THE DISTILLERY: BHP blues

A jotter foresees escalating IR problems for BHP Billiton, while another takes us inside China's banks.

Now that BHP Billiton's production problems at its Queensland coal mines have been put down to an act of God, the miner will be praying for an impasse in a costly union spat that has dragged on for 10 long months. This morning, the commentariat leaps on the miner's "force majeure", with one jotter pointing out things could get a lot worse – and not only for BHP. Elsewhere, one writer reckons a sleazy scandal at Echo Entertainment has caught James Packer's eye, and another explains why interest rates won't budge this afternoon. Finally, an insightful discussion of the challenges facing China's all-important banks.

But first, The Australian Financial Review's Matthew Stevens takes aim at intensifying protests at BHP Billiton's Bowen Basin coal operations – plus their flow-on effects – and places the blame firmly on Labor's industrial relations reforms.

"What BMA’s move to force majeure does is confirm that there is a heavy cost to the sort of sustained hard bargaining that is made all too possible by the Fair Work Act. Its customers have been told to prepare for some pain as contracts are not filled and a key supplier like QR National has already warned its shareholders that profits have been hit by the strike. QR has warned its workers, too, that there might be issues ahead if the strike action worsens. So far QR has managed to mitigate some of the impact of BMA’s shortfalls by re-allocating capacity and convincing workers to use holidays. But on March 23 QR noted it would need to "re-examine other options” if the strike action persisted. Well, it is persisting and, depending on how BMA plays it from here, it might well get a whole lot worse. Because one of the options BMA has flagged is that further industrial action only undermines the viability of its highest-cost operation, the Norwich Park mine. Closing Norwich Park either temporarily or permanently are live options. And either would, obviously, be potentially explosive."

In the same newspaper, Chanticleer columnist Michael Smith explains how James Packer's Crown could clean up as a messy sexual harassment scandal engulfs rival casino operator – and potential takeover target – Echo Entertainment.

"The spotlight will be back on Echo’s Sydney casino this week with public hearings starting today into the sacking of The Star’s managing director Sid Vaikunta. … It is not a good look for a company whose investors are being courted by a competitor. Packer, who spent $256.6 million upping his stake in Crown to 10 per cent, is seeking government approval to increase his share further. Packer is pushing for a board seat at Echo, something the company is understandably opposed to given Packer controls its competitor, Crown. However, if Packer can convince enough investors that he can run the Sydney assets better than Echo his story will be easier to sell."

Ahead of the Reserve Bank's rates decision this afternoon, The Age's Michael Pascoe puts forward his case for the cash rate to stay on hold – despite what the commentariat might be shouting. They problem is, he says, we're paying too much attention to Solly Lew, and not enough to Glenn Stevens.

"What Solly and others feeling the blow torch of the great restructuring don't want to face up to is that south-east Australia actually can't go back to those rosy days of unsustainable boom we thought we were enjoying before the GFC hit, or relive the stimulus thrown at the economy by the RBA and Treasury to avoid recession when the rest of the world stalled. The first resulted in the RBA pushing the standard variable home loan rate up to 9.6 per cent in 2008 as it fought to hose us down and the latter could only ever deliver temporary relief. There's been nothing Delphic about the RBA's message: some parts of the economy have to make room through lower growth for other parts to grow more quickly. For Australia to grow "close to trend" when some regions are industries are going gangbusters, other regions and industries have to be subdued or worse."

In The Australian Financial Review, Tony Boyd offers some fascinating insights into China's financial system as he visits the nation's banking supervisor in Beijing's financial district. After discussing the nation's looming banking upheaval with Yang Shaojun, deputy director-general of the China Banking and Regulatory Commission, Boyd ends with this exchange:

"But Mr Yang revealed that some unidentified countries had prevented Chinese banks from taking over domestic banks. 'Some countries have set very high standards for Chinese banks to stop mergers and acquisitions,' he said. 'They are trying to politicise some commercial acts of China. As China is in the World Trade Organisation, we should get the same treatment, however, this is a double standard on us.' Mr Yang laughed when asked which countries had banned Chinese banks from buying domestic banks. He laughed even louder when asked if it was Australia that had put up the barriers to some merger and acquisition activity."

Back at home, The Australian's Glenda Korporaal reckons the Future Fund's incoming chairman, David Gonski, will take the opportunity to review the scope and content of the fund – and perhaps take it out of the shadows. And The Age's Eric Johnston gets his hands on some figures that rank the productivity of the big four banks' branches, and uses them to discuss a new push to remove penalty rates for Saturday afternoons and Sundays.

In the Fairfax papers, Scott Rochfort says Business Spectator columnist Steve Keen has cemented his position in the "A-Team" of doomsday economists, after a high-profile disagreement with New York Times economist Paul Krugman, while The Australian's Tim Boreham frames DirectCash Payments' bid for struggling ATM operator Customers as a "mercy killing", dismissing claims it is being sold too cheaply at $173 million.

And finally, in the Herald Sun, Terry McCrann hits out at The Australian Financial Review's recent News Corp expose, which allegedly linked the company to a wave of pay-TV piracy, as "total and embarrassing crock." (Let's not forget who his publisher is.)

Related Articles