Money & Banking

Michael Schumacher’s wife makes emotional call

Michael Schumacher’s family has made the difficult decision to auction off his personal collection of luxury watches ahead of the Italian Grand Prix on May 19. The F1 legend's wife Corinna is believed to have made the decision as she continues to care for him after his devastating skiing accident over 10 years ago. Corinna manages Schumacher's $970 million fortune, which is set to grow with the sale of Schumacher's eight most valuable watches, including a one-of-a-kind FP Journe Vagabondage 1 Model, which is expected to sell for between $1.7 million and $3.4 million. Auction house Christie’s will conduct the sale of the F1 legend's watch collection, which is believed to be worth roughly $6 million. “Christie’s expresses sincere thanks to the Schumacher family for their trust in us and their wish to share these masterpieces of horology with other passionate collectors around the globe,” Rémi Guillemin, Christie’s Head of Watches Europe and US, said. “We are proud to present these iconic and unique timepieces belonging to one of the most celebrated Formula 1 legends. An exceptional moment, for watch and F1 enthusiasts alike. “We are looking forward to meeting with passionate collectors during our international exhibitions and the auction on 13 May in Geneva.” One of the other watches going up for auction is an Audemars Piguet watch which features the Ferrari emblem, Schumacher’s helmet design, symbols representing his seven titles and an engraved message, which read: “Xmas 2004 — Jean Todt for my friend Michael Schumacher." The watch was given to him by Todt and is expected to sell for between $250,000 and $425,000. The auction is another financial move by Corinna, who reportedly meets with a small group of financial advisers about three or four times a year to make decisions about the family's sales and investments. Ever since the accident Corinna has also been protecting her husband's privacy, with no one outside of Schumacher's inner circle knowing what happened to the F1 legend. <em style="box-sizing: inherit; margin: 0px; padding: 0px; border: 0px; font-size: 16px; vertical-align: baseline; color: #323338; font-family: Figtree, Roboto, 'Noto Sans Hebrew', 'Noto Kufi Arabic', 'Noto Sans JP', sans-serif; background-color: #ffffff; outline: none !important;">Image: Getty/ Christie's

Money & Banking

Kochie's warning for every Aussie parent

Australian finance expert David Koch has warned parents to think twice before offering financial assistance to their adult children who are thinking of buying their first home. With many young Australians looking to buy property turning to the “Bank of Mum and Dad” for financial help, Kochie has advised parents to approach this with caution, structured agreements, and clear communication, to reduce the risks and protect both parties involved. “The Bank of Mum and Dad provided $2.7 billion to their adult children to buy property over the past year," the finance expert said on his latest column in The Nightly He encouraged a structured approach to navigating the common intergenerational finance practice, and added that financial assistance from parents has become a significant player in the housing market. “If it was an actual bank, it would be somewhere between the fifth and ninth biggest mortgage lender," he said, referring to an estimation by the Productivity Commission. He then warned against the casual approach that is often taken, saying: “We all want to help our kids … But the question is what that help looks like.” “Treat the loan as a business transaction and draw up a formal agreement between each party outlining the terms of the deal, including a set repayment schedule,” he emphasised. Kochie also drew attention to the University of Newcastle’s findings on the increased risk of financial elder abuse associated with parental assistance. “Borrowing from the Bank of Mum and Dad encourages ageist attitudes, which leads to kids financially abusing their parents," he quoted the study. He then differentiated the different forms of financial assistance, explaining the difference between gifts, loans, and guarantees. “If your child is married or in a de facto relationship and it ends, gifts will usually be considered part of the family assets and divided up in court,” he warned. He also offered guidance on parental investments in entrepreneurial ventures, advising parents to “think of your role as that of a regular investor." Image: news.com.au

Money & Banking

Loyalty programs may limit competition, and they could be pushing prices up for everyone

<a href="https://theconversation.com/profiles/alexandru-nichifor-1342216">Alexandru Nichifor</a>, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a> and <a href="https://theconversation.com/profiles/scott-duke-kominers-1494057">Scott Duke Kominers</a>, <a href="https://theconversation.com/institutions/harvard-university-1306">Harvard University</a> Loyalty programs enable firms to offer significantly lower prices to some of their customers. You’d think this would encourage strong competition. But that isn’t always what actually happens. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4377561">New research</a> shows that paradoxically, by changing the way companies target customers, loyalty programs can sometimes reduce price competition. The research also points to solutions. <h2>A win-win proposition?</h2> Joining a loyalty program is supposed to be a win-win. You – the customer – get to enjoy perks and discounts, while the company gains useful commercial insights and builds brand allegiance. For example, a hotel chain loyalty program might reward travellers for frequent stays, with points redeemable for future bookings, upgrades or other benefits. The hotel chain, in turn, records and analyses how you spend money and encourages you to stay with them again. Such programs are commonplace across many industries – appearing everywhere from travel and accommodation to supermarket or petrol retailing. But they are increasingly coming under scrutiny. In 2019, the Australian Competition and Consumer Commission (ACCC) <a href="https://www.accc.gov.au/about-us/publications/customer-loyalty-schemes-final-report">cautioned</a> consumers about the sheer volume of personal data collected when participating in a loyalty program, and what companies can do with it. Hidden costs – such as having to pay a redemption fee on rewards or losing benefits when points expire – are another way these schemes can harm consumers. But a larger question – how loyalty programs impact consumers overall – remains difficult to settle, because their effect on competitiveness is unclear. As the ACCC’s <a href="https://www.accc.gov.au/about-us/publications/customer-loyalty-schemes-final-report">final report</a> notes, on the one hand: "Loyalty schemes can have pro-competitive effects and intensify competition between rivals leading to competing loyalty discounts and lower prices for consumers." But on the other hand: "Loyalty schemes can also reduce the flexibility of consumers’ buying patterns and responsiveness to competing offers, which may reduce competition." <h2>How a two-speed price system can hurt everyone</h2> A new economic theory research <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4377561">working paper</a>, coauthored by one of us (Kominers), suggests that on competitive grounds alone, loyalty programs can sometimes harm all consumers – both ordinary shoppers and the program’s own members. It’s easy to see how the ordinary shopper can be worse off. Since a firm’s loyalty program enables it to offer discounted prices to its members, the firm can raise the base prices it offers to everyone else. Those not participating in the program pay more than they otherwise would have, and the firm can respond by saying “join our program!” instead of having to lower its price. But sometimes, even the program’s own members can end up worse off. When a given customer’s loyalty status is not visible to a firm’s competitors – as is the case in many loyalty programs today – it’s hard for those competitors to identify them and entice them to switch. The main way to compete for those customers becomes to lower the base price for everyone, but this means missing out on the high base margins achieved through the existence of your own loyalty program – remember, having a loyalty program means you can charge non-members more. It’s often more profitable for firms to just maintain high base prices. This, in turn, reduces overall price competition for loyal customers, so firms can raise prices for them, too. <h2>What’s the solution?</h2> Despite these effects on competition, loyalty programs still offer benefits for consumers and an opportunity for brands to form closer relationships with them. So, how do we preserve these benefits while enabling price competition? The research suggests an answer: making a customer’s loyalty status verifiable, transparent and portable across firms. This would make it possible for firms to tailor offers for their competitors’ loyal customers. This is already happening in the market for retail electricity. While there aren’t loyalty programs there per se, a consumer’s energy consumption profile, which could be used by a competitor to calibrate a personalised offer, is known only to their current electricity supplier. To address this, in 2015, the Victorian government launched a <a href="https://compare.energy.vic.gov.au">program</a> encouraging households to compare energy offers. This process involved first revealing a customer’s energy consumption profile to the market, and then asking retailers to compete via personalised offers. By opening information that might have otherwise been hidden to the broader market, this approach enabled firms to compete for each other’s top customers, in a way that could be emulated for loyalty programs. Such systems in the private sector could build upon “<a href="https://thepointsguy.com/guide/airline-status-matches-challenges/">status match</a>” policies at airlines. These allow direct transfer of loyalty status, but currently rely on a lengthy, individual-level verification process. For example, a design paradigm known as “<a href="https://hbr.org/2022/05/what-is-web3">Web3</a>” – where customer transactions and loyalty statuses are recorded on public, shared blockchain ledgers – offers a way to make loyalty transparent across the market. This would enable an enhanced, decentralised version of status match: a firm could use blockchain records to verifiably identify who its competitors’ loyal customers are, and directly incentivise them to switch. Both startups and established firms have experimented with building such systems. <h2>What next?</h2> New academic research helps us model and better understand when loyalty programs could be weakening supply side competition and undermining consumer welfare. A neat universal solution may prove elusive. But targeted government or industry interventions – centred on increasing the transparency of a customer’s loyalty status and letting them move it between firms – could help level the playing field between firms and consumers.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/220669/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/alexandru-nichifor-1342216">Alexandru Nichifor</a>, Associate Professor, Faculty of Business and Economics, University of Melbourne, <a href="https://theconversation.com/institutions/the-university-of-melbourne-722">The University of Melbourne</a> and <a href="https://theconversation.com/profiles/scott-duke-kominers-1494057">Scott Duke Kominers</a>, Sarofim-Rock Professor of Business Administration, <a href="https://theconversation.com/institutions/harvard-university-1306">Harvard University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/loyalty-programs-may-limit-competition-and-they-could-be-pushing-prices-up-for-everyone-220669">original article</a>.

