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Trump’s Cancellation of North Korea Summit Sends Markets Down

US and European stocks fell after US president Donald Trump cancelled a planned June summit with North Korean leader Kim Jong-un.

On Thursday morning, Trump cancelled the June 12 Singapore meeting, citing Pyongyang’s “open hostility” even though North Korea followed through on its pledge to destroy tunnels at its nuclear test site.

The Dow Jones fell 75.05 points (0.3 per cent) to finish at 24,811.76 while the S&P dipped by 5.53 points (0.2 per cent) to close at 2,727.76. Nasdaq also dropped 1.53 points (0.02 per cent) to 7,424.43.

European bourses had a sharp dip, with London and Frankfurt down by almost one per cent each.

The markets were also impacted by Trump’s order of investigation into vehicle part imports, which could lead to tariffs on foreign auto goods. US carmakers such as General Motors and Ford rose with 1.4 and 1.5 per cent respectively.

Rio Tinto’s Climate Change Resolution Marks a Significant Shift in Investor Culture

Anita Foerster, University of Melbourne and Jacqueline Peel, University of Melbourne

What does the advocacy group the Australian Centre for Corporate Responsibility (ACCR) have in common with the Local Government Super fund, the Church of England Pensions Board, and the Seventh Swedish National Pension Fund?

Quite a lot, it seems. These three institutional investors joined with the ACCR to co-file a shareholder resolution on climate change at mining giant Rio Tinto’s Australian annual general meeting in Melbourne yesterday. While Rio’s board advised shareholders to vote against the resolution, there was a very healthy showing of 18.3% shareholders voting in support (over 20% including abstentions).

The resolution called on Rio to review and comprehensively report on its membership of industry associations such as the Minerals Council of Australia (MCA). The MCA’s pro-coal political lobbying has been distinctly at odds with the position of companies such as Rio, which publicly support measures to reduce carbon emissions in line with the Paris climate agreement.




Read more:
Is BHP really about to split from the Minerals Council’s hive mind?


This alliance between civil society and institutional investors is significant for several reasons.

Institutional investors (large investors such as superannuation funds which pool money to buy shares and other assets) are increasingly concerned about the long-term resilience of their investments to the business risks posed by climate change.

For an energy-hungry miner such as Rio, these risks include changing energy prices and markets, as well as operational disruptions caused by climate impacts such as storms, floods, and droughts.

Investors want companies to disclose these risks fully and to outline how they will manage them to maintain company value over the long term. As the Rio resolution suggests, they also want companies to be transparent and consistent in their approach to climate change. Paying multimillion-dollar memberships for industry associations that lobby against climate action is inconsistent with the long-term investment goals of such shareholders.

New phenomenon

Shareholder resolutions on climate change are a relatively new phenomenon in Australia. In the United States, however, there is a long history of using resolutions to pressure companies to address human rights abuses and change their approach to issues like climate change.

In Australia, advocacy groups such as ACCR (and its counterpart Market Forces) have taken up this tool more recently and lodged resolutions to Australian banks, utilities, oil and gas companies, insurers, and now the big miners, asking for improved disclosure and better management of climate risks.

What’s more, institutional investors are increasingly backing these requests. This latest resolution to Rio Tinto is also reportedly supported by key voting advisors ACSI and Regnan, as well as other major Australian super funds.

As a result, it marks a significant shift in investor culture in Australia, signalling an increased willingness to engage proactively and publicly on environmental, social and governance issues.

Compared with the US and UK, shareholders in Australia have more limited rights to bring resolutions to an AGM expressing their views or requesting that certain actions be undertaken by company management. Australian court decisions have upheld a strict division of powers between company management and shareholders. Nonbinding advisory resolutions on matters that interfere with company management are not permitted. This means shareholders must lodge a special resolution to change the company constitution to allow them to put forward an advisory resolution on a substantive matter such as climate change.

