Monthly Bulletin - June 2020

Tuesday, 2 June 2020

In This Bulletin 

1.  Government Offer to remove impediments to your production in your business.

2.  Promote your product or service to other Scholars

3. 17 June 2020 - Webinar: ILF Exclusive- How to improve your  business asset and achieve profitable growth in turbulent times.

4.  What are ILF Scholars thinking? 

5.  Quiz Competition – win a bottle of wine  

6.  Coming Events - Cocktail Function with Robert Gerard AO

7.  Read Geoff Vogt's personal opinions on Negative Interest Rates - Coming Soon?

8.  Scholars in Focus - Corrina Wright (ILF2012)

9.  Scholars in the News
 

Government Offer to remove impediments to your production in your business.

Geoff has been asked by a member of the government with access to the very top if Scholars are experiencing impediments to production that could be removed. Examples include lack of critical parts, bottlenecks in the supply chain or red tape. They are keen to learn about these things so they can attempt to remove or overcome the issues to expedite the economic recovery.

Please contact Geoff on 0457 900 202 or at ceo@industryleaders.com.au with details.

Promote your product or service to other Scholars

In the interests of supporting fellow South Australian businesses, it has been decided that Scholars will be permitted to promote their products to fellow Scholars in the Bulletin from the July edition.

Entries will need to be lodged by 5 pm Friday 26 June and must be no more than 50 words. The entry can be repeated upon request for one further month without modification. After that a fresh edited or new entry will be required. Links to your website can be included. Special offers for Scholars only are encouraged.  

Please email Suzi@industryleaders.com.au
 

Webinar: ILF Exclusive-  How to improve your business asset and achieve profitable growth in turbulent times

Wednesday, 17 June 2020
12:00pm-12:45pm ACST

Have you found the last three months the busiest and/or most stressful business experience of your life. You are not alone. Surveys show business confidence is down at the very moment when opportunity abounds.

You have a choice. You can hunker down and hope for the best, or you look for opportunity and grasp it. Experience shows some of the best business decisions and biggest fortunes are made in times of turmoil. Opportunities abound for those who move fast, and danger lurks for those who are frozen in the spotlight.

ILFSN Sponsor Grant Thornton has teamed up with Stellar Business Consulting to offer an ILF exclusive 45 minute Webinar which will assist you to see what you can to do to grasp the opportunities.

  The Webinar covers the following topics:

• Understanding economic, industry and business cycles
• Considering your business systems
• Getting ready for the upswing – what can you do now?
• Understanding business valuation principles and methodologies
• Identifying factors that influence value

What are ILF Scholars Thinking?

The CEO of the ILF is often asked what our Scholars are thinking about various business related issues. To help me give accurate answers I propose to seek your thoughts through questions in the bulletin.

The May question was, “Do you think Covid-19 is predominantly a threat to your business or more an opportunity?”

Dr Derek Rogers used an historic perspective to draw lessons for today. He wins the prize for May, a bottle of carefully aged Oliver’s Taranga Vineyards 2015 small batch Fiano (Gary Walsh 93 points). His comment was -

Opportunity to do things differently – e.g. remote maintenance
But also a threat (although in reality should be standard practice) in terms of cost impact – the need to provide better employee facilities and services to keep people healthy and improve flexible and remote working. The first is the same as hospitals learned after the 1918 pandemic – good light and ventilation – many companies have forgotten that with their ‘call centre’ (chicken farm) facilities.
 

The June question is “Should our borders with other states :

1. Be opened now? 
2. Be opened selectively with states where the risk of infection is as low as in SA?
3. Remain closed until it the risk of infection is safe in all states?  

Please email Suzi@industryleaders.com.au answering 1, 2 or 3 in the heading.  

Quiz Competition - Win a bottle of wine
 

Congratulations to Vito Rinaldi and Dwayne Povey for correctly predicting in our May quiz that China would not agree to the holding of an open and transparent international inquiry into the source of Covid-19 by 31 May. 

They each receive a bottle of highly prized Ashton Hills Piccadilly Valley 2018 Pinot Noir (Huon Hook 95 points).

In case you missed the quiz last time and you are interested in going for a quality bottle please answer the following question-  

Predict the CPI change for the June Quarter to the nearest decimal place, measured by the All Groups Index for Australia (March 2020 quarter actual: +0.3%). 
 

Please email Suzi@industryleaders.com.au with your prediction. 
 

COMING EVENTS - Date to be determined

ILFSN Cocktail Function 

Speaker - Robert Gerard AO (Gerard Industries Pty Ltd)

This event will be hosted by Morgan Stanley. 
Further details will be provided after Covid-19 restrictions are lifted. 

NEGATIVE INTEREST RATES- COMING SOON?

WHAT DOES IS MATTER?
 

Why could it happen?