Money & Banking

Qantas announces massive overhaul of frequent flyer program

Qantas, Australia's flagship airline, has unveiled significant changes to its frequent flyer program in response to ongoing feedback from millions of members. The announcement, made at the airline's headquarters in Sydney, marks one of the most substantial expansions in the 35-year history of the Qantas Frequent Flyer program. During the event, Qantas CEO Vanessa Hudson, alongside Andrew Glance, the newly appointed Loyalty boss, outlined the updates to both the media and select members of the frequent flyer program. These changes aim to address longstanding concerns and enhance the overall experience for loyal customers. A key highlight of the overhaul is the introduction of Classic Plus Flight Rewards, providing members with access to an additional 20 million reward seats for booking flights. Vanessa Hudson said that this expansion is a direct response to member feedback. “The Qantas Frequent Flyer program is an integral part of Qantas and has always been about recognising our customers for their loyalty," Hudson said. "We’ve spent a lot of time listening to members about how we can better reward them . . . We’re adding over 20 million new flight rewards with the launch of a new type of reward seat called Classic Plus. It’s one of the biggest expansions we’ve made to the Frequent Flyer program in its 35-year history." With Classic Plus Flight Rewards, frequent flyer members can now access sought-after destinations such as London, Tokyo, New York and Singapore with greater ease, even during peak travel periods. This substantial increase in available seats – 20 million annually compared to the previous 5 million – represents a significant advantage for members seeking to redeem their points for travel. However, it's important to note that while Classic Plus Flight Rewards offer increased availability, they will require more points to book compared to the original program. This announcement follows recent speculation about a major revamp of the frequent flyer program, with Qantas hinting at changes aimed at allowing customers to maximise the value of their points. These changes come in response to feedback from program members, some of whom have voiced frustrations about the devaluation of points and difficulties in securing rewards seats. Qantas' announcement of sweeping changes to its frequent flyer program signals a significant step in the airline's ongoing efforts to prioritise customer satisfaction and loyalty. Images: Qantas

Money & Banking

“Let’s share it”: Karl’s wild idea to save the Brisbane Olympics

Karl Stefanovic has become the unlikely face of a good idea, pitching a revolutionary way to save the Brisbane Olympics from disaster. The 2032 games will be the first time Australia has hosted the event since Sydney in 2000, with hundreds of thousands of people expected to make the pilgrimage to the sunshine state to watch their favourite sports. Despite the building excitement for the games, the Queensland government has copped backlash in recent weeks over the preparations for the event, after Premier Steven Miles announced he would bin a $3.4 billion plan to build a new inner-city stadium in Victoria Park in time for the Olympics. Instead, the premier plans to use the exisiting Suncorp Stadium to host the opening and closing ceremonies, while the Queensland Sport and Athletics Centre will host the athletics events. Today host and Brisbane native Karl Stefanovic has labelled the plan as a “seismic international embarrassment” and in a strange turn of events, even offered up a good suggestion for how to fix it. “So how about we share the Olympics across the country, opening ceremonies in all the major already existing stadiums, events split among world-class facilities and the rest of the events showcasing this great country to the world,” he said. “We’ll have the triathlon on the Gold Coast, the cycling in Far North Queensland, the surfing at Bells Beach, the marathon past Uluru, the shooting in Longreach, it could be a magnificent two-week tourism ad for this country, leaving a legacy that’s cheaper." “Our athletes deserve the very best, so if Queensland can’t do it, let’s share it. ” It seems Karl isn't the only one up in arms over the decision to not build a new stadium, as a group of high-profile Aussie Olympians penned an open letter to the premier, imploring him to "revisit the decision". The letter states, "We all remember the magnificent event that Sydney put on in 2000. Queensland deserves something equally spectacular, without a centrepiece that would reek of compromise." The letter was signed by 14 current and former Australian Olympians including Grant Hackett, Sally Pearson, Leisel Jones and more. Image credits: Today

Money & Banking

Biggest spenders of the Voice campaign finally revealed

The recently disclosed financial reports of the failed Voice to Parliament referendum in Australia have shed light on the substantial investments made by both the Yes and No campaigns. According to newly released disclosures, the Yes campaign significantly outspent its counterpart, with expenditures nearing $55 million – more than double the amount spent by the No campaign. Under Australian law, any campaign expenditure exceeding $15,200 must be reported to the Australian Electoral Commission. These reports, made public almost six months after the referendum's defeat, offer a comprehensive overview of the financial landscape surrounding the proposal to embed an Indigenous voice within the country's constitution, which ultimately saw a 60-40% defeat. Australians for Indigenous Constitutional Recognition spearheaded the Yes campaign, amassing $47.5 million in donations and spending $43.8 million. Additionally, the University of New South Wales (UNSW), home to the Uluru Statement from the Heart, received $11.12 million in donations, allocating $10.3 million toward campaign efforts. On the opposing front, No campaign groups collectively spent over $25 million. Australians for Unity, also recognised as Fair Australia, invested $11.1 million, while Advance Australia allocated $10.3 million, despite receiving only $1.3 million in donations during the reporting period. A noteworthy highlight of the disclosures is the substantial contributions from various entities. The Paul Ramsay Foundation emerged as the largest individual donor, contributing $7.01 million to Australians for Indigenous Constitutional Recognition. Other notable donors include corporate entities such as ANZ, Woodside Energy, Commonwealth Bank and Westpac, all of which supported initiatives associated with the Yes campaign. Conversely, mineral magnate Clive Palmer's Mineralogy led the No campaign with a spending of $1.93 million. Additionally, political parties played a role in the referendum's financial landscape, with the Liberal Party of Australia, the Nationals, and the Australian Labor Party all making significant contributions. Former Prime Minister Malcolm Turnbull notably donated $50,000 to the Yes campaign, reflecting a bipartisan interest in Indigenous recognition efforts. Moreover, local governments and independent candidates also made notable contributions to the referendum discourse. The Paul Ramsay Foundation, a significant donor to the Yes campaign, has been actively involved in addressing social disparities in Australia. With a focus on enabling equitable opportunities for marginalised communities, the foundation's support for Indigenous recognition aligns with its broader mission of fostering sustainable social change. While the referendum may have concluded, the broader pursuit of Indigenous rights and recognition remains an ongoing journey for the nation. Image: Two Way Street

Money & Banking

Think $5.50 is too much for a flat white? Actually it’s too cheap, and our world-famous cafes are paying the price