This is not only clunky and inefficient, but also acts as a significant deterrent for investors to support a substantive resolution with which they would otherwise concur. There are renewed calls for law reform, widely supported by institutional investors and also, increasingly, by some of the companies facing these resolutions, to change the law to allow for a more consistent and orderly approach in Australia.

Do these resolutions actually change behaviour?

From their brief history in Australia so far, it appears that shareholder resolutions on climate change, together with a range of other influences, do have the potential to drive change. Many Australian companies that have faced these resolutions so far have responded with significant improvements in climate risk disclosure and management.

Santos recently released its first Climate Change Report; AGL has developed a long term energy transition strategy; and BHP Billiton (which faced a similar resolution to Rio Tinto on its membership of industry associations in 2017) has announced its withdrawal from the World Coal Association and reviewed its other industry association memberships, including the MCA.

While these developments are undoubtedly the result of many factors – including technology and market developments, behind-the-scenes engagement with investors on climate risks, and increased pressure from financial institutions and regulators – it seems that shareholder resolutions can help to focus a company’s attention on ensuring its climate stance is defensible to shareholders. The impact of these resolutions in Australia may also be a function of their relative novelty compared with other jurisdictions such as the United States.




Read more:
Why has BHP distanced itself from legal threat to environment groups?


This week’s resolution at Rio Tinto signals a coming of age for investor engagement on climate change in Australia. Shareholder resolutions have clearly become an important part of the toolbox for civil society in Australia seeking to influence corporate decision making on climate change.

As mainstream investors come on board with these resolutions, their potential impact is heightened considerably. For their part, Australian institutional investors seem to be increasingly willing to stand behind calls for better disclosure and management of climate risks by the companies in which they invest, including by forming new alliances and supporting the use of these more activist tools.

The ConversationIn a country with a relatively conservative approach to investor engagement, these are important cultural shifts. They offer promising signs that Australian businesses and investors are taking a more considered and proactive approach on climate risks.

Anita Foerster, Senior Research Fellow, University of Melbourne and Jacqueline Peel, Professor of Environmental and Climate Law, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Lachlan Fearnley Brisbane

Brisbane House Price Growth Slides to a 5-Year Low

Home prices in Brisbane have fallen, leading the annual growth to drop to a five-year low.

According to the latest Domain Group’s quarterly house price report released in late April, median house prices were down 0.4 per cent across the area, while unit prices dropped by 1.9 per cent.

Alex Jordan of McGrath Paddington told Domain that changes in Sydney might have influenced buyer activity in Brisbane. “I think the change to Sydney’s market is affecting our confidence,” Jordan said. “When Sydney is going up, we look at them as a leading indicator, so when they turn, confidence in our market also goes down.”

This is despite the fact that the city made the latest Knight Frank Global Residential Cities Index as one of the world’s cities with highest home price growth last month. Brisbane achieved the 100th rank with a growth of 2.1 per cent in the past 12 months, beating cities like Beijing and London.

However, local agents claimed that sales were robust for Brisbane real estate. “Overall, the data might show not much is happening but in certain areas, there will be a real momentum and demand driving things along,” said Lachlan Walker, advisory director at Place. “We’re also a very seasonal city when it comes to property — traditionally things are quieter in the March quarter and September quarter.”

AGL to Build $400 Million Gas-Fired Power Plant in NSW

AGL will build a $400 million gas-fired power plant near Newcastle, NSW to replace the ageing Liddell coal-fired station.

The energy company said it is assessing sites for a 252-megawatt facility development, due for completion in the end of 2022.

“AGL is committed to supporting the orderly transition of Australia’s electricity generation capability to modern, clean and reliable energy supply,” said AGL chief executive Andy Vesey.

“That’s why we gave seven years’ notice of when we intend to close the Liddell power station at the end of 2022 and we are pleased to commit today to build the power station near Newcastle.”

AGL also said there were plans to “assess the potential” to develop a further 500 megawatts of gas-fired generation capacity, pending commercial and industrial demand.

