Markets power ahead despite US inflation data

This week on Talking Finance:

• Tom McIlroy, Federal Politics Reporter at the Australian Financial Review, takes us through yesterday’s extraordinary Senate hearing with Christine Holgate, the political ramifications for Scott Morrison, and how the nation’s vaccine rollout is progressing;
• Kyle Rodda, Market Analyst at IG, checks the pulse of global markets as Wall Street reached fresh record highs overnight despite higher than expected inflation numbers; 
• Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, checks in on Australia’s economic recovery and how JobKeeper ending will impact it; and
• Patrick Coghlan, CEO of CreditorWatch, talks through their latest Business Risk Review and how businesses are recovering from COVID.

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AG: Hello and welcome to Talking Finance, I’m Alex Gluyas, and there’s plenty happening on this week’s show, starting with a look at politics and, in particular, the extraordinary Senate inquiry in which Christine Holgate accused Scott Morrison of driving her out of her role as Australia Post chief executive and humiliating her, so we’ve got Tom McIlroy, Federal Politics Reporter at the Australian Financial Review, who has been closely keeping up to date with that. And markets seemed relatively unphased by the higher than forecast inflation numbers in the US overnight with the S&P 500 reaching a fresh record high, so for a look at that and markets generally, we’ve got Kyle Rodda, Market Analyst at IG.

For a look at the economy and what impact the end of JobKeeper is going to have, we’re talking to Shane Oliver who is the Chief Economist at AMP Capital, and then we’ve got Patrick Coghlan, the CEO of CreditorWatch, who takes us through their latest Business Risk Review which looks at how businesses are recovering from COVID and he’s very bullish on that.

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AG: And now for a look at Politics here’s Tom McIlroy, Federal Politics Reporter at the Australian Financial Review. Tom, it was an extraordinary senate inquiry yesterday with Chris Holgate effectively blaming Scott Morrison for driving her out of the Australia Post chief executive role and humiliating her. Holgate really seems to be taking a 'nothing to hide' approach here so what political ramifications do you think this will have on Scott Morrison?

TM: It will be interesting to see how Scott Morrison deals with it, it was pointed criticism from Christine Holgate, she places blame firmly with Scott Morrison and with the Chair of Australia Post Lucio Di Bartolomeo who was appointed by the Coalition. I think Scott Morrison will be able to brush it off, the company moved this week to announce Paul Graham as the new Chief Executive Officer starting later in the year so in some ways, I think the PM will probably treat this hearing as a sideshow, someone else’s concern. It will be interesting to see last week he described it as a matter for Australia Post and for the board, not for the government.

AG: Do you think he will need to respond to this at all or are you confident that he can just kind of, as you said, brush this off?

TM: I think he will be asked about it today, he should respond to it, the criticism I think in some quarters is that he overreacted, that news of the $20,000 spending on Cartier watches coincided with pressure on the government about the purchase of land for the new Western Sydney Airport, the so called Leppington Triangle as well as other spending controversies related to ASIC and of course the sports rorts affair. Scott Morrison went from zero to 100 in question time demanding that Christine Holgate stand aside or quit, that’s why she says she was bullied. I think it’s appropriate that the PM is asked about it and given the opportunity to respond.

It’s not every day that a leading business person and former CEO of a government-owned corporation accuses the PM of bullying and humiliation but Scott Morrison is adept at not dealing with questions he doesn’t want to answer at some length so to be blunt I wouldn’t be surprised if he tries to move on very quickly from it.

AG: Of course, the other pressure being faced by the Morrison government at the moment is the vaccine rollout and Morrison appeared on a Facebook video this week conceding that not all Australians will get their first dose by the end of the year and effectively dumping that October target date so do you think the frustration that currently exists about the slow vaccine rollout could potentially overtake the positive view the public had over the government’s initial handling of COVID?

TM: I think there’s a real risk of that. I think the government is acutely aware of that risk. Scott Morrison today is saying that the government is returning to a war footing on the vaccine rollout, he’s moving national cabinet meetings from once a month to twice a week which is quite an escalation. There are some state and federal tensions on the rollout as we have seen in the last couple of weeks with Premiers being pretty pointed in their criticism but I think the reality is if the rollout goes poorly, and at the moment you’d have to say that it is, that criticism will land with the federal government. It’s almost certainly pushed the prospect of an election this year totally out of favour into 2022 and I think the government genuinely wants people to be vaccinated as quickly as possible.