<a href="https://theconversation.com/profiles/emma-felton-143029">Emma Felton</a>, <a href="https://theconversation.com/institutions/university-of-south-australia-1180">University of South Australia</a> Even in a stubborn cost-of-living crisis, it seems there’s one luxury most Australians <a href="https://www.comparethemarket.com.au/news/what-australians-wont-give-up-cost-of-living-crisis-report/">won’t sacrifice</a> – their daily cup of coffee. Coffee sales have largely <a href="https://www.statista.com/statistics/866543/australia-domestic-consumption-of-coffee/">remained stable</a>, even as financial pressures have bitten over the past few years. So too have prices. Though many of us became upset when prices began to creep up last year, they’ve since largely settled in the range between $4.00 and $5.50 for a basic drink. But this could soon have to change. By international standards, Australian coffee prices are low. No one wants to pay more for essentials, least of all right now. But our independent cafes are struggling. By not valuing coffee properly, we risk losing the <a href="https://bizcup.com.au/australian-coffee-culture/">internationally renowned</a> coffee culture we’ve worked so hard to create, and the phenomenal quality of cup we enjoy. <h2>Coffee is relatively cheap in Australia</h2> Our recent survey of Australian capital cities found the average price of a small takeaway flat white at speciality venues is A$4.78. But in <a href="https://pabloandrustys.com.au/blogs/drinkbettercoffee/global-coffee-prices">some international capitals</a>, it’s almost double this, even after adjusting for local <a href="https://www.investopedia.com/updates/purchasing-power-parity-ppp/">purchasing power parity</a>. <iframe id="gaplH" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/gaplH/" width="100%" height="400px" frameborder="0"></iframe> In London, a small flat white costs about A$6.96. Singapore, A$8.42. In Athens, as much as A$9.95. <h2>The cafe business is getting harder</h2> Over the past few decades, coffee prices haven’t kept pace with input costs. In the early 2000s, after wages, food costs, utilities and rent, many cafes <a href="https://www.coffeecommune.com.au/blog-why-are-cafes-so-expensive/">earned healthy profit margins</a> as high as 20%. The <a href="https://www.ibisworld.com/au/industry/cafes-coffee-shops/2015/">most recent data from IBISWorld</a> show that while Australian cafe net profits have recovered from a drop in 2020, at 7.6%, they remain much lower than the Australian <a href="https://www.money.com.au/research/australian-business-statistics">average business profit margin of 13.3%</a>. For an independent owner operating a cafe with the <a href="https://www.ibisworld.com/au/industry/cafes-coffee-shops/2015/">average turnover of A$300,000</a>, this would amount to a meagre A$22,800 annual net profit after all the bills are paid. <h2>What goes into a cup?</h2> Just looking at the cost of raw inputs – milk, beans, a cup and a lid – might make the margin seem lucrative. But they don’t paint the whole picture. <figure class="align-center "><img src="https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/584949/original/file-20240328-24-rlngpk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" alt="A takeaway coffee cup showing the price inputs, with wages and operation costs making up over 65% of the cost of a coffee" /><figcaption>Chart: The Conversation. <a class="source" href="https://pabloandrustys.com.au/blogs/drinkbettercoffee/whats-in-the-cost-of-coffee">Data: Pablo and Rusty's Coffee Roasters</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></figcaption></figure> Over the past few years, renting the building, keeping the lights on and paying staff have all become <a href="https://www.reuters.com/business/ground-down-australia-coffee-shops-an-early-inflation-casualty-2023-07-10/">much bigger factors</a> in the equation for coffee shop owners, and many of these pressures aren’t easing. 1. Green coffee price Increasingly <a href="https://www.aa.com.tr/en/environment/brewing-crisis-how-climate-change-is-reshaping-coffee-production/3113886">subject to the effects</a> of climate change, the baseline commodity price of green (unroasted) coffee is <a href="https://perfectdailygrind.com/2024/02/demand-for-robusta-prices-record-high/">going up</a>. Arabica – the higher quality bean you’re most likely drinking at specialty cafes – is a more expensive raw product. Despite levelling off from post-pandemic highs, its price is still trending up. In 2018, it <a href="https://www.statista.com/statistics/675807/average-prices-arabica-and-robusta-coffee-worldwide/">sold</a> for US$2.93 per kilogram, which is projected to increase to US$4.38 dollars in 2025. Robusta coffee is cheaper, and is the type <a href="https://www.lavazza.com.au/en/coffee-secrets/difference-type-arabica-robusta-coffee">typically used to make instant coffee</a>. But serious drought in Vietnam has just pushed the price of robusta to an <a href="https://www.barchart.com/story/news/25094367/coffee-rallies-with-robusta-at-a-record-high-on-shrinking-coffee-output-in-vietnam">all-time high</a>, putting pressure on the cost of coffee more broadly. 2. Milk prices The price of fresh milk has risen by <a href="https://cdn-prod.dairyaustralia.com.au/-/media/project/dairy-australia-sites/national-home/resources/reports/situation-and-outlook/situation-and-outlook-report-march-2024.pdf?rev=b0222df4b01b40d0ae36cf8ac7b01bc0">more than 20%</a> over the past two years, and remains at a peak. This has put sustained cost pressure on the production of our <a href="https://gitnux.org/australian-coffee-consumption-statistics/#:%7E:text=Coffee%20is%20a%20beloved%20beverage,approximately%206%20billion%20cups%20annually.">most popular drink orders</a>: cappuccinos and flat whites. 3. Wages and utilities Over the past year, Australian wages have grown at their <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/real-wages-growth-back">fastest rate</a> since 2009, which is welcome news for cafe staff, but tough on operators in a sector with low margins. Electricity prices remain elevated after significant inflation, but could <a href="https://www.sbs.com.au/news/article/heres-how-much-your-energy-bills-might-go-down-by-and-when/k8g00jheg">begin to fall mid-year</a>. <h2>Specialty vs. commodity coffee: why price expectations create an industry divide</h2> One of the key factors keeping prices low in Australia is consumer expectation. For many people coffee is a fundamental part of everyday life, a marker of livability. Unlike wine or other alcohol, coffee is not considered a luxury or even a treat, where one might expect to pay a little more, or reduce consumption when times are economically tough. We anchor on familiar prices. <iframe id="oDbah" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/oDbah/" width="100%" height="400px" frameborder="0"></iframe> Because of this, it really hurts cafe owners to put their prices up. In touch with their customer base almost every day, they’re acutely aware of how much inflation can hurt. But in Australia, a huge proportion of coffee companies are also passionate about creating a world-class product by only using “<a href="https://medium.com/@samandsunrise/why-is-specialty-coffee-so-expensive-6cf298935e4b#:%7E:text=Specialty%20Shops%20Feature%20High%20Grade%20Coffees&text=Their%20coffees%20are%20hand%2Dpicked,even%20on%20the%20same%20tree.">specialty coffee</a>”. Ranked at least 80 on a quality scale, specialty beans cost significant more than commodity grade, but their production offers better working conditions for farmers and encourages more sustainable growing practices. Although not commensurate with the wine industry, there are similarities. Single origin, high quality beans are often sourced from one farm and demand higher prices than commodity grade coffee, where cheaper sourced beans are often combined in a blend. Running a specialty cafe can also mean roasting your own beans, which requires a big investment in expertise and equipment. It’s an obvious example of doing the right thing by your suppliers and customers. But specialty cafes face much higher operating costs, and when they’re next to a commodity-grade competitor, customers are typically unwillingly to pay the difference. <h2>Approach price rises with curiosity, not defensiveness</h2> When cafe owners put up their prices, we often rush to accuse them of selfishness or profiteering. But they’re often just trying to survive. Given the quality of our coffee and its global reputation, it shouldn’t surprise us if we’re soon asked to pay a little bit more for our daily brew. If we are, we should afford the people who create one of our most important “<a href="https://theconversation.com/how-cafes-bars-gyms-barbershops-and-other-third-places-create-our-social-fabric-135530">third spaces</a>” kindness and curiosity as to why. <img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/226015/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/emma-felton-143029">Emma Felton</a>, Adjunct Senior Researcher, <a href="https://theconversation.com/institutions/university-of-south-australia-1180">University of South Australia</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/think-5-50-is-too-much-for-a-flat-white-actually-its-too-cheap-and-our-world-famous-cafes-are-paying-the-price-226015">original article</a>.

Money & Banking

Why a one-cent stamp is set to sell for millions

An extremely rare stamp that was once bought for a measly one cent is set to sell for millions of dollars, breaking records at a US auction house. While to the untrained eye, the blue stamp seems like any old stamp, the 1868 one-cent Z-grill is actually the rarest stamp in America due to its unique history and rarity. On June 14th, the one-cent Z-grill will be put up for sale by Robert A. Siegel Auction Galleries, marking the first time the rare stamp has been on auction since 1998. Experts from the New York auction house say it could fetch $6 million to $7.5 million (AUD), which would make it the single most expensive US stamp ever sold. The reason for the extraordinary price comes down to the fact that out of the two known Z-grill stamp copies, the one up for auction is the only copy available for private purchase by collectors, while other historic copy is held at the New York Public Library. The Z-grill is unique due to its signature embossed paper, which was introduced to the US postal service after the Civil War to prevent stamps from being reused. Since 2005, the coveted stamp has belonged to billionaire investor and “bond king” Bill Gross. “It’s considered the trophy of collecting United States stamps,” said Charles Shreve, who has managed and built Gross’ extensive stamp collection for years and serves as director of international auctions at Robert A. Siegel Auction Galleries. “There’s only one. If you want to brag, that’s the stamp.” Mr Gross' entire collection is estimated to be worth $22.6 million to $30 million AUD. The top 100 stamps from the collection will be auctioned off on June 14th, while the remaining stamps will be sold on June 15th. “There’s multiple stamps that’ll bring $500,000 or $750,000 (USD) but the (one-cent) Z-grill is the star of the show,” Shreve said. “I just know some people who are lusting for it, and we want to try to get as many people interested in it as possible.” Image credits: Robert A. Siegel Auction Galleries

Money & Banking

Undernourished, stressed and overworked: cost-of-living pressures are taking a toll on Australians’ health

