"I view our robotics as extending human capability in a way that allows us more efficiency, the automation that we add really doesn't eliminate jobs, it just makes the jobs at our fulfilment centres more efficient and redirects employees to more sophisticated tasks" Tye Brady, Chief Technologist – Amazon Robotics
As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.
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Domestic Interest Rates
"The last increase in the cash rate was more than seven years ago, so an increase will come as a shock to some people. But it is worth remembering that the most likely scenario in which interest rates are increasing is one in which the economy is strengthening and income growth is also picking up” Philip Lowe, Governor, RBA
Australian Economy
"What we are now seeing is corporates, the middle market and the sustainable larger employers, saying “I have repaired my balance sheet, and I now am going to make some investments”. And for the first time in a long time, we have started to see that trickle into credit growth. I am feeling better this time this year than I have for a long time, as it relates to not just confidence but actually businesses putting their money where their mouth is” David Lindberg, CEO, Westpac Business Bank
US Economy
“I believe that many people underestimate the possibility of higher inflation and wages, which means they might be underestimating the chance that the Federal Reserve may have to raise rates faster than we all think” Jamie Dimon, CEO, JPMorgan
US Housing
“The housing market has been strong and it is continuing to strengthen. There is a general sense of optimism in the market as jobs have been created, the labour participation rate is increasing and wages are higher. The low unemployment rate and the labour shortage are driving wage growth which, on the one hand, has added to our construction costs, but on the other hand, has expanded our customer base” Stuart Miller, CEO, Lennar Corporation
Renewables
“We are seeing increased activity in the renewable energy market in Western Australia” Paul Dalgleish, MD and CEO, RCR Tomlinson
Banking
“There is an opportunity for supermarket banks to be very successful" Benny Higgins, Chairman, Kyckr
Mortgage Broking
"Let's be clear: brokers deliver enormous economic value to the banks, and now some big banks want customers to pay for it. This is like asking a home buyer to pay the auctioneer and vendor's selling costs" Mike Felton, CEO, Mortgage & Finance Association of Australia
"If a consumer-based fee for service is introduced, customers will not just face new broker charges, but higher interest rates as the big four banks would then be permitted to restore their lost interest margins" Mike Felton, CEO, Mortgage & Finance Association of Australia
Superfund Governance
"It's early days but we'll be looking at some of the advice that's provided within super across a range of different super funds" Peter Kell, Deputy Chairman, ASIC
"We're still seeing, at times, quite poor quality advice around life insurance. We're still seeing firms without adequate compliance and advice or legal systems" Peter Kell, Deputy Chairman, ASIC
Insurance
“At a macro perspective the Australian economy continues to grow. The conditions in the Australian insurance market are good. We are seeing continued system growth and we are keeping pace with the market across personal and commercial insurance. We are seeing rates harden” Mark Milliner, CEO, IAG Australia
“In personal lines of insurance, home products are seeing increases of around 3% and for motor products around 5%. In commercial classes we are seeing rate increases of at least 5%” Mark Milliner, CEO, IAG Australia
Telecommunications
"The government, through the NBN, is effectively nationalising fixed-line broadband and, retailers buy from the NBN at the same price. Where you’ve got retailers buying a product from a government utility for the same price, the retailer who can market the most efficiently should win in the long term" David Shafer, Executive Director, Kogan
Agriculture
“We have a pinch point coming. We need to find new sources and ways to get the supply [of malt barley] up so we can make sure malt production is good to meet demand from the beer market, and effectively priced” Mark Palmquist, MD, GrainCorp
“There’s quite an attraction to peanuts in the short term, especially with sugar returns barely making cane worth the effort, but if sugar prices don’t lift more, the country will go to Macadamias and other horticulture options” Jason Loeskow, Cane Grower
Sustainability
“I tell our shareholders you have to accept that we are in a society, where we have to deliver to society as well. Accept a little bit less ROE but make sure you are sustainable, that's the key” Steven Koseff, CEO, Investec
Thank you for reading.
Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.
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