Economics

Another savage blow to regional media spells disaster for the communities they serve

Kristy Hess Associate Professor (Communication), Deakin University With swift and savage force, the COVID-19 pandemic has inadvertently attacked Australia’s local news media ecology, which was already battling a weakened immune system. As a researcher working on Australia’s largest academic study into the future of local newspapers, the phones have been running hot in recent weeks. We’ve had calls from everyday people, journalists made redundant, cadets surviving on JobKeeper, and independent news proprietors, all navigating their way through the crisis. News Corp has announced plans to close or suspend printing operations of more than 100 suburban and small community titles. Its more successful publications, such as the Geelong Advertiser, Gold Coast Bulletin, Hobart Mercury and the iconic Northern Territory News, will remain with print and digital editions. Other independently-owned newspapers across rural and regional Australia are still breathing: they are gasping for air, but they are breathing. They’ve either temporarily suspended operations, cut back the number of print editions or shifted to a digital-only model to “see how it goes”. Since the COVID-19 crisis emerged, there have been two key funding schemes introduced (or re-introduced) to support news providers – the government’s $50 million Public Interest News Gathering Program and a $5 million Regional and Small Publishers Innovation Fund. The federal government has also announced plans to force Google and Facebook to share advertising revenue with producers of quality journalism in Australia. The Australian Competition and Consumer Commission is now seeking views on its new draft mandatory code that will address bargaining power imbalances between Australia’s news media businesses, and Google and Facebook. This has been met with some initial concern from the Country Press Association of Australia amid fears the modelling may only benefit big companies and not the little players that serve small towns and cities. The Victorian government has waded in to provide more than $4 million in additional advertising […]

How the gig economy can transform farms in the developing world

For truly modern agriculture, we need to look to the skies. Because that’s where drone technology will work its magic. Drones will have a particularly powerful impact in the developing world, whose mostly smallholder farmers face enormous challenges producing quality food and selling it for a decent price. The green shoots of this transformation are already sprouting. In the People’s Republic of China, farmers are using drones for crop-dusting. Affordable, locally manufactured drones can spray pesticides across huge areas, helping to cut labour and equipment maintenance costs. They also get the job done fast – over 500 acres per day. Developing countries in Asia should try to anticipate the future uses of drone technology. Drones make precision farming a reality. They can carry out surveys like infrared mapping to gather crucial information like crop condition, costing farmers as little as $5 per acre. With the survey data in hand, the farmer might be able to boost crop yields by 20%. The time spent doing the surveys is reduced from a couple of days to a couple of hours. Image: Nesta Drones are reshaping agriculture in developing countries. The farm sectoremploys most people in developing countries but is arguably the most difficult to transform. In these countries, agriculture doesn’t contribute as much as it should to gross domestic product because it’s typically not competitive. Most farms are small and unproductive. Young people are leaving in search of city jobs that provide higher salaries. Farms are being abandoned or left to the elderly who toil alone in the fields. Drones could make farming easier and more profitable for those who still work the land, and even attract youth back from the city. They can also be part of the solution to possible food shortages as more nimble, profitable smallholder farms produce more affordable […]

The last thing companies should be doing right now is paying dividends

The economic heart attack induced by COVID-19 has revealed an ugly truth – many very large companies have too little cash to ride out sharp downturns. Cash flow variability, and the inability to retain earnings to buffer that variability, is one of the most common reasons small businesses fail. Because large companies have raised large amounts of cash through public offers, and take in large amounts of cash in their ordinary operations, they ought to be more resilient. Yet even though the pandemic-inspired shutdowns are mere weeks old, many big companies such as Virgin Australia and listed childcare providers are already pleading for or receiving public guarantees and bailouts. Other companies such as Flight Centre and Cochlear are rushing to raise extra funds though discounted share placements. Bond and debt markets are experiencing severe problems, making it difficult for these companies to borrow. Why are big companies so vulnerable? Catastrophic declines in cash flow are only half the story. The other half is the three-decade focus on maximising shareholder returns. Companies have used four strategies to keep their share prices high and push them higher. First, they have paid out profits to shareholders in the form of dividends, leaving them with less to build cash buffers, pay higher wages and reinvest in the business. Reserve Bank research shows that over the past three decades dividend payouts have trended up over time to more than 80 cents of every dollar of corporate profits. In some companies dividends payouts exceed 100% of profits. Second, the same Reserve Bank research points to the increased use of share buy-backs and dividend reinvestment plans. The former boosts share prices by shrinking the stock of shares. The latter boosts demand for that stock. Third, to lock in these historically high dividend payout ratios, shareholders, including institutional shareholders such as superannuation funds, have demanded boards agree to dividend guarantees. […]

How do economic crises end?