<a href="https://theconversation.com/profiles/nicole-black-103425">Nicole Black</a>, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>; <a href="https://theconversation.com/profiles/anthony-harris-7148">Anthony Harris</a>, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>; <a href="https://theconversation.com/profiles/danusha-jayawardana-1406565">Danusha Jayawardana</a>, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>, and <a href="https://theconversation.com/profiles/david-johnston-1126643">David Johnston</a>, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a> For the past few years, it has been impossible to escape the impact of inflation. Meeting our most basic needs – such as food, housing and health care – now costs significantly more, and wage increases <a href="https://futurework.org.au/post/for-most-workers-wages-are-still-failing-to-keep-up-with-inflation/">haven’t kept up</a>. There are signs relief could be on the horizon. Inflation has fallen to its <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">lowest levels</a> since January 2022. But Australia now also finds itself in the midst of an <a href="https://theconversation.com/prepare-to-hear-about-an-official-recession-unofficially-weve-been-in-one-for-some-time-224963">economic downturn</a>, putting further pressure on households. Rising prices have an obvious negative impact on our financial health. But they can also have a profound effect on our physical and mental wellbeing, which is often overlooked. Australians may continue to feel the health effects of high inflation for quite some time. <h2>It’s costing more to live well</h2> Between March 2021 and March 2023, the price of goods and services <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/jun-quarter-2023">rose substantially</a>, marking a period of high <a href="https://www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html">inflation</a>. <iframe id="5vFeh" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/5vFeh/" width="100%" height="400px" frameborder="0"></iframe> Worryingly, the prices of basic needs that are important for staying healthy – nutritious food, health care, housing and utilities – rose between 11% and 36%. <h2>Who is affected the most?</h2> Higher prices on essentials are virtually impossible to dodge, but they impact certain groups of people more than others. Wealthier households have managed their higher expenses by <a href="https://www.rba.gov.au/publications/fsr/2023/oct/pdf/financial-stability-review-2023-10.pdf">cutting back on discretionary spending and dipping into savings</a>. However, lower income households spend <a href="https://www.rba.gov.au/publications/fsr/2023/oct/household-business-finances-in-australia.html#:%7E:text=Lower%20income%20households%2C%20including%20many,than%20households%20on%20higher%20incomes.">a much larger portion of their income</a> on housing and other essentials. Without a savings buffer, these households experience severe financial strain and poor health outcomes. <h2>Financial stress affects our health</h2> Our research shows that high inflation has <a href="https://www.vichealth.vic.gov.au/resources/resource-download/high-inflation-and-implications-for-health">a range of effects</a> on people’s health. These effects fall into three main groups: material hardship, psychosocial, and behavioural. 1. Material hardship People facing material hardship can’t meet their basic needs because they can’t afford to pay for them. Material hardship can present itself in a variety of ways: <ul> <li><a href="https://theconversation.com/how-many-australians-are-going-hungry-we-dont-know-for-sure-and-thats-a-big-part-of-the-problem-195360">food insecurity</a> – not getting adequate nutrition</li> <li><a href="https://theconversation.com/1-in-4-households-struggle-to-pay-power-bills-here-are-5-ways-to-tackle-hidden-energy-poverty-204672">energy poverty</a> – struggling to pay for electricity and gas</li> <li>deferred health care – putting off medical treatment</li> <li>housing insecurity – struggling to find a stable place to live.</li> </ul> Between August 2022 and February 2023, when inflation hit its highest levels in 33 years, over half (53%) of surveyed Australians reported <a href="https://melbourneinstitute.unimelb.edu.au/data/taking-the-pulse-of-the-nation-2022/2023/australians-face-challenging-budgetary-constraints">struggling to afford</a> their basic needs. Finding ourselves in this situation can have far-reaching implications for our health. For example, food insecurity is linked to <a href="https://www.vichealth.vic.gov.au/sites/default/files/VH_High-Inflation-Paper_FINAL_1.pdf">an increased risk of poor nutrition, obesity and chronic illness</a>, as households facing cost-of-living pressures shift towards cheaper, lower-quality food options. Energy poverty is linked to <a href="https://www.vichealth.vic.gov.au/sites/default/files/VH_High-Inflation-Paper_FINAL_1.pdf">physical and mental health problems</a> as people struggle to keep warm in wintertime, and cool in the summer. Delaying health care <a href="https://www.vichealth.vic.gov.au/sites/default/files/VH_High-Inflation-Paper_FINAL_1.pdf">increases</a> the risk of facing severe health problems, staying in hospital for longer, and being admitted to the emergency department. This isn’t just worse for individuals, it’s also far more costly for our health care system. 2. Psychosocial effects Psychosocial effects are the ways in which cost-of-living pressures impact our mind and social relationships. Difficulties in meeting our basic needs are strongly associated with <a href="https://www.vichealth.vic.gov.au/sites/default/files/VH_High-Inflation-Paper_FINAL_1.pdf">increased levels of psychological distress</a>, including symptoms of anxiety and depression. This impact can worsen over time if individuals experience sustained financial stress. By undermining our ability to work well, the psychosocial effects of prolonged financial stress can initiate a “vicious cycle”, leading to reduced productivity and lower earnings. Financial stress can also have a detrimental impact on spousal relationships, which can affect the mental health of other household members such as children. 3. Behavioural effects Cost-of-living pressures can also cause a number of changes in the way we behave. For many, these pressures have become a reason to work longer hours and gain additional income. Last year, Australians collectively worked 4.6% longer, an <a href="https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/aug-2023">extra 86 million hours</a>. But working longer hours <a href="https://www.vichealth.vic.gov.au/sites/default/files/VH_High-Inflation-Paper_FINAL_1.pdf">reduces people’s overall health</a>, especially among parents of young children facing greater time constraints. It also leaves less time for activities that help to keep people healthy, such as getting regular exercise and cooking healthy meals. <h2>How can policymakers respond?</h2> In theory, the Reserve Bank of Australia’s primary tool for combating inflation – raising interest rates – should help. By reducing aggregate spending in the economy, it is designed to put downward pressure on prices. But by bluntly increasing the cost of borrowing, it also puts significant short-term financial pressure on both lower-income mortgage holders and renters. Better acknowledgement of this fact, and of inflation’s broader impact on people’s physical and mental health, would be a great start. When formulating policy responses to high inflation, governments could factor health and wellbeing impacts into their assessment of the trade-offs between alternative policy responses. This could help minimise any policy’s long-term negative health consequences and its impact on the health care system. Policymakers could also focus on making sure affordable and timely access to health care, especially mental health support, is made available to those most vulnerable to cost-of-living pressures.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/223625/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/nicole-black-103425">Nicole Black</a>, Associate Professor of Health Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>; <a href="https://theconversation.com/profiles/anthony-harris-7148">Anthony Harris</a>, Professor of Health Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>; <a href="https://theconversation.com/profiles/danusha-jayawardana-1406565">Danusha Jayawardana</a>, Research Fellow in Health Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a>, and <a href="https://theconversation.com/profiles/david-johnston-1126643">David Johnston</a>, Professor of Health Economics, <a href="https://theconversation.com/institutions/monash-university-1065">Monash University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/undernourished-stressed-and-overworked-cost-of-living-pressures-are-taking-a-toll-on-australians-health-223625">original article</a>.

Money & Banking

Qantas announces major price hike

Qantas customers have been warned that they will see a significant increase in price to the airline’s domestic club lounges from next month. For the first time in seven years, the airline will charge Qantas Club membership holders 17 per cent more to access their lounges, with price changes set to be made from April 18. The increase coincides with Qantas' plans to renovate 24 of their domestic lounges over the next year, with the carrier spending an estimated $100 million on renovations. This means that annual fees for new members will increase from $699 to $828, including the $129 joining fee. For current members looking to renew, their annual fees will rise from $540 to $629. “This is the first time the Qantas Club membership fees have increased in seven years and will help cover cost increases passed on from a range of suppliers over that time. This follows a reduction in the membership fees for several years during the pandemic,” a spokesperson told news.com.au. They added that these changes will not affect Qantas Frequent Flyers members who will continue to receive complimentary access to the Club through Points Club Plus or their Gold, Platinum or Platinum One status. Members can also avoid the price hike if they renew their membership before April 18. Image: Getty

Money & Banking

Millions of Aussies set for power bill relief

Millions of Aussies are set for some financial relief, with electricity costs set to drop by up to 7 per cent in the coming months. The Australian Energy Regulator (AER) and Victoria's Essential Services Commission (ESC) both released their draft default market offers - the maximum energy retailers are allowed to charge customers - for the 2024-25 financial year. Under the AER draft, residents in Sydney, Newcastle and the Hunter on the default offer will pay between 3 and 3.4 per cent less for electricity starting from July 1. The biggest drop is set for Victoria, with the ESC proposing a 6.4 per cent decrease. Those in Western Sydney, the Illawarra, and South Coast, will see their electricity bills decrease by 1.9 to 7.1 per cent. South Australians will receive a drop between 0.5 and 2.5 per cent. A number of small business customers will also benefit from lower power bill costs with 9.7 per cent for Sydney, Newcastle and the Hunter; 4.4 per cent for Western Sydney and the South Coast; 0.3 per cent for South-East Queensland; 8.2 per cent for South Australia; and 7 per cent for Victoria. Energy Minister Chris Bowen welcomed the news of lower power bill costs, but acknowledged that it will continue to play a part in the cost of living challenges faced by many Australians. "This is encouraging news," he said. "Encouraging for those small businesses and families who will receive lower energy bills as a result. "But nobody should suggest that there aren't real cost of living pressures around the world and in Australia, and energy prices are of course part of that and will continue to be." Not everyone will see a drop, with customers in the rest of regional NSW to get a small increase of 0.9 per cent, while the default offer for South East Queensland will increase by up to 2.7 per cent. While not all households are on the default offer, Bowen said that the AER's decision will also affect those not on the offer. "This either impacts directly or indirectly your energy bill," he said. "Directly for those on the default market offer. For those who aren't on the direct market offer, indirectly - the energy companies have to benchmark themselves against this, tell their consumers how they compare to this, and it provides very real pressure on them to match it. "If they don't, consumers will know about it and will make choices accordingly. "It's partly about those on the default market offer, but it actually impacts on all our bills indirectly." AER chair Clare Savage said that the cost of living crisis was the main contributor for their draft decision. "We know that economic conditions have put pressure on many Australians and the increases in electricity prices over the last two years has made energy less affordable for many households," she said. "In light of this, the AER has, in this decision, placed increased weight on protecting consumers." The draft decision is not final, with both the AER and ESC to receive consultation and feedback from stakeholders before confirming their default market offers in May. Image: Getty

Money & Banking

How 8-year-old Ruby McLellan became Australia's youngest home owner

Move over, monopoly tycoons and pretend princes of pretend kingdoms – meet Ruby McLellan, the pint-sized powerhouse who's rewriting the rules of real estate and giving the term "property ladder" a literal twist. That's right: Ruby is just eight years old and already owns a four-bedroom house. Meanwhile, most of us can barely find matching socks in the morning. Now, before you start picturing a tiny landlord with a playhouse adorned with "No Girls Allowed" signs, let's delve into Ruby's remarkable tale of fiscal responsibility and pocket money prowess. While most kids her age were still trying to figure out if they preferred chocolate or strawberry milk, Ruby was busy checking out property market trends and crunching numbers like a seasoned Wall Street mogul. With the help of her siblings, Angus (14) and Lucy (13), Ruby pooled their collective pocket money - a grand total of $6000 - to secure a deposit for their first property. Their weapon of choice? Not lemonade stands or tooth fairy funds, but good old-fashioned hard work and frugality. The result? A four-bedroom home in Clyde, southeast of Melbourne, bought by the McLellan kids for $671,000. Their dad, Cam McLellan, CEO of a property investment company, guided them through the labyrinth of real estate jargon, teaching them about positive gearing and growth corridors. While other kids were learning their times tables, Ruby was calculating potential rental yields. Talk about a head start in life! And while their friends were blowing their allowances on the latest toys and gadgets, these pint-sized property moguls were saying no to impulse buys and yes to long-term investments. It's like they were born with calculators instead of rattles. Now, you might be wondering, what's next for these mini-magnates? Well, they plan to hold onto their property until Lucy and Angus hit their early 20s, ensuring they've waited through one full "growth property cycle". After that, it's off to the races, with hopes that their humble abode will fetch a cool million bucks. But Ruby's not stopping there. She's already asking about tax implications and property sales, proving that she's got the brains to match her business acumen. Who needs a lemonade stand when you can have a diversified investment portfolio? So, while most kids are busy mastering Fortnite dances or perfecting their TikTok routines, Ruby McLellan is out here making moves in the property market. Who knows? Maybe one day we'll all be renting from her property empire. But just remember, when you're paying rent to an eight-year-old landlord, be sure to pay on time. Late fees might include extra homework assignments or a mandatory bedtime story session. Hey, it's all in the lease agreement... Image: The Today Show

Money & Banking

Millions of eligible Aussies about to receive financial boost

Starting this Wednesday, millions of Australians relying on Centrelink benefits will see a welcome increase in their payments. With indexation kicking in, fortnightly boosts ranging from $14 to $30 will be allocated to eligible recipients, depending on their specific circumstances and the type of payment they receive. This adjustment will not only benefit current beneficiaries but also extend support to more individuals, with an additional 77,000 parents now qualifying for higher payment rates. The eligibility criteria for certain payments have been expanded, particularly for parents whose youngest child is under 14, a significant extension from the previous threshold of under eight. Income and assets limits tied to these payments will also experience an uptick in line with the indexation process, offering further relief to recipients. But how exactly will these increments manifest across different categories of payments? For single parents, the fortnightly payment will see a boost of $17.50, while partnered parents will witness an increase of $12.30 individually. Moreover, the income free area will rise to $1,345 for each person, an enhancement of $20 per fortnight. Jobseekers with children or those aged over 55 will receive an additional $14.40 fortnightly. Single JobSeeker recipients without children and individuals aged over 22 on ABSTUDY will enjoy a $13.50 increase per fortnight, with couples receiving an extra $12.30 each. Rent assistance, however, will see relatively modest increments, ranging from $2.27 to $3.40, depending on the recipient's family situation. For those on the age pension, disability support pension, and carer payment, the increase is more substantial, with singles receiving an extra $19.60 and couples combined receiving $29.40 each fortnight. This brings the maximum rate of the pension to $1116.30 for singles and $1682.80 for couples, including pension and energy supplements. Amanda Rishworth, the Social Services Minister, explains that indexation plays a crucial role in ensuring that welfare recipients can cope with inflation and the rising cost of living – and that addressing these pressures remains a top priority for the government. This increase in Centrelink payments comes at a critical time when many Australians are grappling with economic uncertainty due to various factors, including the ongoing pandemic. While these adjustments may seem modest to some, they can make a significant difference for those relying on welfare support to make ends meet. It's essential for eligible individuals to stay informed about these changes and ensure they receive the full benefits they're entitled to. For those who may be unsure about their eligibility or how to navigate the system, seeking assistance from Centrelink or relevant support services can provide valuable guidance. As the cost of living continues to evolve, initiatives like indexation serve as vital mechanisms for maintaining the welfare safety net and supporting vulnerable members of society. By keeping pace with economic realities, these adjustments strive to provide meaningful relief to those who need it most, contributing to a more equitable and inclusive society for all Australians. Image: Getty

Money & Banking

Bunnings has toppled Woolworths as Australia’s most ‘trusted’ brand – what makes us trust a brand in the first place?

<a href="https://theconversation.com/profiles/louise-grimmer-212082">Louise Grimmer</a>, <a href="https://theconversation.com/institutions/university-of-tasmania-888">University of Tasmania</a> Think of some of the world’s biggest brands: Nike, McDonald’s, Coca-Cola, Apple. With what do you associate them? Are they positive associations? Now consider, do you trust them? Brand trust is a measure of how customers feel about a brand in terms of how well the brand delivers on its promises. Trust is an important measure for any organisation, large or small. Whether or not customers trust a brand can be the difference between choosing that brand’s products or services over another. In Australia, Woolworths <a href="https://www.roymorgan.com/findings/9472-risk-monitor-quartely-update-december-2023">held the title</a> of our most trusted brand for three and a half years. But recent cost-of-living pressures have put supermarkets in the spotlight for all the wrong reasons. Roy Morgan Research’s <a href="https://www.roymorgan.com/findings/9472-risk-monitor-quartely-update-december-2023">most recent trust rankings</a> show Woolworths has slipped to number two, handing its crown to hardware behemoth Bunnings. It’s clear that trust is fragile and can be quickly squandered when brands lose touch with those they serve. So what makes us trust a brand in the first place? And why do we trust some more than others? <h2>What makes us trust a brand?</h2> According to customer experience management firm Qualtrics, <a href="https://www.qualtrics.com/au/experience-management/brand/brand-trust/">brand trust</a> is <blockquote> the confidence that customers have in a brand’s ability to deliver on what it promises. As a brand consistently meets the expectations it has set in the minds of customers, trust in that brand grows. </blockquote> There are many ways to go about measuring brand trust. A typical first step is to ask lots of people what they think, collating their general opinions on product quality and the brand’s customer service experience. This can be strengthened with more quantifiable elements, including: <ul> <li>online ratings and reviews</li> <li>social media “sentiment” (positive, negative or neutral)</li> <li>corporate social responsibility activities</li> <li>philanthropic efforts</li> <li>customer data security and privacy.</li> </ul> Some surveys go even deeper, asking respondents to consider a brand’s vision and mission, its approaches to sustainability and worker standards, and how honest its advertising appears. <h2>Is this a real and useful metric?</h2> The qualitative methodology used by <a href="https://www.roymorgan.com/findings/9472-risk-monitor-quartely-update-december-2023">Roy Morgan</a> to determine what Australian consumers think about 1,000 brands has been administered over two decades, so the data can be reliably compared across time. On measures of both trust and distrust, it asks respondents which brands they trust and why. This approach is useful because it tells us which elements factor into brand trust judgements. <a href="https://roymorgan-cms-prod.s3.ap-southeast-2.amazonaws.com/wp-content/uploads/2024/03/07035120/9472-Risk-Monitor-Quartely-Update-December-2023-1-1.pdf">Customer responses</a> about the survey’s most recent winner, Bunnings, show that customer service, product range, value-for-money pricing and generous returns policies are the key drivers of strong trust in its brand. Here are some examples: <blockquote> Great customer service. Love their welcoming staff. Whether it’s nuts and bolts or a new toilet seat, they have it all, value for money. Great products and price and have a no quibble refund policy. Great stock range, help is there if you need it and it is my go-to for my gardening and tool needs. Really convenient trading hours, and their return policy is good. </blockquote> In addition to trust, there are three other metrics commonly used to assess brand performance: <ul> <li> brand equity – the commercial or social value of consumer perceptions of a brand </li> <li> brand loyalty – consumer willingness to consistently choose one brand over others regardless of price or competitor’s efforts </li> <li> brand affinity – the emotional connection and common values between a brand and its customers. </li> </ul> However, trust is becoming a disproportionately important metric as consumers demand that companies provide <a href="https://www.forbes.com/sites/bernhardschroeder/2020/01/16/from-the-traditional-to-the-outrageous-four-brands-that-use-honest-transparency-to-build-loyal-customers-with-non-traditional-marketing-and-branding/?sh=6689f81320a1">increased transparency</a> and exhibit greater care for their customers, not just their shareholders. <h2>Why do Australians trust retailers so much?</h2> Of Australia’s top ten most trusted brands, seven are retailers – Bunnings, Woolworths, Aldi, Coles, Kmart, Myer and Big W. <figure class="align-center zoomable"><a href="https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img src="https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px" srcset="https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=279&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=279&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=279&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=350&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=350&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582082/original/file-20240314-28-h0xdf4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=350&fit=crop&dpr=3 2262w" alt="table shows that Bunnings is now Australia's most trusted brand, and Optus the least trusted brand." /></a><figcaption>The latest changes to Australia’s most trusted and most distrusted brand rankings. <a class="source" href="https://www.roymorgan.com/findings/9472-risk-monitor-quartely-update-december-2023">Roy Morgan Single Source (Australia)</a></figcaption></figure> This <a href="https://www.fastcompany.com/90901331/america-most-trusted-brands-companies-report-2023-morning-consult">stands in contrast</a> with the United States, where the most trusted brands are predominantly from the healthcare sector. So why do retail brands dominate our trust rankings? They certainly aren’t small local businesses. Our retail sector is <a href="https://www.afr.com/companies/retail/in-the-shopping-trolley-war-the-supermarkets-have-to-give-20240122-p5ez4k">highly concentrated</a>, dominated by a few giant retail brands. We have only two major department stores (David Jones and Myer), three major discount department stores (Big W, Target and Kmart) and a <a href="https://www.abc.net.au/news/2024-02-23/a-history-of-the-duopoly-coles-woolworths/103494070">supermarket “duopoly”</a> (Coles and Woolworths). It’s most likely then that these brands have been enjoying leftover goodwill from the pandemic. As Australia closed down to tackle COVID-19, the retail sector, and in particular the grocery sector, was credited with enabling customers to <a href="https://www.smh.com.au/business/companies/inside-story-how-woolworths-and-coles-joined-forces-to-avert-covid-19-disaster-20200611-p551lk.html">safely access</a> food and household goods. Compared with many other countries, we did not see a predominance of empty shelves across Australia. Retailers in this country stepped up – implementing or improving their online shopping capabilities and ensuring physical stores followed health guidelines and protocols. Now, with the pandemic behind us and in an environment of high inflation, the <a href="https://www.abc.net.au/news/2024-02-20/woolworths-coles-supermarket-tactics-grocery-four-corners/103405054">big two supermarkets</a> face <a href="https://www.theguardian.com/australia-news/2024/feb/20/do-coles-woolworths-specials-actually-offer-savings-choice-survey-supermarket-price-gouging-inquiry">growing distrust</a> and a <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Supermarket_Prices/SupermarketPrices">public inquiry</a>. <h2>Lessons from the losers</h2> After <a href="https://www.theguardian.com/business/2023/nov/20/optus-scandals-network-outage-cyberattack-ceo-resignation-kelly-bayer-rosmarin">two high profile disasters</a>, Optus finds itself the most distrusted brand in Australia. Its companions in the “most distrusted” group include social media brands Meta (Facebook), TikTok and X. Qantas, Medibank Private, Newscorp, Nestle and Amazon also made the top 10. The main reason consumers distrust brands is for a perceived failure to live up to their promises and responsibilities. For example, <a href="https://www.washingtonpost.com/technology/2023/09/18/amazon-working-conditions-safety-osha-doj/">worker conditions at multinational firm Amazon</a> are seen by some consumers as a reflection of questionable business practices. Other brands may have earned a reputation for failing to deliver the basics, like when chronic <a href="https://www.afr.com/companies/transport/compensating-travellers-for-cancelled-flights-long-overdue-20240212-p5f45c">flight delays and cancellations</a> plagued many Qantas customers. <h2>Lessons from the winners</h2> On the flip side, consumers have rewarded budget-friendly retailers with increased trust in the most recent rankings. Aldi, Kmart and Bunnings have improved their standing as trusted brands, no doubt in part because they have helped many Australian consumers deal with tight household budgets. As discretionary consumer spending continues to tighten, we may see a more permanent consumer shopping <a href="https://www.theaustralian.com.au/business/retail/rise-of-the-value-shopper-as-budgets-are-crunched-a-threat-and-opportunity-for-retailers/news-story/9b7a355cfb3866ec60d2ee42b7cbd567">shift towards value for money</a> brands and discounters. Trust is a fragile thing to maintain once earned. As we move through 2024, Australian companies must pay close attention to their most important asset – strong relationships with those they serve.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/225578/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/louise-grimmer-212082">Louise Grimmer</a>, Senior Lecturer in Retail Marketing, <a href="https://theconversation.com/institutions/university-of-tasmania-888">University of Tasmania</a> This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/bunnings-has-toppled-woolworths-as-australias-most-trusted-brand-what-makes-us-trust-a-brand-in-the-first-place-225578">original article</a>.

