Business Now | 9 October

0:00I just want the city to work the way that Angelino's wanted to, the way that they vote it to. You know, you have to have heart, especially Los Angeles. Eight and a half months pregnant, Nipi has said, I want in homelessness and Los Angeles. When she first ran, she took on every power in the city. Urban planner, Nipi Aramit, receives the most votes in council history. They didn't stand a chance. She is the ultimate hop cider. She cannot be bought off. She's not sure if running a male politician, she does every single part of the job. Street homelessness cut 49% in her district. Strongest tenant protections in 40 years. That is this year. On San Flos, I will work my heart out for you. To end homelessness and end the affordability crisis, we can have streetlights that work. Hot holes that are paved. I will protect renters every single day. We can build housing again. City Hall should be for sale. We deserve a city that works.

1:00This is business now with Edward Boyd. Hi and welcome to Business Now. Thanks for your company today. I'm Edward Boyd. Coming up on the program. The firmest management team, Paul's its proposed $44 billion dollar IPO this morning and are now reportedly planning to list on the Nasdaq in the US. We've got full coverage with Carl Roder in just a second. The federal government inquiry into artificial intelligence wrapped up today will recap some of the key events, including the appearance by OpenAI with David Kean, the chief executive of scx.ai in just a minute. Plus, rents across Australia's search to a record high in the September quarter, capital cities driving the growth. Louis Christopher from SQM Research will join us a bit later in the show. That's all coming up on today's program. Other stories today you should know about the Australian Taxation Officers' Decision to Ban Credit Card Payments from the 1st of December has been delayed until June next year after the Albanese government intervened,

2:00following a massive backlash from the business sector. Treasure Jim Charm is his allocated additional funding to the ATO to help cover the cost of credit card payments until June 30, 2027. The ATO announced the unpopular credit card ban last week, following the Reserve Bank of Australia's decision to ban card surchargers, which took effect on the 1st of October. After some serious pushback from the business sector, the treasurer was forced to intervene. So we've stepped in here to provide the necessary funding to ensure that the ATO can continue to take credit card payments until the end of the financial year. We take very seriously the feedback that the ATO and the government have received when it comes to implementing this surcharge ban. Let's see how the markets finished up for the day. Local market, it lifted this morning most sectors in the green, tech stocks, retailers and utilities for the top performers, Telco slumped, AS6200 finished the day,

3:02at up about 0.6%. Pension and life insurance provider generation developed was a pretty strong performer today. LaVisa bounced back after being the worst performer yesterday, gaming maker Light and Wonder Up as well, along with two of the big tech stocks, Wise Tech Global and Zero. Other gaiders included the furniture retailer, Templar Webster, family tracking app, Life360, the fund manager, Magellan, which is going to be rebranded to Baron Joe in pretty soon, plus the Binaural Pay Later service zip, and building materials maker, James Hardy, up about 3.1%. Lithia Miners took a tumble led by PLS Group and Liantown. Property manager, Somerset Group down as well, the Uranium Miners all plunged today, led by Paladin, and the metal recycler sims off about 3.3%. Well, a firmist, technology's management team was forced to pull its IPO this morning after receiving a weaker than expected response from investors. Firmist was targeting a valuation of almost $44 billion,

4:05which would have made it the biggest initial public offering in Australia since Telstra in 1997. Now, it's reportedly looking to list on America's NASDAQ index at some point next year, so what went wrong? Let's bring in here, Carl Roder, senior financial market analyst at capital.com. Carl, we were chatting about this a week ago. The high valuation seems like a lot of investors agreed. What did you make of this IPO being pulled at the last minute? Well, I think it just ultimately shows that investors weren't buying what the company was effectively selling, or at least at the price that it was effectively selling at four. And as a result, this is a combination of factors, maybe some cracks in the AI trade, maybe a bit of a reflection of the difficulty in listing on the Australian stock exchange. But underneath it all is doubts about the company's ability to deliver upon its promises, and effectively worth what it says that it's worth, and that as a result, there simply wasn't for demand there for the stock at that price for the company to raise the capital that it was looking for.