The company’s announcement to the Australian stock exchange followed pressures from the federal government to sell Liddell power plant instead of closing it. Rivalling company Alinta has expressed interest in acquiring the power plant to keep it open until 2029.

Federal Environment Minister Josh Frydenberg said Liddell’s closure would still bring blackout risk, even with the replacement plan. “That’s why it’s really important that the executives of AGL consider on its merits this offer that comes from Alinta,” Frydenberg said.

The Australian Energy Market Operator (AEMO) said there would be a potential shortfall in capacity of 850 megawatts if Liddell was to be closed, but it also said AGL’s replacement plan “would deliver sufficient dispatchable resources to fill the identified 850MW resource gap”.

Will Rio Tinto’s Bid to Escape from Its Contracts with Rusal Succeed?

Mark Giancaspro, University of Adelaide

Mining giant Rio Tinto is attempting to use new American sanctions on Russia to walk away from an agreement with a Russian aluminium company, Rusal. But if the contract is not worded precisely, the law may actually work to Rio’s detriment.

Many companies have successfully ended contracts when war has broken out or the government has changed the law in ways that significantly impacted the contract. However, the fact a government’s actions have made a contract harder or more expensive to complete does not automatically mean it will be terminated.

Rio Tinto’s case depends on whether it can invoke a “force majeure” clause in its contracts with Rusal. This kind of clause allows parties to suspend or end a contract when unique and unforeseen events beyond their control occur.

Under the new sanctions, companies and individuals within the United States have until May 7 to divest or transfer any debt, equity or other holdings in Rusal. Rusal is controlled by Russian billionaire Oleg Deripaska, who has previously been investigated for money laundering, extortion, bribery and alleged links to organised crime groups.

Rio Tinto has a joint venture with Rusal that could be affected by the US sanctions.

The effect of force majeure

Typically, when unique or unforeseen events occur, the contract may be legally “frustrated” and end automatically. Frustration is the legal term for a contract being so radically affected by unforeseeable events outside the control of the parties that it is terminated.

A force majeure clause generally prevents this happening because the inclusion of the clause is regarded as “foresight” of the event. However, force majeure clauses typically allow parties to end the contract if the event lasts for a given time, and don’t always require “radical change” like the frustration doctrine does.

It all turns upon the wording of the particular clause in the Rio Tinto contracts.

Force majeure through history

A successful claim of force majeure was made in the American case of Eastern Airlines v McDonnell Douglas Corp. In this case aircraft manufacturer McDonnell Douglas argued that US government policy during the Vietnam War (occurring at the time) caused the government to prioritise military contracts over civilian ones.

As a result, McDonnell Douglas’s contract with Eastern Airlines was delayed. It invoked a force majeure clause covering “acts of government” to avoid liability for the airline’s lost profits.

The court ruled that McDonnell Douglas was entitled to rely upon the force majeure clause and walk away from the agreement due to the government’s policy.

Importantly, just because a contract has a force majeure clause, this does not mean it can be used freely. Some English cases suggest that parties must still make reasonable efforts to keep the contract alive before resorting to force majeure. Evidence of attempts to preserve its contracts with Rusal would likely work in Rio Tinto’s favour.

The courts have also stressed that force majeure cannot be relied upon where there were reasonable alternative ways to complete the contract.

In the Australian case of European Bank Ltd v Citibank Ltd, Citibank was unsuccessful in claiming force majeure when it transferred European Bank’s deposit to a New York account and the funds were seized by the United States Marshal. The force majeure clause allowed Citibank to escape liability if it could not perform due to “reasons beyond its reasonable control”.

The court held that Citibank could have refunded European Bank’s deposit from other accounts or made other arrangements, so the situation could have been avoided.

In Rio Tinto’s case, its efforts to make alternative arrangements will be of critical importance. If there are no feasible options other than to cancel the Rusal contracts, force majeure will likely apply.