Money & Banking

What is negative gearing and what is it doing to housing affordability?

<a href="https://theconversation.com/profiles/michelle-cull-340911">Michelle Cull</a>, <a href="https://theconversation.com/institutions/western-sydney-university-1092">Western Sydney University</a> Australia’s housing crisis is putting the <a href="https://www.mortgagechoice.com.au/guides/what-is-the-great-australian-dream/">Australian dream</a> to own one’s home out of reach for many. But it’s not just <a href="https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure">home ownership</a> that has been affected. Rental affordability has also become a serious issue. This has reignited the debate about negative gearing; whether or not it is fair and whether it holds the key to fixing the housing crisis. <h2>What is negative gearing?</h2> <a href="https://treasury.gov.au/review/tax-white-paper/negative-gearing">Negative gearing</a> refers to using borrowed money to invest in an asset so it results in a loss which can be claimed as a tax deduction against other income. For example, a property investment is negatively geared if the net rental income received is lower than the mortgage interest. The loss is then offset against other income, such as wages and salaries, which reduces the amount of income tax payable. Negative gearing is commonly used for property investments but also applies to other investments (such as shares). Investments can also be positively geared when net income from the investment is more than the interest on borrowings. The attractiveness of negative gearing in Australia is mainly due to its ability to reduce the amount of income tax. For this reason, it can be more beneficial to individuals who are on higher marginal tax rates. However, capital gains tax must be paid on any gain when the asset is sold. <h2>How does negative gearing work?</h2> Let’s look at a simple example of negative gearing. Say an investment property was rented to tenants at A$500 a week ($26,000 a year), and associated expenses (such as agent fees, rates, mortgage interest, maintenance) were $40,000 for the year. This leaves a shortfall of $14,000. The property owner can deduct the $14,000 from their taxable income to reduce their liability. For example if they received $100,000 from wages, they would pay tax on only $86,000 (saving $4,550 in income tax). Individuals on higher incomes and therefore higher marginal tax rates would receive larger tax deductions (for example, someone earning over $180,001 would pay $6,300 less tax). While negative gearing an investment property can reduce tax while it is being rented, it can also result in a large <a href="https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/what-is-capital-gains-tax">capital gains tax</a> bill once the property is sold (even though capital gains tax is halved for assets held for more than 12 months). For example, if the cost base for a property purchased ten years ago was $400,000 and it sells for $900,000 today, capital gains tax would be calculated on half of the $500,000 difference. At a marginal rate of 45%, the tax bill would be $112,500. <h2>How widespread is it in Australia?</h2> According to the <a href="https://data.gov.au/data/dataset/taxation-statistics-2020-21">Australian Taxation Office</a>, about 2.25 million individual tax payers (21% of all individual tax payers) claimed deductions against rental income for a total 3.25 million properties in 2020-21 financial year. Of these, 47% negatively geared their properties, claiming a net rental loss. This is equivalent to just less than 10% of all taxpayers. Investors with fewer properties were more likely to be using negative gearing with over 71% of property investors having only one investment property. <hr /> <iframe id="Wv9lV" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/Wv9lV/" width="100%" height="400px" frameborder="0"></iframe> <hr /> The largest group of property investors (524,220) had one investment property and a total annual taxable income between $50,001 and $100,000. The chart above shows the proportion of property investors by age group. From 2016-2017 to 2020-2021, the total net rental income on property investments in Australia went from a loss of $3.3 billion to a gain of $3.1 billion (as you can see from the chart below). For the same period, the proportion of investors negatively gearing their properties dropped from 58% to 47%, as lower interest rates reduced losses. <hr /> <iframe id="fXnoe" class="tc-infographic-datawrapper" style="border: none;" src="https://datawrapper.dwcdn.net/fXnoe/" width="100%" height="400px" frameborder="0"></iframe> <hr /> Negative gearing is also becoming less attractive with the government’s recent changes to <a href="https://treasury.gov.au/tax-cuts">tax brackets and marginal tax rates</a>. According to a study conducted by <a href="https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system_compressed-sm-1679450145.pdf">LongView and PEXA</a>, 60% of property investors would be financially better off if they instead put their money into a superannuation fund. <h2>When was it introduced?</h2> Negative gearing has been allowed under tax laws since 1936. It was thought it would encourage investment in housing and increase supply. However, debate around its impact on housing affordability led the government to partially abolish it in 1985 by not allowing rental property losses to reduce tax on other sources of income. There was a shortage of housing and rents rose during the two years it was abolished. As a result, in 1987, negative gearing was reinstated and capital gains tax legislation was introduced. <h2>Is it used in other countries?</h2> Canada, Germany, Japan and Norway use negative gearing. In Finland, France and the United States, rental losses can offset future rental income only. In the US, <a href="https://www.irs.gov/publications/p936#en_US_2023_publink1000229891">home owners are entitled</a> to claim a tax deduction for mortgage interest on their own home. The use and benefit of negative gearing depends upon all aspects of a country’s tax system. So although it may be attractive in countries with high marginal tax rates, other taxes such as capital gains tax, land tax and stamp duties may reduce its appeal. <h2>Negative gearing’s impact on housing affordability</h2> Many factors affect the cost of housing, including interest rates, inflation, employment, the overall taxation system and population growth, making housing affordability a complex issue. <a href="https://www.smh.com.au/politics/federal/nz-kills-tax-loophole-on-property-to-slow-soaring-house-prices-20210323-p57d9s.html">In New Zealand, negative gearing is being phased out</a> due to its impact on housing prices. However, unlike Australia, New Zealand does not have capital gains tax, making negative gearing more popular and more likely to impact housing prices. In addition to phasing out negative gearing, the New Zealand government <a href="https://www.hud.govt.nz/our-work/public-housing-plan/">increased the supply of public housing</a> and <a href="https://www.abc.net.au/news/2023-09-25/nz-auckland-house-supply-experiment-results-in-dramatic-change/102846126">relaxed zoning regulations</a> to provide more affordable housing. In Australia, however, there are concerns abolishing negative gearing will cause rents to rise, as they did in the 1980s. More innovative approaches to housing affordability are needed to ensure ample supply of property for first home buyers and tenants. Some consideration could be given to allowing first home buyers to claim a tax deduction for mortgage interest, increasing capital gains tax, limiting the number or type of investment properties held, capping rent increases, or more infrastructure investment from the government for first home buyers and social housing. One or more of these measures would be a step in the right direction. Negative gearing on its own is not the answer to housing affordability. The whole system needs an overhaul, with a combination of measures needed to adequately address affordability, for now and for future generations. Taking no action will put home ownership out of reach for even more Australians.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/223823/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/michelle-cull-340911">Michelle Cull</a>, Associate professor, <a href="https://theconversation.com/institutions/western-sydney-university-1092">Western Sydney University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/what-is-negative-gearing-and-what-is-it-doing-to-housing-affordability-223823">original article</a>.

Money & Banking

Restaurant sparks outrage for "ridiculous" fee

As inflation rates continue to rise it is not surprising that restaurants are charging extra fees, but one disgruntled customer was particularly shocked to see this "ridiculous" fee on their bill. The customer, who dined at restaurant and cocktail bar in Georgia, USA shamed the restaurant for charging their customers a $20 fee for “live band entertainment”. They shared their complaints on Reddit with a copy of their receipt and an unexpected fee at the bottom which read: “Two Live Band Entertainment Fee — $20”. Most people in the comments were equally annoyed and called the fee "ridiculous". “This is one of those leave money on the table, hand the waiter a tip and leave, sorry but if I didn’t order it, I’m not paying for it,” one wrote. “Great way to not have repeat customers,” said another. “This will backfire for them, just be honest and upfront," a third added. Other commenters were less sympathetic and did not understand why the customer was complaining when it looked like they could afford it. “When you’re paying seven dollars for a bottle of water, you really don’t get to complain about ‘unexpected costs.’ You knew what you signed up for," one commenter wrote. “Imagine a live band getting paid, huh,” another added. “They’re buying $7 bottles of water, they can probably afford it,” added a third. Image: Getty/ Reddit

Money & Banking

Rise in insurance premiums set to devastate Aussies

Australians struggling with the cost of living are set to be hit with another blow to their wallets as health insurance premiums rise. Coming into effect on April 1st, private health insurance premiums are set to rise by more than 3 per cent, in the biggest increase in five years. The federal government has approved an average industry premium rise of 3.03 per cent, which will impact 14 million Australians paying for private health cover. The 2024 increase is slightly higher than a rise of 2.9 per cent in 2023, and 2.7 per cent in 2022 and 2021. In 2019, premiums rose by 3.3 per cent, making the 2024 rise the biggest in five years. Health Minister Mark Butler said the rise was smaller than the increase in wages, the age pension and inflation. “I wasn’t prepared to just tick and flick the claims of health insurers, as the opposition asked me to do,” Butler said. “I asked insurers to go back and sharpen their pencils and put forward a more reasonable offer for the 15 million Australians with private health insurance.” “Private health insurers must ensure their members are getting value for money,” Butler said. “When costs rise, Australians want to know that higher premiums are contributing to system-wide improvements like higher wages for nurses and other health workers and ensuring that affordable services are available.” Image credits: Getty Images

Money & Banking

Why is gluten-free bread so expensive? A food supply chain expert explains

<a href="https://theconversation.com/profiles/flavio-macau-998456">Flavio Macau</a>, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan University</a> Before the cost of living hit Australian families hard, a group of consumers were already paying top dollar for their staples. Whether it be gluten free, dairy free or lactose free, people with special dietary requirements are used to spending more at the supermarket checkout. A 2016 study from the University of Wollongong found that Australians were <a href="https://onlinelibrary.wiley.com/doi/10.1111/1747-0080.12171">paying up to 17% more for a gluten-free diet</a>. Current examples are easy to find. A <a href="https://www.coles.com.au/product/coles-white-bread-650g-4901345">white sandwich loaf at Coles</a> costs A$2.40 (or A$0.37 per 100g), whereas <a href="https://www.coles.com.au/product/coles-i'm-free-from-white-loaf-500g-3216673">the cheapest gluten-free option</a> costs $5.70 (or $1.14 per 100g). That’s over three times as much. Prices are closer comparing Coles Full Cream Milk at A$1.50 per litre with Coles Lactose Free Lite Milk at A$1.60, the exception that confirms the rule. So why are allergen-free products more expensive? <h2>Is it the ingredients?</h2> If manufacturers pay more for ingredients, this is usually reflected in the price of the final product. Regular and gluten-free bread share many common ingredients, but there is a substantial change where wheat flour is replaced by gluten-free flour. This ingredient may cost manufacturers around two times as much given the uniqueness of gluten-free grains, seeds, and nuts. These special ingredients are not as abundant or easy to process as wheat, and are also a bit more difficult to buy in very large scale. For a simple reference, compare <a href="https://www.coles.com.au/product/coles-white-plain-flour-1kg-5881232">regular</a> and <a href="https://www.coles.com.au/product/coles-i'm-free-from-plain-flour-gluten-free-500g-2478197">gluten-free flour</a> at Coles. Gluten, <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/jgh.13703">a complex mixture of hundreds of related but distinct proteins</a>, has unique properties. It is a binding agent that improves texture in recipes. Gluten-free bread therefore needs extra help to, literally, hold it together. Additional items such as thickeners, tapioca and maize starches are added to gluten-free recipes to improve viscosity and keep baked items in shape. That means a longer ingredient list and a slightly more complex manufacturing process. So, from an ingredient perspective, gluten-free bread costs more than regular bread. This applies for other allergen-free products as well. But with so many common ingredients, it is reasonable to say that this is not the main explanation. <h2>Is it manufacturing and transporting?</h2> A substantial part of price differences between regular and allergen-free foods comes from <a href="https://www.investopedia.com/terms/e/economiesofscale.asp">economies of scale</a>. Regular products are manufactured in very large quantities, while allergen-free products involve much smaller volumes. Bulk buying from large suppliers gets you bigger discounts. The more machines in a factory, the cheaper it is to run them. Larger outputs coming from the same place mean smaller costs for each individual product. Given that you have fixed costs to pay anyway, size is king. You pay the same amount for a grain mill regardless of whether you grind one kilo or one tonne of grains a day. Sure, you spend more on electricity or gas, but those are <a href="https://corporatefinanceinstitute.com/resources/accounting/fixed-and-variable-costs/">variable costs</a>. Then, there is the need for rigorous quality control. The United Nations Food and Agriculture Organization has a detailed <a href="https://www.fao.org/fao-who-codexalimentarius/sh-proxy/en/?lnk=1&url=https%253A%252F%252Fworkspace.fao.org%252Fsites%252Fcodex%252FStandards%252FCXC%2B80-2020%252FCXC_080e.pdf">code of practice on food allergen management for food business operators</a>, covering harvesting, handling, storage, transportation, packaging, and more. The <a href="https://www.foodstandards.gov.au/food-standards-code">Australia New Zealand Food Standards Code</a> also sets specific standards. Deep cleaning machines, thoroughly checking that standards are met, and scrapping whole batches when they are not makes manufacturing allergen-free products more complex and expensive. The <a href="https://www.health.wa.gov.au/-/media/Files/Corporate/general-documents/food/PDF/DOHComplianceandEnforcementPolicyVersion3.pdf">implications for non-compliance</a> vary in severity, from a simple recall to a costly infringement notice, plus <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10574315/">reputational damage to consumer trust</a>. It is hard to exactly measure the impact of economies of scale and quality costs on the price of allergen-free products. Each manufacturer will have its own challenges and solutions. But it is reasonable to say a considerable chunk of the difference we see when comparing gluten-free bread with its regular counterpart comes from these factors. Transportation costs follow a similar rule. If it is easier and quicker to fill your trucks with regular products, while allergen-free products have a hard time making a full load, there are disadvantages in the latter. <h2>Is it the marketing strategy?</h2> The final consideration on allergen-free food prices has to do with competition and willingness to pay. A quick search on Coles’ website shows 276 results for “bread” once you remove the 42 items that are gluten-free. That means that there are many more brands and products competing for bread consumers than for gluten-free bread consumers. That’s over six to one! This means customers with dietary restrictions are at a disadvantage as they are beholden to the limited options on offer. As noted by the Australian Competition & Consumer Commission, “<a href="https://www.accc.gov.au/business/competition-and-exemptions/competition-and-anti-competitive-behaviour">competition leads to lower prices and more choice for consumers</a>”. Also, fewer allergen-free products make it to the “own brand” list. Australians are <a href="https://www.news.com.au/finance/money/costs/coles-woolworths-ownbrand-products-booming-on-back-of-costofliving-crisis/news-story/d0be8b8d6e98c0a6477959cd83da17ad">relying more on these when facing the cost-of-living crisis</a>. There is also the <a href="https://online.hbs.edu/blog/post/willingness-to-pay">willingness to pay</a>, where consumers pay more for products deemed as having higher value. <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/obr.13525">Research</a> shows that on average consumers are willing to pay 30% more for food products that they perceive to be healthier. Manufacturers and retailers more often than not will capitalise on that, increasing their profit margins for allergen-free products. <h2>4 tips for saving money if you have allergies</h2> People with dietary requirements looking to ease the cost of their weekly grocery shop should use the same strategies as every savvy consumer: <ul> <li>research prices</li> <li>buy larger quantities where possible</li> <li>keep a keen eye on price reduction and items on sale</li> <li>consider replacing products tagged “allergen-free” with alternatives from other categories, such as going for rice instead of gluten-free pasta in a dish.</li> </ul> In the long run, if more customers choose allergen-free products it could lead to more volume and competition, bringing prices down. <img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/223648/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/flavio-macau-998456">Flavio Macau</a>, Associate Dean - School of Business and Law, <a href="https://theconversation.com/institutions/edith-cowan-university-720">Edith Cowan University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/why-is-gluten-free-bread-so-expensive-a-food-supply-chain-expert-explains-223648">original article</a>.