The Issue We are now in the acute economic phase of a crisis that is unprecedented in modern times — a health crisis from the coronavirus pandemic that has sparked a follow-on economic crisis. The virus represents both a supply shock (as people are forced not to work and supply chains are disrupted by the need for social distancing) and a demand shock (as incomes plunge, people are unable to go out, and economic uncertainty surges). Moreover, these shocks have put severe strains on the financial system. Against this backdrop, the economic outlook has darkened considerably since the pandemic burst into public view, and many macro forecasters now expect a deep and painful recession as economic activity is abruptly curtailed. While much remains unknown about the spread and severity of the coronavirus crisis, and even though there are clear differences from the current situation, we can look at two past economic crises — the Financial Crisis and the Great Depression — to draw lessons. History suggests that two ingredients are needed to stanch the acute phase of an economic crisis; a transparent resolution of the underlying cause of the crisis and a dramatic economic policy response that both mitigates the economic damage and causes a shift in business and consumer sentiment. History suggests two ingredients are needed to stanch the acute phase of an economic crisis; a resolution of the underlying cause and a dramatic economic policy response that mitigates the economic damage and causes a shift in sentiment. The Facts: The Great Depression began with a financial panic that was ignited by the stock market collapse in October 1929. That panic quickly led to a run on banks and many bank failures. Indeed, the number of banks operating in the United States at the end of 1933 was down by almost half from its […]

Is this the person the media world is now watching?

It was always Rupert. The focus was on the father who has been so active over the past 60 years to create a media empire the world had never seen before. Through this time of triumph and turmoil the father kept his children close by. As heir apparents they had a vital role to play in the future of News Corp. But things changed. Thanks to the News of the World scandal, James dropped away and Elizabeth just isn’t around much anymore. Lachlan is the one, he is standing upfront and running things. He is the public face And the history of this family in media means that what he does will be watched closely. And company results will be watched closely. When will there be another book by Michael Wolff, when will the next crises at Fox raise its head. And why does it seem that it is this media company and this media empire that gets most of the attention when things go wrong, just as when things go right? Because the founder put his neck on the line so many times to creative a business so strong and powerful and significant that the rest of the world watched him do it. He made enemies, he made friends. Sure, there are other large and famous family media businesses. They mainly are quieter, less controversial and not so much watched for their every move. And because this family of media people – the Murdochs – somehow draw the attention, how will Lachlan handle it? He is 46 and by the time he reaches his father’s age, we may well be looking at a whole new ball game.

The World: A Brief Introduction

An invaluable primer from Richard Haass, president of the US Council on Foreign Relations, that will help anyone, expert and non-expert alike, navigate a time in which many of our biggest challenges come from the world beyond our borders. Like it or not, we live in a global era, in which what happens thousands of miles away has the ability to affect our lives. This time, it is a Coronavirus known as Covid-19, which originated in a Chinese city many had never heard of but has spread to the corners of the earth. Next time it could well be another infectious disease from somewhere else. Twenty years ago it was a group of terrorists trained in Afghanistan and armed with box-cutters who commandeered four airplanes and flew them into buildings (and in one case a field) and claimed nearly three thousand lives. Next time it could be terrorists who use a truck bomb or gain access to a weapon of mass destruction. In 2016 hackers in a nondescript office building in Russia traveled virtually in cyberspace to manipulate America’s elections. Now they have burrowed into our political life. In recent years, severe hurricanes and large fires linked to climate change have ravaged parts of the earth; in the future we can anticipate even more serious natural disasters. In 2008, it was a global financial crisis caused by mortgage-backed securities in America, but one day it could well be a financial contagion originating in Europe, Asia, or Africa. This is the new normal of the 21st century. The World is designed to provide readers of any age and experience with the essential background and building blocks they need to make sense of this complicated and interconnected world. It will empower them to manage the flood of daily news. Readers will become more […]

If more of us work from home after coronavirus we’ll need to rethink city planning

We have seen an unprecedented rise in the number of people working from home as directed by governments and employers around the world to help stop the spread of COVID-19. If, as some expect, people are likely to work from home more often after the pandemic, what will this mean for infrastructure planning? Will cities still need all the multibillion-dollar road, public transport, telecommunications and energy projects, including some already in the pipeline? World’s largest work-from-home experiment Remote working was steadily on the rise well before COVID-19. But the pandemic suddenly escalated the trend into the “world’s largest work-from-home experiment”. Many people who have had to embrace remote working during the pandemic might not want to return to the office every day once restrictions are lifted. They might have found some work tasks are actually easier to do at home. Or they (and their employers) might have discovered things that weren’t thought possible to do from home are possible. They might then question why they had to go into the workplace so often in the first place. But what impact will this have on our cities? After all, many aspects of our cities were designed with commuting, not working from home, in mind. Stress test for NBN and energy networks From a telecommunications perspective, the huge increase in people working from home challenges the ways in which our existing networks were designed. Data from Aussie Broadband show evening peak broadband use has increased 25% during the shutdown. Additional daytime increases are expected due to home schooling with term 2 starting. Research by the then federal Department of Communications in 2018 estimated the average Australian household would need a maximum download speed of 49Mbps during peak-use times by 2026. If more people work from home after COVID-19, the size and times of peak use might need to be recalculated. […]