5:07Yeah, it looks like they've said publicly now they're going to pursue private funding on the private markets. Now, potentially followed by an IPO in America next year on the NASDAQ, but you mentioned the ASX. How big a blow is this for them? Because they were obviously hoping they'll attract capital right now. It is somewhat of a blow, and I think one of the reasons why there was so much excitement around this listing is that we've had a dearth of them over the last few years, and especially companies that are tied to this very strong automatic artificial intelligence. But this isn't a problem necessarily unique to the ASX either. The London Stock Exchange has had very significant issues with attracting IPOs, markets across Europe too, and everything going to almost your point before seems to be happening in the United States, where capital markets are very, very deep. There's a lot of money going around, a lot of people willing to take risks, especially on companies like these. And as a result, everyone else has kind of been left behind. So it is a little bit of a blow, not necessarily in the ASX, but it does show the kind of, again, opportunities that local investors are being deprived of from not being able to participate and get involved in this.

6:11These really big, exciting IPOs. Do you think the NASDAQ could potentially be a better fit for firmness? Is the investor market there more sort of geared into the tech sector and big technology plays like this with a lot of growth potential? I mean, all else being equal, obviously, the company is probably going to be able to attract more capital and a higher valuation than what would. Seems like every California homeowner knows someone whose insurance has been canceled. That's where Kin comes in. Kin can help with flexible coverage across all 58 California counties and policy options tailored to the risks you face where you live, including wildfire, wind, and severe weather conditions. CY California homeowners are turning to Kin at kin.com slash podcast. That's k-i-n dot com forward slash podcast. Kin refers to Kin distributor insurance services, a licensed California surplus lines broker. Coverage is placed with an insurer that is not licensed or regulated by the California Insurance Commissioner. And by the wise on the ASX, the next question though is, of course, will it be the $32 million US dollars that it was valuing itself?

7:12That was, you know, more or less trying to sort of price its shares at. And is that going to be achievable achievable for that company? There are still doubts about that. I think ultimately the concern from investors about the company's fund. It was around execution risk. It was generating $50 million a year. It was running a loss as far as its P&L is concerned. It was only running sort of five percent of its capacity now. And a lot of the capital that it was looking to raise to be able to grow. And justify the valuation that it was looking for. You know, it was very much behind this guy investors were starting to get a bit nervous that effectively that their money wasn't safe in this investment. So yes, that we better off probably listing on the NASDAQ because of just the market structure. But it doesn't necessarily assuage all the fears about the company fundamentals that led investors to pull back this week. But then you look more broadly at technology sector in America. You've still got a lot of big companies that are looking to list specifically anthropic, which could be joining the market before Christmas. Yes. And I mean, that'll be another canary in the coal mine potentially.

8:12A lot of people have tried to turn this firm historians of perhaps being canary in the coal mine as well. And that's about the overall AI trade and perhaps some concern about the ROI on artificial intelligence. I don't think that is true. I think if you're looking across the markets, the moment we're still seeing incredible enthusiasm for artificial intelligence companies right across the supply chain. And that the next big test will be what happens with anthropic open AI as well, which has obviously been in the last 24 hours. So if you really do look at sentiment towards those companies and those potential listings, it remains incredibly strong in those businesses, not a lot stronger too. So it's quite justified. So the hype still there, for us, was unable to capitalize on it. I think that's why I was listing now at one to two. But overall the space to remain through robust as far as sentiment is concerned. Carl Rottler, thanks for coming on the show. Thank you. The parliamentary inquiry into artificial intelligence. It finished up today after holding four days of hearings this week. The most significant group to give evidence was the tech giant open AI that we've just been talking about, which sent its chief strategy officer Jason Kwan.

9:18He spoke on Tuesday where he apologized for open AI's recent hacks into Aussie government websites. But today, the big guest was CDC data centers, which recently scrapped its multi-billion dollar deal with firmest to build a series of data centers with the company. The chief strategy officer of CDC explaining why they walked away from that deal. Our arrangements with firmest have begun when their focus was a lot more on Australia and creating sovereign AI capability in Australia. Their business model has then since evolved. And probably the most blunt way of putting it is we have a very clear business model and a very clear mission for our company. And when things start diverging significantly from that, we continue to follow our commission. So to cover the inquiry in AI, I'm joined by David Keem, the chief executive of SCX.ai.

