Ferrari if you can only afford to buy one litre of petrol per month,” Slattery says.
The undersea cable will increase capacity to download from the US, the origin of 65% of Australia’s online information. There is currently one undersea data connection in operation, owned by the private Southern Cross consortium. Australian internet infrastructure company Pipe Networks is also considering constructing an undersea cable to the US via Guam.
– Mike Preston
Biggest trading giants in paper row
Trade friction between the US and China just got a lot worse, after the US decided to impose tariffs on imports of Chinese coated paper products.
The US decision is expected to lead US manufacturers of other products to demand similar duties, particularly in the textile, steel and furniture industries.
The Chinese Government’s reaction, which was to say that the decision brings harm to the feelings of Chinese business people, is unlikely to have much affect.
The US wants big policy changes after China’s trade surplus for February was 10 times that of the previous year.
– Amanda Gome
ALP position on unpaid maternity leave
An industrial relations newsletter, Discrimination Alert, has reported that the Australian Labor Party has abandoned its pledge to double unpaid maternity leave to two years if it wins power.
The newsletter refers to the draft policy platform to be discussed at the party’s conference in April 2007, which indicates that the party plans to introduce paid maternity leave “over time” and at no cost to small business.
But a spokeswoman for Deputy Opposition Leader Julia Gillard denied that the document was an abandonment of the pledge to double unpaid maternity leave and stated that there has yet been no policy announcement on paid or unpaid maternity leave.
– Jacqui Walker
More marketing start-ups on the way
Small marketing companies hoping to be bought out by the Mitchell Communications Group, the new marketing services company formed by the merger between emitch and Mitchell & Partners will be disappointed.
Executive chairman Harold Mitchell says the merged group, which will have revenue of $130 million, will add more businesses such as PR, direct marketing, sponsorship and corporate social responsibility.
But as The Australian Financial Review reports this morning, they will not be acquisitions. Instead the company would enter new areas by starting up new businesses. The reason? It is easier to keep companies closely related if they are start-ups as opposed to acquisitions, says Mitchell.
– Amanda Gome
New policy direction?
The Intergenerational Report 2007, due out at 12.30pm today, has been delayed and will be released by the Government after lunch.
Come back to the SmartCompany Briefing page at 2.30pm today for our summary. The last Intergenerational Report in 2002 led to a major new policy direction for government.
Economic round up
The chances of an interest rate cut in the US have been downgraded after the Core Personal Consumption Expenditure Index grew by 0.3% in February, exceeding market expectations.
The S&P/ASX 200 is down 0.8% from Friday’s close to be 5944.4 at 12.30pm. At the same time, the Australian dollar is trading at US81.44 cents, up strongly on the last Sydney close of US80.90 cents.