Last week I read an interesting article predicting that the Fed (USA central bank) will go negative. We have not experienced negative rates in Australia and the Reserve Bank have said they will not cut rates lower than the current level. This is against the trend in the developed world. Only the USA, the UK and Australia had committed to keeping rates positive, and recently the UK has indicated that negative rates are under consideration. The article which can be accessed through the link below gives several reasons why the Fed might well change its stance including:

·         The futures market is pricing negative rates to be in place in 12 months.

·         The US government finances are a mess and will not be getting better any time soon. One way to reduce the burden of massive debt is to lower the interest rate.

·         Everyone else is doing it. Japan, Italy, France, Spain And Germany are there and others indicate they are going there.  

·         The Fed’s employment and inflation mandates are miles away. In these circumstances boosting the economy is the primary goal.

Inflation is very weak so that is not an impediment, and in fact higher inflation increases tax revenues and reduces the real value of the debt overhang. High inflation after the second world war was one of the most effective way of reducing the massive debts run up to fight the war.

If the Fed goes negative Australia will almost certainly have to follow suit to avoid rapid escalation of the AUD exchange rate.

In fact the rising AUD right now must be getting close to the point where economic recovery could be jeopardised. One way to cure that is to reduce interest rates. The only reason to expect that might not happen is that the RBA over the last decade seems to have exhibited an illogical preference for rates higher than required because of unfounded fears of rampant inflation. In my opinion that is why the currency went much higher than necessary during the mining boom with the result that many manufacturing industries in Australia were destroyed.       

The article, which is rather long, can be accessed here.

What does it mean to you?

The big question is what do negative interest rates mean for Scholars and industry generally.

The discussion above deals with central bank benchmark rates which are regarded as risk free. Banks are not risk free so borrow money at a margin over the risk free rate and they on-lend to business at a margin above their borrowing cost.

In other words negative rates do not necessarily mean banks will pay you to borrow from them.  

However the discussion above does seem to indicate that rates will be low for an extended period.

It is also likely that governments will be less concerned to avoid inflation and in fact more likely to favour policies that boost activity even if the result is inflation.

If I am right then this will be return to the economic circumstances of the fifties and mid- seventies when borrowing to buy real assets was cheap and the value of the real assets accelerated rapidly. The difference now is that the rapid evolution of technology means many assets will depreciate in value even though inflation is high. Borrowing to buy carefully selected assets might be a very profitable strategy over the medium term.

This article is intended to encourage you to consider possibilities that others seem not to be considering at a time when planning and strategy are crucial. Please note because these are my personal opinions and are generalised they should not be relied upon. This article is not expert advice and the ILF cannot be held liable for any decisions you make. You should seek your own expert advice before making any plans.
 

Geoff Vogt
Director,
KeyInvest Limited
0401 125941

SCHOLARS IN FOCUS

CORRINA WRIGHT (ILF2012)

Corrina Wright has wine – and 171 years of family grape growing – flowing through her veins. Described by WBM Magazine as a “legend in the making”, by James Halliday as being part of a “remarkable dynasty” and crowned ASVO Winemaker of the Year in 2019, she’s treading a slightly different path among the vines that her forefathers planted in McLaren Vale.

After growing up among the family vineyards and enrolling in a Bachelor of Agricultural Science (Oenology) in 1994 she convinced her Grandfather and Uncles to let her have some fruit from the Taranga vineyard. She created a small-scale Shiraz, and the Oliver’s Taranga Vineyards label was born.

ABOUT OLIVERS TARANGA

Olivers Taranga is a sixth-generation family business (the third oldest family business in Australia according to Family Business Australia) still farming the same land in McLaren Vale that their ancestors have since 1839. Celebrating their 181st year in 2020, the family property ‘Taranga’  was once a mixed farm with cropping, sheep, cattle, horse, pig, dried grapes, fruit trees and grapevines throughout its long history, and now is almost exclusively given over to grapevines.

Scholars in the media – Forging ahead in a challenging environment

The following articles are also available on the ILF website. Please send us your news for inclusion in the bulletin – copies of news, articles published in papers or magazines or MP3 recording of live interviews preferred.

Mitsubishi Motors Australia

Shaun Westcott (ILF2018)

Marks its 40th year with a new construction and relocation to Adelaide Airport.

Discovery Parks

Grant Wilckens (ILF2014) and Amanda Baldwin (ILF2019)

Discover bright new future. 

The Advertiser 6/5/2020

DNA Solutions 

Tania Jolley (ILF2019)

Behind the mask – no security for criminals. 

The Advertiser 26/5/2020

Thomas Foods International

Nektarios Nicolaou (ILF2018)

The Industry Leaders Fund Scholars Network thanks our Sponsors:

The Industry Leaders Fund Scholars Network thanks our Supporters: