THE DISTILLERY: Murdoch minimises
When Rupert Murdoch stepped down from the boards of a handful of British newspapers over the weekend, the global media went into a frenzy: What was his motivation? Would News Corp exit the UK entirely? Will there be asset sales? This morning, one jotter takes a step back to argue this is a sign the mogul is losing control over his entire empire — and his once-iron grip is only going to get weaker from here. There's also contention about where Australia's superannuation riches will flow, and fears our emissions trading scheme will die in Europe.
But first, The Australian Financial Review's Neil Chenoworth thinks Rupert Murdoch's resignation as director of three British newspaper companies "marks the point where his loss of influence in Britain – and diminished control of News Corporation itself – probably becomes irreversible."
"The … view is put by British media analyst Claire Enders, who portrayed it as part of a slow fade by the Murdochs from Britain. 'The grip of the Murdochs, finger by finger, has been loosened and it's not in order to return triumphantly. It's a permanent shift.' Some sense of that irreversibility comes from the decision itself. Mr Murdoch will win no kudos from the move. Yet now that it is done it seems inconceivable he could ever go back on those newspaper boards without public outcry."
At the same time, Murdoch has lost some of his close coterie of trusted executives in New York, which "will make it harder to run the [international] business in the style he has used for 60 years."
Elsewhere, Fairfax's Eric Johnston and Michael Evans suggest that wealth management and superannuation assets could fill a profit void for banks, as the lucrative housing boom slows. The jotters point to a graph detailing the expected growth in local super assets over the next two decades, which "resembles the path of an aircraft on the runway, slowly gathering speed before suddenly rising at a fierce pitch."
"The table represents the expected growth in Australia's wealth management and superannuation assets – from barely a blip in 1996 to less than $1 trillion today to more than $6 trillion by 2030. Australia's big four banks are making a land grab for a slice of the superannuation pie to maintain their record profits. In today's terms, a figure this size would place Australia's super assets somewhere between the entire economic output of China, the world's second-biggest economy and Japan, the third largest."
However, The Australian Financial Review's Tony Boyd points out that Australians are increasingly choosing to take control over their own super.
"About 600 self-managed super funds are being established every week, or about 7000 a quarter, according to the latest data from the Australian Prudential Regulation Authority. The number of self-managed funds is now 470,000, or about double what it was five years ago. Funds under management are now $420 billion, or more than a third of all super. If the trend continues for an extended period, it could prove to be extraordinarily disruptive to the finance sector, which has often been slow to change the way it does business or has been forced kicking and screaming into adopting ethical practices."
Meanwhile, Fairfax's Malcom Maiden worries that a collapse in Europe's benchmark carbon trading price — partly due to too many permits being issued, apparently — means Australia's carbon trading scheme may be "stillborn".
"The $23-a-tonne carbon tax that has just begun here is scheduled to run for three years, and then be replaced by a trading system that has a floor price for three years, beginning at $15, and edging up by about a dollar a year. If the world price that the EU scheme sets is below Australia's floor price, permits acquired for less money overseas would be subject to an equalisation payment. The price is what drives attempts to reduce emissions. Labor and the Greens are unlikely to want to change that rule, despite reports that they have discussed it. If the current scheme survives until 2018, the global price that the EU scheme sets will be Australia's price as the scheme is currently constructed – and carbon price projections even that far out based on demand and the number of permits in circulation are parlous, about €4 a tonne. In other words, if the EU does not find a way to intervene in the market and crush the number of permits on issue, Australia is on a pathway to a trading system that will have next to no effect on emissions."
The Australian's Barry Fitzgerald says the recent slump in the share prices of BHP Billiton and Rio Tinto will be putting pressure on the chief executives of both companies to "earn their pay," by convincing nervous investors that the above-average commodity prices are here to stay. And his colleague Robin Bromby summarises the carnage in metals markets after a poor Spanish bond auction.
At The Australian Financial Review, Matthew Stevens has penned a rather detailed examination of recent trading in the shares of Hastings Diversified Utilities Fund, the pipeline company being pursued by APA Group and Pipeline Partners Australia. Based on a big spike in the stock on Friday, hedge funds appear to be betting on a bidding war.
In other company news, The Australian's Richard Gluyas expects the big four banks to suffer heavier-than-expected losses on their exposures to Hastie Group, as the lenders start to face calls on performance bonds from builders working on incomplete Hastie projects. And Terry McCrann takes aim at the Australian Competition and Consumer Commission, after the regulator allowed NBN Co to pay Optus an $800 million "bribe" not to compete against the upcoming fixed-line technology. He says the ACCC's reasoning – that closing Optus' existing cable network would avoid the cost of the telco providing a service the NBN was also able to provide, and that it would reduce the cost of migrating Optus subscribers from its network to the NBN – was "ridiculous, unbelievable and completely unacceptable".
The Sydney Morning Herald's economics editor, Ross Gittins, runs an eye over detailed new productivity research by a number of local experts, and concludes that for all the shouting about the need for efficiency improvements, there isn't a lot to worry about. "That's because, first, when you dig into the figures you discover they're not nearly as bad as they look. Second, the structural change now hitting so many of our industries is just the thing to (painfully) oblige them to lift their productivity."
And finally, Fairfax's Adele Ferguson describes Australia's building industry as being in "survival mode", as more and more building groups collapse each month. She blames the rise on higher labour costs, less bank lending and delays in payments to builders – and warns that there's no end in sight.