Welcome to Edition 119 of Boardroom Brief.
This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this Edition, we cover: (i) Government’s release of the APRA Capability Review; (ii) Treasury’s paper on wage growth in Australia; (iii) a rise in gold prices; (iv) pending announcement of new UK PM; and (v) last week’s dip in Australian share prices.
YOUR KEY BOARDROOM BRIEF
Government’s capability review urges overhaul of regulator. On 17 July 2019, the Government released its Capability Report and action plan for bolstering APRA’s capability to operate as a high quality prudential supervisor. The Report was prepared by a three-member expert panel, chaired by former ACCC chairman Graeme Samuel and charged with assessing on a forward-looking basis the regulator’s ability to respond to increasingly complex and emerging risks. The panel made 24 recommendations, 19 of which were directed at APRA, with improving culture and leadership central themes. The role of the Government in achieving the outcomes, including the need for additional resourcing, was recognised by the panel. APRA has confirmed its support for the findings. The Australian regulators have already shifted towards a more strategic and forceful use of communication to maximise their impact on regulated entities and Directors can expect that approach to continue. Click here for the regulator’s full response to the recommendations.
Treasury releases paper on wage growth in Australia. The Treasury has released a working paper suggesting that micro rather than macro issues might explain slow wage growth in Australia, which is supported by the slower and muted response of wages to improving labour market conditions in past cycles. The paper, possibly of interest to Directors following recent weak wage growth domestically and across a number of advanced economies, provides detailed analysis on the microeconomic factors at play and the role of declining labour market fluidity.
Gold prices rise after IMF declares US dollar over-valued. Last week, the IMF stated that the US dollar was overvalued by 6-12% based on near-term economic fundamentals. The prospect of a currency war — with the continual stream of headlines suggesting the Treasury and the US Federal Reserve will cross swords — has also pushed investors to the safe-haven commodity. Spot gold traded 0.3% higher at US$1,410.06 per ounce.
THE WEEK AHEAD
New UK Prime Minister to be confirmed today. The odds are hardening on a no deal exit from the EU as Boris Johnson looks set to win the Conservative leadership race. But how a new PM will find a way out of the Brexit nightmare is not clear — and parliamentary sitting breaks for summer this Thursday, leaving only 8 weeks until the deadline of 31 October.
Australian shares drop as unemployment remains steady. Last week, Australian shares closed lower after a flat unemployment figure (5.2%) had investors betting against another rate cut. While the RBA is likely to hold for the next few months to monitor developments in the labour market, a further rate cut later this year is still widely expected. The RBA next meets on 6 August.