A lot of the economy remains shutdown or on hold, most Australians aren’t able to travel and plenty of people aren’t able to come home so it’s in everyone’s interest as well as in the government’s political interest for the vaccine rollout to pick up speed. I think that the supply issues are a real challenge and not just for Australia but for other countries around the world and once that supply picks up they will be able to add some speed to the rollout but it is going very slowly and the frustration that people in the community are feeling will only grow the longer it takes to hit some speed I think.

AG: How are you viewing federal politics then as a whole, Tom, I mean as you mentioned the election is probably going to be next year but do you think the last few scandals that Scott Morrison has been involved with could be enough for him to potentially lose the election?

TM: I think there’s always the potential for governments to lose elections. The challenge for Scott Morrison is winning another federal election after one that he was widely expected to lose last time. If he does win, this will take him into Howard-era territory in terms of four terms in government, that’s a big ask, but I don’t really think the settings for the next election are in place yet. Anthony Albanese is looking a bit stronger in opinion polls and starting to announce the policies and kind of move Labor closer to an election footing but as we have seen so many times, the factors that contribute to who wins and who loses, who’s up and who’s down during a campaign are so easily changed, so easily tipped on their head. If the election is more than a year away, and it could still be a year away, really there’s too many variables.

That being said god forbid another COVID outbreak in Australia or continued lack of speed and disorganisation with the vaccine rollout will frustrate people so that’s the thing I’m looking at. I don’t think Christine Holgate or Leppington Triangle, all those kinds of scandals, will move the needle very much but if people aren’t able to get back to some kind of pre-COVID normal by the time of the election that could hurt the government.

AG: Tom, thanks very much for your time.

TM: My pleasure, thank you for having me.

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AG: And now for a look at markets here is Kyle Rodda, Market Analyst at IG. Kyle, Wall Street mostly powered higher overnight with the S&P500 reaching a fresh record high and the Nasdaq higher despite a larger than forecast rise in inflation. How much do you think the market is reading into those US CPI numbers?

KR: Well it looks like the market is fairly comfortable with the inflation outlook at the moment, the argument might be that the real surge that is expected to come in terms of price pressures through the US economy over the next few months have more or less been discounted. Obviously, there’s two factors to these numbers anyway, there’s obviously the huge surge in demand because of stimulus and the reopening of the US economy and there’s also those base effects that are causing these numbers to be really high but for whatever reason, there were a few other dynamics at play last night in global markets that might have been responsible for the drop in bond yields but the inflation numbers were more or less shrugged off.

We saw yields decline pretty much across the board, the US 10 year treasury was down at around 1.6 per cent which seems like a pretty crucial level and this sort of rotation again back into sort of those growth names, like you said big tech and quite a narrow set of stocks as well in the S&P 500 drove the index to record highs so at least from the surface of things market seemed reasonably comfortable again with the inflation outlook and again the stability in yields is seen as sort of rotation back into growth over value.

AG: Are you viewing this bump in consumer prices as transitory and relatively short-lived then?

KR: Well, it’s interesting for me. I mean I look at what’s being implied in market pricing at the moment and there’s two things that really jump out to me, what’s being implied in breakeven or inflation swap curves and there’s also what’s being implied in futures markets for the federal funds rate. Now in terms of the former, you’re seeing a really big inversion at the moment in terms of that curve which implies that the markets were more or less expecting that the inflation bump that we’ll see over the sort of short to medium term will be fairly transitory like the Fed is suggesting.

I think what becomes a little bit more complicated is that the market is actually pricing in Fed rate hikes at some point around the end of 2022 to the start of 2023 so that sort of raises the question as to whether that inflation spike and the fact that inflation ought to come down in the longer term is actually because of Fed hikes, they’ll actually have to intervene in the market. I think it’s not really clear yet as to the way that the market actually sees this and how it’s going to affect risk assets, obviously stocks in particular. But for the time being, and I think especially with some concerns potentially that the Biden infrastructure package may be watered down a little bit and that the global economic recovery might be a little slower and a little bit more uneven than previously thought, that the markets are reasonably comfortable that we’re not going to get this kind of extra surge in inflation any time soon and that’s probably been supportive for market sentiment, we’ve seen volatility drop as well and those rate sensitive areas in the market like we spoke about off the top are seeing a bit of buying activity again because of those factors as well.

