Welcome to Edition 94 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.

2019 starts with continued macro political and economic uncertainty, while closer to home we have the final report of the Financial Services Royal Commission expected in March and a federal election in May.  Coupled with moves by a number of our key regulators to adopt a much tougher approach to enforcement, 2019 seems set to be a challenging year for Directors to navigate.


1. AICD’s Director Sentiment Index for H2 2018. 

The AICD’s Director Sentiment Index for the second half of 2018 shows directors are generally upbeat about the outlook for the remainder of the financial year, with expectations for staffing levels, labour demand, investment levels and profits strong.   However, concerns about culture, regulation and director liability linger.  Directors consider energy policy, taxation reform, infrastructure, climate change and production growth should be the Federal Government’s top five short-term priorities.  Unsurprisingly, rising global protectionism is considered the biggest economic challenge facing Australian business followed by global economic uncertainty and energy policy. Expectations of credit availability in the future have also turned grim compared to the first half of 2018, with 31% of directors expecting credit for working capital purposes to be constrained.

2. ASIC report on allocations in equity capital transactions. 

Released 20 December 2018, ASIC Report 605 Allocation in Equity Transactions provides ASIC’s views on the conduct of Australian equity capital market (ECM) transactions following its review of market practice. This includes a number of “best practice” recommendations for lead managers as well as some for ASX-listed issuers (and those aspiring to be ASX-listed).  The guidance focuses on allocation processes and bookbuild messaging.  See G+T Insights article “ASIC’s report 605 — Allocations in equity capital transactions” for the report’s wider regulatory context and its relevance to boards of issuers in particular.                                                           

3. 2018-19 Mid-Year Economic and Fiscal Outlook confirms strength of Australian economy.  

According to the Government’s 2018-19 Mid-Year Economic and Fiscal Outlook (released on 17 December 2018): (i) the Budget is expected to reach a surplus of $4.1 billion in 2019-20; (ii) the underlying cash balance is forecast to improve from a $14.5 billion deficit at Budget to a $5.2 billion deficit in 2018-19; and (iii) net debt is expected to decline in each year of the forward estimates and medium term, decreasing from 18.2% of GDP in 2018-19 to 1.5% in 2028-29.  See the Government’s media release for more commentary.

4. Petroleum Resource Rent Tax (PRRT).

Of interest to Directors of oil and gas companies, earlier this month the Government completed consultation of exposure draft legislation and explanatory materials on changes to be introduced from 1 July 2019 which include lowering uplift rates (namely, changes to limit the scope for excessive compounding of deductions) and onshore projects being removed from the PPRT regime.  These measures are expected to raise $6 billion for the Commonwealth by 2028-29.  The Government will consult on other changes intended to improve PRRT efficiency and administration later this year.

5. Government commits $35 million to boost cartel and anti-competitive conduct enforcement action.  

The commitment to inject $35 million into the Australian Competition and Consumer Commission (ACCC) is expected to result in more cartel prosecutions and greater capacity for the ACCC to investigate competition issues.  A review will ensure the ACCC is appropriately funded to protect consumers and enhance competition nationally.

6. Government consults on two CCIV Bills.

The Government is consulting on two bills that implement the tax treatment and regulatory components of the Corporate Collective Investment Vehicle (CCIV) regime — with stakeholders now able to assess the complete package of reforms. The CIVV will allow Australian fund managers to market to participating Asian financial markets using a well-recognised corporate structure vehicle. Submissions can be made until 28 February 2019.  See the tax treatment and regulatory explanatory materials for more information.


Brexit chaos. The UK parliamentary chaos in recent weeks with the overwhelming rejection of Theresa May’s Brexit deal and the UK Government’s narrow survival of a no confidence vote had virtually no impact on markets - probably because the downside risk was already priced in.  The fact remains an abrupt or soft exit in March is likely to disrupt global financial centres.

US-China trade negotiations.  Face-to-face talks between the world’s two largest economies resume tomorrow.  Whether this next round of talks will lead to a real deal is uncertain, but the outcome will be significant particularly for trade-exposed economies such as Australia’s.

Submissions on 2019-2020 Budget priorities to be made by Friday.  You can make a submission here.