Money & Banking

Millions of Aussies to get cash boost in weeks

Millions of Australians are set to receive more money when payments are indexed. On March 20, those on the age pension, disability support pension and carer payment will be pocketing extra money. Single people on the pension and carer payment can expect an extra $19.60, with maximum amount increasing to $1116.30. For couples, the rate will go up $29.40 per fortnight, with the maximum being $1682.80. People on rent assistance, JobSeeker, single parenting payments and ABSTUDY will also benefit from payment increases, with single parenting payment going up by $17.50 a fortnight. Single JobSeeker recipients with no kids, and people over 22 on ABSTUDY, will get an extra $13.50 per fortnight, while each member of a couple will get an additional $12.30 per fortnight. The government has also changed the eligibility criteria for parents seeking welfare payments, with the last budget revealing that 77,000 parents will receive benefits for the youngest child up to the age of 14 instead of eight. The income and assets limits will also be increased in line with indexation in March. Social Services Minister Amanda Rishworth said that these changes will be implemented to ensure that Centrelink recipients would be able to have more money in their accounts, with the rise in cost-of-living. “Our number one priority is addressing inflation and cost of living pressures,” Rishworth said. Image: Getty

Money & Banking

Worried about price gouging? For banks, there’s a simple solution

<a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, <a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a> Does it feel like you’re being charged more for all sorts of things these days, from <a href="https://theconversation.com/supermarkets-airlines-and-power-companies-are-charging-exploitative-prices-despite-reaping-record-profits-222755#:%7E:text=According%20to%20the%20inquiry%2C%20the,dairy%20products%20and%20breakfast%20cereals.&text=Farmers%20recently%20accused%20supermarkets%20of%20making%20too%20much%20profit%20from%20their%20crops.">groceries</a> to <a href="https://theconversation.com/see-when-australias-biggest-banks-stopped-paying-proper-interest-on-your-savings-and-what-you-can-do-about-it-200265">banking</a>? Turns out, you’re right. While we might be more likely to remember prices that go up than prices that go down, the very best evidence – assembled by Australia’s <a href="https://treasury.gov.au/sites/default/files/2023-11/competition-review-mergers-background-note.pdf">Treasury</a>, the federal government’s lead economic adviser – says your suspicions are right. We really are being charged more than we used to be two decades ago. Coupled with the latest profit reports from Australia’s biggest supermarkets and banks, including Tuesday’s half-year results from Coles, it suggests we are contributing more to company profits than we used to. <h2>Climbing price markups</h2> The Treasury estimates show in the 13 years between 2003-04 and 2016-17, the average price markup – the difference between the cost of a product and its selling price – across all Australian industries climbed 6%. That’s extra profit, taken from your wallet, going to the people selling you things. Those Treasury estimates are contained in a background paper prepared for the competition <a href="https://treasury.gov.au/review/competition-review-2023">inquiry</a> being undertaken by a panel including Productivity Commission chair Danielle Wood, former Competition and Consumer Commission chief Rod Sims, and business leader David Gonski. At the same time, the average share of each industry held by its biggest four firms edged up from 41% to 43%. Profit margins are also higher here than in more competitive markets overseas. This is true in banking, where the big four have taken over St George, BankWest, and the Bank of Melbourne – and are about to take over <a href="https://www.accc.gov.au/media-release/australian-competition-tribunal-authorises-anz%E2%80%99s-proposed-acquisition-of-suncorp-bank">Suncorp</a>. It’s also true in supermarkets, where the big two, Woolworths and Coles, have taken over or seen off Franklins, Bi-Lo and Safeway. <h2>Bigger profit margins than overseas</h2> Coles supermarkets reported earnings <a href="https://www.investopedia.com/terms/e/ebitda.asp#:%7E:text=EBITDA%2C%20or%20earnings%20before%20interest,generated%20by%20the%20company's%20operations.">before adjustments</a> of <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02777616-3A637432">A$1.73 billion</a> on sales of $19.778 billion in the half year to December – a profit margin of 8.7%. Last week, Woolworths supermarkets reported earnings of <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02774826-2A1506104">$2.45 billion</a> on sales of $25.648 billion – a margin of 9.6%. By way of comparison, the dominant UK supermarket group, Sainsbury’s, has a profit margin of <a href="https://stockanalysis.com/quote/lon/SBRY/statistics/">6.13%</a>. In banking, the Commonwealth Bank has just reported a return on equity (profit as a proportion of shareholders’ funds) of <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02772167-2A1504649">13.8%</a>. National Australia Bank reported <a href="https://www.nab.com.au/content/dam/nab/documents/reports/corporate/2023-full-year-results.pdf">12.9%</a>. While on a par with the big banks overseas, those recent returns are a good deal higher than CommBank’s <a href="https://www.commbank.com.au/content/dam/commbank-assets/about-us/2021-08/2021-annual-report_spreads.pdf">11.5%</a> and NAB’s <a href="https://www.nab.com.au/content/dam/nab/documents/reports/corporate/2021-full-year-results-management-discussion-and-analysis.pdf">10.7%</a> reported two years ago. <h2>Little hope for groceries</h2> For supermarkets, there’s not a lot the government can do, apart from launching an <a href="https://www.accc.gov.au/inquiries-and-consultations/supermarkets-inquiry-2024-25">inquiry</a>, and perhaps giving Australian authorities the power to <a href="https://www.afr.com/policy/economy/break-up-firms-that-abuse-market-power-says-former-competition-tsar-20230709-p5dmtq">break up</a> firms that abuse their market power. But Prime Minister Anthony Albanese has said he isn’t keen on giving Australian authorities the sort of powers available to authorities in the United States and the United Kingdom, saying (incongruously) Australia is “<a href="https://www.pm.gov.au/media/radio-interview-abc-radio-brisbane-mornings">not the old Soviet Union</a>”. And doing anything short of that would be unlikely to have much effect. Australia’s two supermarket giants have invested a fortune in high-tech <a href="https://theconversation.com/coles-and-woolworths-are-moving-to-robot-warehouses-and-on-demand-labour-as-home-deliveries-soar-166556">warehouses and distribution systems</a>, which new rivals would be hard-pressed to match. <h2>Hope for more competitive banking</h2> But for banks it’s altogether different. Richard Denniss of the Australia Institute has come up with the idea, and it’s a beauty. It’s for the government to provide a low-cost banking service – expanding on services it already offers. The costs would be so low, other banks might decide to add features and resell them in the same way as resellers sell <a href="https://www.whistleout.com.au/MobilePhones/Guides/Telstra-network-coverage-vs-ALDI-Woolworths-Belong-Boost">mobile phone</a> and <a href="https://www.nbnco.com.au/residential/service-providers">NBN</a> services. The primary function of any bank is to provide a numbered account into which Australians can deposit and withdraw funds. The Australian Tax Office does this already, at an incredibly low cost. The tax office gives every working Australian a <a href="https://www.ato.gov.au/individuals-and-families/tax-file-number">tax file number</a>. Employers deposit money into these accounts, and – should the tax office owe a refund – taxpayers withdraw them. Some taxpayers ensure their tax is <a href="https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/in-detail/income/refund-of-over-withheld-withholding-how-to-apply">overpaid</a>, so they withdraw later. Denniss describes it as a bank account with the world’s clumsiest interface. <h2>The government could offer bank loans</h2> It wouldn’t be much of a stretch from improving that interface to offering government loans. In fact, government loans are already provided in some circumstances: such as to retirees with home equity through the <a href="https://www.dss.gov.au/our-responsibilities/seniors/benefits-payments/home-equity-access-scheme">home equity access scheme</a>, and to Centrelink recipients through <a href="https://www.servicesaustralia.gov.au/centrelink-online-account-help-apply-for-advance-payment">advance payments</a>. It woudn’t be much more of stretch to provide loans more broadly, at an incredibly low administrative cost. The government already lends against the <a href="https://www.servicesaustralia.gov.au/who-can-get-loan-under-home-equity-access-scheme">value of homes</a>. Back in the days when the federal government owned the <a href="https://www.commbank.com.au/about-us/our-company/history.html">Commonwealth Bank</a>, it had to cover the high costs of running bricks and mortar branches. Freed from those costs, the government could now offer a low-cost, technology-enabled basic banking service that would tempt us away from the big four banks – unless they offered better value. Of course it would cost money, although a lot of it has already been spent setting up the system of tax file numbers and accounts. And of course the banks would hate the idea. That would be the point. But doing what we can to stop Australians being overcharged is important, not only for wage earners but also for businesses. The <a href="https://treasury.gov.au/review/competition-review-2023">competition inquiry</a> the government has launched is a good start. It shouldn’t be frightened about where it might lead.<img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/223821/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /> <a href="https://theconversation.com/profiles/peter-martin-682709">Peter Martin</a>, Visiting Fellow, <a href="https://theconversation.com/institutions/crawford-school-of-public-policy-australian-national-university-3292">Crawford School of Public Policy, Australian National University</a> Image credits: Getty Images This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/worried-about-price-gouging-for-banks-theres-a-simple-solution-223821">original article</a>.

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