Australia’s COVID-19 opportunity

COVID-19’s impact on the Australian labour market has been dramatic and multifaceted. Some sectors of the economy have been almost completely shut down by government order. The demand in many industries has collapsed, while a few others have seen an increase. As many as one million jobs are under threat. Such estimates came before the government’s extraordinary JobKeeper scheme, which will undoubtedly reduce this figure considerably. Despite that, many who will keep their jobs may not actually have much to do at work. The economy will be in “hibernation” or on “life-support” for some time to come. We’ve gained about 1 billion hours of time If the economy has shed the equivalent of one million jobs, then we’ve gained about one billion hours of available time, and that’s just over the next six months. The full impact of the crisis could be even larger. What should we do with this time? Many of us are spending more time with children who are no longer physically at school. Some of us are doing tasks which our older relatives previously did. Netflix is also a compelling option. From a human capital perspective, the crisis presents a unique economic opportunity to re-train and up-skill Australia’s labour force. The Australian government jumped on board on Sunday, announcing funding that would cut the price of new six-month, remotely delivered diplomas and graduate certificates in nursing, teaching, health, information technology and science provided by universities and private tertiary institutions. Economists have long observed that investment in human capital (education, skills) tends to increase during recessions, because there aren’t as many well-paying alternatives. We can use it to get ahead of the curve In the current recession, the opportunities for training are greater. Even those of us who will remain employed but have little to do can use the time to invest in training. Our […]

Lessons from Asian banks on their coronavirus response

ArticleBy Jacob Dahl, Vito Giudici, Sameer Kumar, Vishal Patwari, and Gabriele Vigo Lessons from Asian banks on their coronavirus responseOpen interactive popupFinancial institutions in countries initially affected by the pandemic moved quickly to safeguard their employees, transform their operations, and serve customers in new ways. As the COVID-19 outbreak continues to spread around the world, the humanitarian crisis has been accompanied by immense social and economic disruption. Almost overnight, whole countries have had to accept a new reality: everything has changed, and daily life may never be the same. Asian banks have already had to grapple with all of these factors, taking actions to maintain operations, protect their workforce, and keep customers informed. Their actions could offer a valuable template for banks around the world that are still amid the crisis and experimenting with initiatives. By focusing on three imperatives—ensuring business survival, fulfilling social responsibilities, and adapting to the new normal—banks can minimise disruption and continue to provide vital services to their customers. Ensure business survival In response to the pandemic, Asian banks moved quickly to shore up their operations and implement new approaches to mitigate operational disruptions. They prioritised several areas to identify issues or obstacles to business continuity and then experimented with new solutions and ways of working. Confirm resilience of internal operations To guide the pandemic response, many financial institutions formed a response-management unit composed of executive-level, cross-functional teams. These teams were empowered to make key decisions as well as communicate COVID-19 responses quickly and effectively across the organisation.1 Asian banks also had to shift to remote working for most employees, a move that required IT to ensure the organization’s infrastructure and systems could support such a shift. In defining remote and work-from-home setups, bank executives considered both the level of human interaction required for certain tasks and the degree to which […]

How a universal basic income can end financial exclusion

The main argument for a universal basic income (UBI) is that it would reduce poverty and income inequality. Yet UBI advocates often overlook a range of other potential benefits. Digital UBI payments can bring people into the financial system and build their financial capability, unlocking a range of development benefits for citizens and governments alike. Take Mongolia for example. In 2014, 92 percent of adults had a bank account—by far the highest share in the developing world. (By comparison, only 43 percent of adults are banked in similar lower-middle income countries.) Young adults, a population often financially disenfranchised, see some of the most impressive usage of financial services; account ownership among Mongolians aged 15-24 years old is 93 percent. Smart policies, digital payments, and greater inclusion of traditionally marginalised groups all helped Mongolia achieve nearly universal account ownership. The Mongolian Human Development Fund (HDF) distributes revenues from the mineral and mining sectors with the objective of redistributing wealth. A flagship program funded by the HDF is the Child Money Program (CMP), launched in 2012. As part of CMP, the government makes monthly electronic deposits into savings accounts opened in children’s names, helping to ensure that all Mongolians will eventually be banked. The program pays about $10 a month to all children aged 0 to 17, thus ensuring that the parents of every new born open an account in their child’s name. Alongside South Africa, Mongolia has one of the developing world’s largest shares of adults receiving government transfers—35 percent—with two-thirds of these payments made directly into bank accounts. Seventy percent of account owners in Mongolia make or receive any payment through their account, while in East Asia and the Pacific the share is 50 percent. These accounts aren’t only passively utilized to receive payments—they are also actively used for monthly cash management and longer-term savings. […]

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