AG: And the US earnings season has kicked off so what are your expectations heading into that?

KR: Well, I mean it’s going to be a pretty bumper quarter, again it’s another one that’s going to have the benefit of base effects from coming off last year’s drop in earnings as the pandemic started to roll on in the United States at the end of Q1 but I mean if you look at Fact Set data, which is a pretty good indicator of sort of the consensus estimate as far as earnings growth goes you’re looking potentially across the S&P 500 of earnings growth of about 28 per cent and a lot of that is being led by some of those value sectors anyway that have outperformed over the quarter, your consumer discretionary and obviously those stocks are very sensitive to stimulus measures and direct payments to households but also the banks and the material sectors are expected to perform relatively well.

The markets are primed for a really bumper earnings season, it will be interesting to see if the markets or the companies can exceed the high bar set for them because unlike the last probably five or six quarters even preceding the pandemic analysts have come into earnings season with pretty low expectations and the bar was set pretty low. This time around things are very optimistic with the bar set fairly high so it will be interesting to see if companies can deliver on that and the continued talk about high valuations can go on without sort of too much questioning and the risk that a pull back in earnings or a disappointment in earnings can somehow undermine this kind of run higher in stock prices.

AG: It’s recently been those value and cyclical stocks which have been performing well so are you expecting to see outperformance from those types of companies to continue into earnings season?

KR: Well, again it will be sort of back to the previous question, is whether the bar is set a little bit too high for some of these companies and especially in terms of the financial spaces the speculation that maybe with profit growth expected to be quite extraordinary there especially amongst the banks, that it’s going to be a high bar to leap over. I think you’ll certainly see that those sectors will be the strongest performing ones. I think the question will be whether they do meet the expectations set for them because they’re so lofty. Overall, I think we’re still in the mindset overall that global markets are positioning for this cyclical uplift and areas of the market that are sensitive to that cyclical uplift like value stocks ought to perform well.

Again, almost like the standard bond yields at the moment, it’s about whether the market has priced in too much too soon and whether there’s sort of a more protracted recovery in front of us, a slower one, or whether this kind of bullishness that is sort of manifest in expectations can really continue to feed upon itself and expectations can be exceeded.

AG: Australia is in a situation where government stimulus and JobKeeper, in particular, played a role in driving markets higher has stopped but you’ve got the US and Europe which will have stimulus for a longer period of time so how do you think that will impact the future performance of the ASX when compared to international markets?

KR: I think as long as we continue to see a big upswing in global growth we’ll be fairly well-positioned. Naturally, the ASX200 relies so heavily on basically miners and banks to be able to do the heavy lifting for the index overall but if we still get this kind of pro-cyclical bend in global markets, that ought to be beneficial for the ASX200 but I think it will be fascinating to see how certain pockets of the market play out, especially as some of this stimulus is withdrawn. Overall though, the expectations are that it’s a speed bump that should be reasonably small and brief for the economy and the Australian stock market to get over the sort of withdrawal of some of the stimulus and some of that growth momentum is certainly continuing to drive Aussie fundamentals really strongly and that the economy overall is not so reliant on government support.

In fact, you could even argue that potentially that kind of handoff between the kind of public sector government-driven recovery to the private sector which will take over for the next leg of the recovery has already happened or is underway, so at the moment things look really good but obviously, we’ll have to stay sensitive to the data as it comes through because realistically JobKeeper only rolled off effectively in the middle of this month, the last payments went out in the middle of April so we’ll have to keep our ear to the ground with some of the data over the next few months just to get a read on whether that kind of handoff between government and the private sector has been done I guess effectively.

AG: Thanks for your time, Kyle.

KR: My pleasure.

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AG: And now, for a look at the economy, here’s Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital. Shane, the latest batch of Australian economic data suggests the recovery is gathering momentum with payroll jobs and total wages running above pre-COVID levels and consumer and business confidence remaining pretty strong, so what’s your take on where we’re at, at the moment?

SO: I think pretty strong is the right way to describe it. We have seen a run of strong data now for several months and the key message, I think, is that the economy has continued to recover quite strongly this year. That, in turn, is feeding through to very strong jobs data. Whether you look at the business surveys, such as the latest NAB survey or whether you look at job ads posted online or in traditional media, all those numbers are running at very, very high levels. In fact, some are running at record levels, suggesting that the jobs market is pretty strong.