When force majeure doesn’t work

But there are plenty of examples where force majeure events such as government intervention have not been regarded as sufficient grounds to end a contract.

In 1962, a court in the United Kingdom found that the closure of the Suez Canal was not sufficient to end a contract requiring 300 tonnes of Sudanese nuts to be shipped between Port Sudan and Hamburg.

The Suez Canal would have been the cheapest and fastest shipping route. However, it was still possible to deliver the nuts by sailing around the Cape of Good Hope, even if this increased the cost for the seller and took more time.

Inadequate wording in a force majeure clause can also backfire, as in the Kriti Rex case. Here a force majeure clause covering ‘“events beyond the control of the parties” was deemed inapplicable because the courier hired by the purchaser (which damaged the goods) was regarded as being within the purchaser’s control.

So what for Rio Tinto?

Ultimately, the success of Rio Tinto’s attempt to invoke force majeure depends entirely upon the wording of the clauses and whether these account for events such as sanctions being imposed.

But it is highly unlikely the clauses would be this specific as the circumstances are unique. Traditional inclusions in force majeure clauses are things like natural disasters, labour strikes or war, not a foreign government’s political sanction of a company’s controller.

Force majeure clauses are also interpreted quite narrowly by courts, so cannot just be stretched to cover every situation.

If the clauses in Rio’s contracts are deemed not to account for the US sanctions, Rio must rely on the doctrine of frustration. It would need to demonstrate that contracting with a company controlled by a Russian oligarch who has been subsequently sanctioned by the US was a reasonably unforeseeable event when the contract was made, and this event radically altered the contract.

It would not be enough for Rio Tinto to argue it might lose money or be inconvenienced. Though the US government’s actions might have been unexpected, the broader effects of Rusal’s suspension upon Rio Tinto’s operations remain to be seen.

The ConversationIf the consequences are purely financial or inconvenient, Rio Tinto’s legal mettle might be tested.

Mark Giancaspro, Lecturer in Law, University of Adelaide

This article was originally published on The Conversation. Read the original article.

Noosa’s Property Market Growth Continues

Noosa real estate market has continued to grow, thanks to limited land supply and increasing demand from international visitors and expats.

The median house price in the suburb grew by 6.2 per cent in 2017, just around $15,000 under Brisbane LGA’s median price.

In February, a record $22 million deal was made for a seven-bedroom beachfront estate at 21-23 Webb Road. Only two weeks earlier, Pat and Lara Rafter’s beachside mansion was sold for $18 million. In November, a property in Noosa’s north shore and another at Noosaville each sold for over $10 million.

Michelle van der Splinter, sales agent at Tom Offermann Real Estate said Noosa’s performance was at its best over this summer season.

“Wealthy sea-changers, those from interstate and overseas, make up nearly half of our interested buyers for top end houses along the beachfront and canals, and are adding to the strengthening market,” said van der Splinter.

Offermann himself said the tourist destination’s attraction reaches way beyond the local population. “Many think of it as a northern suburb of Sydney; even ‘Toorak in shorts’ for Melburnians,” he said. “But expats from London, Dubai, Hong Kong, Shanghai and Singapore have been very active in the past year.”

Real Estate Institute of Queensland CEO Antonia Mercorella said Noosa’s natural topography is what makes the property market both desirable and limited in supply. “Noosa’s world-class beaches, stunning natural bushland settings and wonderful warm community are factors that are fanning the flames of buyer demand,” said Mercorella.

“It is inevitable that this will push up prices.”

Do You Really Need Private Health Insurance? Here’s What You Need to Know Before Deciding

Sophie Lewis, UNSW and Karen Willis, La Trobe University

Every year at the end of March and early in April, the 11 million Australians who have private health insurance receive notification that premiums are increasing.

Premiums will increase by an average of 3.95% from April 1 and will vary with the insurer and the product. The increase is lower than previous years but still higher than any wage growth, leaving consumers wondering if they should give it up or downgrade to save money.


Read more:
Private health insurance premium increases explained in 14 charts


Why go private?

Australia has a universal health care system, Medicare. Health care is available to all and is financed, in part, through a 2% tax on our wages (the Medicare levy). Access to general practitioners and public hospitals are just some of the benefits.

The Commonwealth government encourages Australians to have private health insurance. It imposes penalties for not taking it out (paying more income tax: the Medicare levy surcharge) and offers incentives for those who do (rebates on premiums).

Some 45.8% of Australians have private health insurance, a rise from 31% in 1999.

Australians have different reasons for taking out private health insurance. For some, it makes financial sense to take out policies to avoid paying the Medicare levy surcharge.


Read more:
Explainer: why do Australians have private health insurance?


Others choose to take out policies to avoid waiting times for elective treatment (predominantly surgery); to choose their own specialist or hospital; or to have the option of a private room, better food or more attractive facilities.

Some people perceive that private health insurance will give them access to better care in the private system. Many are fearful they won’t get the services they need in the public system.

Shorter waits than the public system

A universal health system is based on people with the most clinical need gaining access to the services required.

Most emergency treatment is provided in public hospitals. The case is different for “non-urgent” or elective surgery, with patients encouraged to use their private health insurance, mainly because of waiting times for such surgery in the public system.

Elective surgery waiting times for public hospitals vary according to whether patients are publicly or privately funded. In 2015-2016, the median waiting time (the time within which 50% of all patients are admitted) was 42 days for public patients, 20 days for patients who used their private health insurance to fund their admission, and 16 days for those who self-funded their treatment.

Bear in mind, however, that waiting times vary according to clinical urgency. In 2016-17 in New South Wales, 98% of public patients were admitted within the clinically recommended time frame.

Differences in waiting times also vary according to the type of procedure. In 2015-2016, cardiothoracic (heart) surgery had a median waiting time of 18 days for public patients and 16 days for all other patients. In contrast, the median wait for public patients needing total knee replacement was 203 days, and 67 days for all other patients.

The question of choice

Choice of provider is a leading reason people take out private health insurance.

The idea that consumers should have choice in the services they receive has been promoted by government and private health insurance companies for some years, with great success. Many consumers now believe that more choice is better and private health insurance is an “enabler of choice”.

But do people really have choice? Choice is not equally distributed, and not everyone with private health insurance gets the choices they desire.


Read more:
Private health insurance and the illusion of choice


Private health insurers reserve the right to restrict benefits, or provide maximum benefits for using their “preferred providers”. This, in fact, limits the choices consumers can make.

A recent example of this is the announcement from Bupa that, from August 1, members will face higher out-of-pocket costs in private hospitals that don’t have a special relationship with the company, and some procedures will be excluded from particular policies.

Finding the best policy

If you decide to keep your private health insurance, make sure you’re getting the best deal on a policy that’s right for you. Shop around for a policy that meets your needs.

Take note of what is excluded. If you are thinking about starting a family, you may want to look at whether obstetrics care is covered. For those who are older, inclusions such as hip replacements and cataract removal may be more important.

The Australian government website PrivateHealth.gov.au or the Choice health insurance finder are good places to start. These include all registered health funds in Australia and allow you to compare what is covered in each policy.

Other “free” comparison sites may compare only some health funds and policies, or earn a fee per sale from insurers.


Read more:
Here’s what’s actually driving up health insurance premiums (hint: it’s not young people dropping off)


Before taking out extras cover, see whether you are better off to self-insure: setting aside money for if and when you need to pay for extras such as dental or optical care.

Review your policy each year and talk to your health insurance fund about your changing needs. Seek redress if something goes wrong.

If you need a procedure, find out the waiting period in the public system, rather than assuming it will be quicker in the private system. Check the out-of-pocket costs if you choose to use your private health insurance. Then you can assess whether the price tag is worth getting your surgery a few weeks earlier.

The Conversation* This article originally said more than half of Australians had private health insurance. This has now been corrected to 45.8%.

Sophie Lewis, Senior Research Fellow, Centre for Social Research in Health, UNSW and Karen Willis, Professor, Allied Health Research, Melbourne Health, LaTrobe University, La Trobe University

This article was originally published on The Conversation. Read the original article.

Should You Buy Off the Plan?

More off the plan houses and apartments are on the market today – but are they truly a good investment? We lay down the facts.

The Positives

The first off the plan properties to be released are usually offered at cheaper prices than the established ones, as the developers need cash fast to begin the project. This is great if you’re looking for a more competitive price and can afford to wait.

You can also use the time needed to finish building the property to reorganise your finances and moving out plans.

In some states and territories, you can also claim stamp duty concessions for the purchase of off the plan properties, as local governments are looking to support development of new residential buildings. There are also some tax deductions for investors.

The sooner you get involved in an off the plan transaction, the more likely it is that you can customise your property, such as the location, the floor plans and the finishes.

The Risks

Even with the most meticulous plan, the resulting product may be different from what you expected. The finish date can also be delayed, meaning that you may need to reschedule and change your plans.

Off the plan properties may not be the most profitable investment, too. According to BIS Oxford Economics, most off the plan buyers who resell in a few years are either facing loss or getting less capital gain than those who buy established properties.

Tips

Research the developer to evaluate their credibility and trustworthiness. Visit the site in person to see how living in the area will be like.

Always read the fine print and double check the contract. Things to look out for include the cooling off period, deposit, estimated completion time, defects, deposit and insurance.

Australia’s Housing Market is Worth $6.87 Trillion

Australia’s housing market is now valued at $6.87 trillion, according to the Australian Bureau of Statistics.

The ABS house price index found that the average Australian residential property prices increased by 1 per cent in the three months to December, gaining almost $93 billion. The average home price in Australia is now $686,700.

Despite this record number, the market is finally slowing down after years of growth. The national annual average gain of residential property prices in eight capital cities now stands at 5 per cent, down from 10.2 per cent rise in the year to June.

In the year to December 2017, Sydney property prices grew 3.8 per cent while Canberra rose 5.7 per cent, Melbourne 10.2 per cent and Hobart 13.1 per cent. The only capital experiencing decline was Darwin with 6.3 per cent year-on-year fall.

Flexible Working Hours Might Not Be So Beneficial

Flexible working hours has been championed as a way to give employees more work-life balance – however, a study found that it may not be very beneficial for workers and employers alike.

A new research from the University of Melbourne found that the ‘4/10’ arrangement, where workers do four ten-hour days per week, can actually be damaging to employee satisfaction. Around 35 per cent of surveyed workers reported low satisfaction levels.

“These kinds of arrangements can actually be damaging in some cases, with workers experiencing fatigue from the longer daily hours and working extra hours,” wrote researchers Edward Hyatt and Dr Erica Coslor.

“There are [also] other downsides of flexible work practices including social pressure to conform to more traditional roles at the same time as working a ‘flexible’ schedule, the propagation of negative stereotypes about less committed mothers, and assumptions about availability and ‘face time’ hampering promotion and development prospects.”

Hyatt said employers often apply the 4/10 arrangement in order to cut expenses on opening the office. “What they were trying to do was save money, especially on utilities,” Hyatt told the ABC. “We found out that they did save money but it was very marginal compared to what they were hoping for.”

To gain the most optimum result from compressed working week, the researchers suggest giving employees more true freedom to determine their work time.

“An example of a truly flexible work schedule might be one that allows employees to determine their work time around a core set of designated business hours,” the researchers wrote. “If everyone is working in a truly flexible manner, the stigma that can hamper careers or make women feel like they ‘have’ to be available no longer applies. And expectations around meeting times can be limited by only scheduling them during core hours.”