Obviously, there’s uncertainties around coronavirus with the vaccine rollout and snap lockdowns periodically, but the general impression I get is that things are doing pretty well and that even though JobKeeper ended at the end of March and it’s too early to see any impact of that yet because we don’t have the April data for employment and won’t have that data for some time yet, the general impression I get is that, yes, some people may lose their jobs as a result of the end of JobKeeper but it’s going to be pretty minor.

I reckon maybe 70,000, perhaps 100,000 jobs at most, under the fact that job vacancy numbers are running so high, suggests that most of those should be able to find a new job pretty quickly. Overall, I think the economic indicators suggest the Australian economy is continuing to do pretty well.

AG: Do you think the issues the Federal Government is having with the vaccine rollout at the moment have the ability to slow down Australia’s economic recovery?

SO: It potentially could. I’ve got to be realistic here, I think we all need to be realistic here – only something like 5 per cent of Australians have got a dose of vaccine so far which is better than nothing, but it hasn’t played a big role in the reopening. The reopening has occurred because we’ve been able to reopen because we got coronavirus under control, that’s been the main factor. But there has been optimism about a vaccine and there has been an expectation that it will come along through the course of this year and that the original expectation was that by October, anyone who wanted to get a vaccine, at least the first dose, would’ve got one.

And of course, the vaccine rollout in Australia and globally is critical to reopening borders on a sustained basis. Obviously, those latitude things have been adversely affected by this, there may be a bit of an impact on confidence and there may be a further delay in the reopening of borders internationally, although I don’t think that’s just due to Australia, I think that’s issues globally as well. So, yes, it could impact things but I don’t think we should overstate it. Australians are actually benefitting from – well, I shouldn’t say this, but the Australian economy is benefitting from the closed borders to the extent that we tend to lose more from Australian tourists going overseas than foreign tourists coming here, that’s the norm, we run a trade deficit in tourism normally.

If you’re constraining Australians to having their holidays and doing their leisure-related spending in Australia, then it actually has boosted the economy. Obviously, there’s a negative impact on education, although that one will probably play out more over the longer term if this continues. So, in terms of tourism, yes, it’s bad news for tourist operators, but I don’t see it as bad news for the economy as a whole because Australians have simply spent more on Australian holidays or more likely spent more on other things such as more household goods or boats or whatever it is to fill up their leisure spending budget, so to speak.

In the great scheme of things, I don’t see it having a huge negative impact on the recovery, I think the recovery can continue. The other point to note is that the big risk with coronavirus was that you get a whole bunch of sick people who inundate our hospital system and therefore, you result in more deaths. But if you can inoculate all of those aged over 65, all of those who are potentially working with vulnerable people and obviously all people who are vulnerable and under the age groups, then a lot of that risk will go away. You can still reopen, there might still be coronavirus circulating through the community, but the risk of death goes down and the sort of big fear of last year that the hospital system gets inundated is removed.

To me, I think that’s critically important here and I think that can still occur even though there are these delays occurring. The other aspect we’ve got to bear in mind here is that all of these breakouts in coronavirus we’ve had since the middle of last year, in fact, all of them come from international travellers obviously, but all the problems we’ve had in the last six months have come out of the quarantine system. If you can keep coronavirus corralled in the quarantine system by inoculating all of those people working in it, whether they be doctors to security guards and also inoculating Australians when they’re returning home two weeks before they come here, then I think you could virtually eliminate that risk of having coronavirus escape into the community, which in turn eliminates the risk of snap lockdowns.

I think there are ways to manage this which won’t damage the economic recovery and therefore I think perhaps as a nation, we’re making too much of these delays. It’s interesting soap opera to some degree, it’s annoying that there’s been delays and so on, but this was never going to be smooth sailing. No one could predict that there might be issues with the AstraZeneca and Johnson & Johnson vaccine over the other vaccines, but that’s the way the cookie crumbled. It’s terrible and horrible, but by the same token we just have to make do with what we have and so far, Australia’s been doing pretty well.

AG: Just looking at things from a global sense then, international markets have been experiencing some very strong momentum. Could you give us a sense of what’s driving that in markets such as in Europe, the US, and Japan?

SO: I must admit, to some it might seem very confusing, we’ve got markets at record highs in the US, Japan had almost a 30-year high. We’ve got Europe which looks to be on the cusp of breaking out of the range it’s been stuck in for the last 20-plus years and the Aussie share market is coming up towards an all-time high, it’s a couple of hundred points away from an all-time high. That might seem somewhat confusing, but this whole rally, I guess, to some people has been confusing because markets started rallying more than a year ago, March the 23^rd. As is often the case, the share market looks forward, whereas most people are still looking backwards. What most people saw was a deep recession and high unemployment, so how the hell can the share market be going up? Well, that’s just the way the share market works, it anticipates better conditions ahead which is what it’s done.

The strength we’re seeing this year I think reflects a bunch of factors, particularly lately. Obviously, there’s still confidence that the vaccines will work. All the evidence suggests that they are effective and heading off deaths and hospitalisations and they substantially reduce the chance of getting coronavirus, so there’s optimism around that and of course the key market which drives sentiment so much is the US and the vaccine is being rolled out very quickly in the US, they’re running at over 3 million people a day, something like 79 per cent or 80 per cent of over 65-year-olds have been vaccinated which is good news for them. Having botched the initial phase regarding coronavirus, they seem to be on top of it in terms of the vaccination phase so that’s adding to confidence. In Europe, I think there’s confidence that, yes, they’re in lockdowns at the moment but coronavirus looks like it’s coming under control again in some countries. On top of that, the vaccine rollout is starting to accelerate in Europe.

We’ve seen more stimulus, obviously Joe Biden’s measures in the US, initially the market worried about causing overheating, now there seems to be more of a focus on it could cause higher bond yields, but it also causes higher earnings growth and on the earnings front the news has been very positive. We’ve seen good economic data globally whether it’s the US jobs numbers, the business surveys out of Europe and so on, that in turn is feeding through to higher earnings growth and earnings upgrades, so when you look at historical PEs they look pretty high. I think in the US it’s around 30 times, in Australia when I looked one measure had it at 59 times, but that’s reflecting the depressed earnings of a year ago.

Whereas if you look at earnings on a forward earnings basis for the next 12 months, consensus for the next 12 months, the PEs are a lot more reasonable, down in Australia around 18 times, in the US around 21 times. Bond yields are still pretty low, so those PEs are not unreasonable in the great scheme of things. All of those things are occurring and then you’ve got central banks which kept telling us that they’re going to remain dovish, they’re going to remain patient. Yes, there’s been a recovery, but we’ve got a lot of spare capacity. We saw what happened last decade, we got a recovery but we didn’t get much inflation so therefore, we don’t want to repeat the same mistakes of prematurely tightening monetary policy again.

All of those factors are helping share markets. I reckon there’s going to be rough patches along the way. Too early to say that the bond market taper tantrum is over given the ongoing rise in inflation in the US. But by the same token, the recovery and the strength in earnings suggest to me that by the time we get to the end of the year share markets will be quite a bit higher again. Just allow though, we are into the second 12 months of a cyclical bull market in shares, the second 12 months normally sees much more constrained returns than the first 12 months. When people look at it, they say, “Well, the share market was up 75 per cent in the first 12 months, Aussie shares were up over 50 per cent…” Just allow that it’s not going to continue at that pace, it’s going to be a lot more constrained over the subsequent 12 months and that’s the period we’re now in.

AG: Thanks, very much for your time, Shane.

SO: My pleasure, thank you.

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AG: And now, here’s Patrick Coghlan, CEO of CreditorWatch. Well, Patrick, CreditorWatch has just released its latest Business Risk Review which revealed that credit enquiries are at their highest level in 18 months. What does this tell us about how businesses are recovering from the COVID crisis?

PC: The way I’ve been explaining it, is where we find ourselves at the moment probably wasn’t on a best-case scenario playbook six months or 12 months ago, so we’re in a phenomenal position, the economy’s booming, the credit enquiries is a really good indicator that businesses out there performing checks on customers and obviously customers are applying for credit and all signs are very positive.

AG: There’s been plenty of positives including the higher than expected economic growth of 3.1 per cent in the December quarter and falling unemployment rate, but businesses are now having to deal with the ending of JobKeeper. Have you seen any early impacts from that or are they yet to take effect?

PC: They’re really yet to take effect. We’ve seen a couple of increases in administrations, January to Feb and then Feb to March. However, ultimately they’re still down 40 to 50 per cent compared to the same periods last year, so really, we haven’t seen any real indicators of economic stress which is to be expected because it takes time for businesses to really take stock of the fact that they don’t have access to JobKeeper anymore. They talk to an accountant or an advisor, eventually get referred to an administrator. That sort of thing can take four weeks at least as a minimum. We may see some little increases in payment times and payment defaults which is probably one of the indicators that the business risk review has flagged, but really, it’s still a bit too early for that.

AG: When do you think we will be able to get an accurate picture of the fallout from JobKeeper and when those administrations and payment defaults might start ticking up in a meaningful way?

PC: Look, I really think it’ll be late April we might start to see some indicators, but one of the challenges with April, as you know, with Easter and also school holidays, normal sort of transactions regardless of how you measure economic stress, are going to be down anyway because people are just not working as much. Late April, we’ll probably start to see something and then through May and June, particularly if we have no further lockdowns. I think you’ll start to see ASIC and the ATO probably gently ramp up their collections process as well.

Plus, you’ll just get normal creditors who go, “Look, the Australian economy is in a fantastic position…” They’ll be putting pressure on their debtors who they’ve been quite lenient with over the last 12 months to pay their bills in a timely fashion and if they don’t, that’s where we start to see CreditorWatch payment defaults, plus payment times and ultimately court actions and administrations.

AG: Are there any sectors in particular that you’re seeing increasing payment times as being a concern in?

PC: Yeah, definitely. The ones we see the biggest concern in would be construction, which is an interesting one because it’s performed really well for the last 12 months. It could be that Q1 coming out of December-Jan, obviously it’s a very slow time for construction and payments in general so we’ll be keeping a close eye on that. Healthcare still seems to be a real problem and that’s quite a unique one because you think that healthcare in the middle of a pandemic would be a really safe industry, but the fact is everything is very much COVID-focused. If you’re in the healthcare industry and you’re not related to or providing services that are related to COVID, you’ve actually been hit really hard – you think of surgeries that have been put on hold or turned off for months on end and plus, just the lack of focus on anyone doing anything outside of COVID has put a real dampener on that industry.

Of course, the other one to keep an eye on is always retail and hospitality. The reports we’re hearing and seeing is that those industries are certainly bouncing back which is really good and hopefully it’s sustainable even post JobKeeper, JobSeeker coming to an end.

AG: What’s the outlook there, Patrick? I mean, are you anticipating those three factors you look at, voluntary administrations, court cases and default numbers will continue to rise as the withdrawal of Government stimulus takes effect?

PC: Yes, but that’s not a negative, even though it sounds like a negative. As you can appreciate, we need to get back to or those indicators will ultimately get back to pre-COVID numbers. If they go back to pre-COVID numbers, you look at 2019, 2019 was a pretty positive and stable year. If those numbers go back to those 2019 numbers, that’s not a negative. However, the way it is going to be reported ultimately is that payment defaults, administrations, court actions are on the rise, that’s just the fact that we’ve been at all-time lows, down 40-50 per cent, sometimes even higher than that.

I’m really quite bullish, I think we’re in a phenomenal position and I think we’re going to see continued improvement, continued confidence come through from consumers and business for the rest of the year with obviously the asterisk at the end of that sentence being, as long as there are no significant breakouts and lockdowns, we’re looking really good.

AG: And just finally, what are the symptoms I guess that people should keep an eye out for that things might potentially be going badly? I know you’ve said you’re quite bullish on it, but in a worst case scenario, what would you kind of be looking out for?

PC: Sure. I think if you’re a creditor, you really need to have a good understanding of your customers, your debtors, what sort of position are they in. Have they continued to buy and pay their bills or have you had ones that have disappeared and then popped back up all of a sudden? You really need to be performing your due diligence on all your customers, regardless of whether you’ve been trading with them for a minute or 10 years, you really need to understand and appreciate that COVID has certainly affected a lot of companies out there. There’s probably three or four thousand out there that would normally have gone into administration in a normal year that haven’t, so they need to sort of wash through the system.

You need to still be certainly very, not paranoid obviously, but very cautious in how you approach your customers, keeping a close eye on their payments and also keeping a close eye on the credit limits that you’ve provided to them.

AG: Great to chat, Patrick, thanks very much for your time.

PC: No problem, thanks for having me.

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AG: Happy Birthday to Midnight Oil’s Peter Garrett, who turns 68 on Friday. Here’s a little of Beds Are Burning to celebrate.

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AG: That’s all from me – have a great week.

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