10:18David, thanks for joining me for something. We've got to start with firmest. Do you think it's affecting any sentiment more broadly across the technology sector? Or is it isolated or? Look, I think from the AI industry point of view, what we're seeing is that AI continues to be a technology that all Australians are embracing. Whether it's business, whether it's their personal life and even in government. We're seeing AI have a potential to change the way our economy operates and our people live their lives. But at the same time, we need to find deals that are appropriately set up to be economically and environmentally viable. I think from the industry point of view, what we would feel is that, look, the ASX remains a viable location for high growth AI companies. I think many in the industry feel that the ASX can continue to lead that on a global basis. Maybe that particular deal wasn't the right fit. But I don't see it actually impacting confidence of investors in the fundamental proposition behind AI. Yeah, you obviously listed on the ASX pretty racially. What were the things benefiting you to... why did you want to join the ASX?

11:19Well, I think what we felt was the ASX gave access to capital, but it also brought the AI opportunity to investors who often have been squeezed out. If you think about what we just heard about firmest pursuing private capital and then potentially a US listing next year, what that kind of does is exclude Australian investors from the opportunity. Now, they can make their own decisions about the value of that opportunity, but it just takes that away from them being able to pursue it as they find it fits their investment hypothesis. So we believe that certainly for us, ASX was a great place to list. Now, of course, we believe as well that sovereign AI is important for Australia. And if we're going to do that, we have to walk the walk. We have to bring that opportunity to Australians, be listed on the ASX, ensure that everything we do with AI doesn't just run here in Australia, but it's under Australian law. And I thought in the inquiry, we heard a lot of commentaries, Senator Pocock, particularly very vocal, about we need AI that services Australia with guarantees over sovereignty, governance and management of our information.

12:19Yeah, the term sovereign AI was mentioned a lot this week. Do you know how much of your business is managed under Australian sort of sovereign control? Well, we set up our business for exactly that. We're going to ensure viewers here, that's what we do. We ensure that their information runs here, it stays here and is governed under Australian law. And that's what we think is very important for building the success of AI in Australia. Now, we know that many Australians will continue to use foreign providers, and that's totally fine. And they should have access to the very best technology that they can use where it fits. But a lot of Australians are very concerned about what happens to their information with AI. And I talk to people every day, and the concern they have is, gee, they're sending their most sensitive information overseas just to use basic AI. And we need to change that. And that was the very mission behind SCX. The apology from open AI is Jason Kwan, this is what actually sent him in person. I mean, how big a step do you think that was to send a message? I think it was important. I think it reassures Australians that the AI community does care about what happens, and is trying to do its very best.

13:24I think my view is that the challenge we had with the Medicare hack was more a problem of architecture, rather than a problem of notification. Folks that have watched that story have heard about the months of delay before people were notified of that potential hack. I think if we focus on delivering AI onshore under Australian law, we never have to be concerned with those delays and those structures. Let's build the architecture right from the beginning for sovereign AI, and we can benefit all Australians. Yeah, the Prime Minister was in New York a couple of weeks ago trying to put global guardrails around AI. How does Australia stack up when it comes to trying to regulate the artificial intelligence beast? There's a lot of talk about that, particularly in the US now. We had some interesting discussions from the President there about what he sees we should be thinking about with this technology. I think Australia is trying its best to find its way through. We want to remain open to foreign direct investment. We want big capability here so our companies and our citizens can make the most of AI. But I think people have been heard now. They want AI that understands and protects their sovereignty, but also their environment.

14:27And we're hearing that everywhere. People need to use AI, but they need to use it in a governed, regulated appropriately without too much regulation, but the right level of regulation. But that also understands the concerns that everyday Australians have about energy and water. And I think that's something I'm hearing a lot. We need to build efficient, effective AI that understands how Australians will use it. Do you think that message is getting through to the government? I think slowly, I think people are still uncertain a little bit because there's still a lot of learning going on in the AI community. I think the government's trying to grasp it and understand where they can play a role in actually helping Australians to improve their lives with AI. I think we're kind of crossed the line now. And I think people understand that they're not going to walk back from AI. They're going to need it to make their business work better and to make their lives be better. But it's got to be done in an appropriate way. David Kenchief, Executive S, the next day, thanks for coming on the show. Thank you for having me. After the break, rents soared to record highs in September with capital cities driving the increases. We'll chat property with Louis Christopher next.

15:30Welcome back. We've been 5.5% in the past year to a new record high of $675 per week across Australia. Now that's the latest data from the RIA Group rental report, which shows that capital cities have been driving this growth nationally. So to discuss rents in the housing market, let's bring in here. Louis Christopher, Managing Director of FSU Research. Louis, great to see you. Is your data telling a roughly similar story? That's a close to record highs, but the pace of rental increases is slowing down a bit. Absolutely, our data is also showing a bit of a slowdown. And so we've got our data through to last week. And I can tear that slowdown scene to what occurred beyond the September court into October so far. Now we need to keep in mind that the slowdown could be seasonal. So typically you see a bit of a low in the rental market during the winter months. Then it picks up again during the spring and early summer months. And we may well still see that pick up, but it is interesting that the annual numbers also showing a slowdown.

16:36So the pick up if we are to get one over the next few weeks looks like a won't be as strong as what we had this time last year. So yeah, most interesting with the rental market. Yes, we've hit new highs, but the rate of growth does appear to be slowing somewhat. Are there any cities that might be at more significant risk of a big pick up over the next couple of months as we get into that some period? Sydney tends to see that pick up more than most other cities. Brisbane does as well. So they would be the two cities to keep the iron melt Melbourne also generally does see a bit of a pick up during the latest spring and summer months. So we're watching it very closely right now if there is a city that's still growing very quickly, that is Darwin. So we've got Darwin rents up in the double digits for the last 12 months. And I think RIA showed the same thing as well. And when we look at the city of Darwin, that's been a city that's been better than you a lot from higher energy prices, particularly gas prices, which that local economy has a major exposure to.

17:42So, but the rest of the cities know we've been recording a little bit of a slide down, which is interesting and probably a little bit unexpected. I think the expectation was after the property taxation changes, bought in by the federal government, or announced by the federal government, we would see a knee jerk reaction in the rental market from landlords. Well, we really haven't seen it yet. Yeah, I was going to ask you about regional areas if they're performing any better than the sort of more capital cities on the coast, but you say Darwin's good. Is there anywhere else that's doing reasonably well anywhere that's actually got exposure to commodity prices and energy prices. So we're seeing an ongoing pickup in rent in, for example, Western Australian mining towns, but standard agricultural areas, holiday coastal regions. We're not really seeing much of a pickup, but goal codes, for example, of anything we're recording just a flat rental market in terms of rental growth. So it does depend on which region we are discussing.

18:45RIA Group showing vacancy rates about 1.5%. What's your data saying at the moment? How are vacancy rates going? Yeah, we're pretty close. I just want the city to work the way that Angelinos wanted to, the way that they vote it to. You know, you have to have heart, especially in Los Angeles. 8.5 months pregnant, Nipi has said, I want in homelessness and Los Angeles. When she first ran, she took on every power in the city. Urban planner, Nipi Aramit, receives the most votes in council history. They didn't stand a chance. She is the ultimate hopseller. She cannot be bought off. So she's not your run-of-the-mill politician. She does every single part of your job. Street homelessness cut 49% in her district. Strongest tenant protections in 40 years. That is this year. In San bliss, I will work my heart out for you. To end homelessness and end the affordability crisis, we can have streetlights that work. Hot holes that are paved. I will protect renters every single day.

19:46We can build housing again. City Hall should be for sale. We deserve a city that works. We have the number of 1.3%. So, both on their number and our number, that is showing a very tight vacancy market. The thing is, I would argue that perhaps what the renters are showing is that a lot of that tightness is becoming increasingly priced into the rental market. And we are getting to the point where tenants cannot, they physically cannot afford to pay anymore. So they are responding in the rental market by sharing more, living with their parents for a longer period of time. And so that means that housing formations probably being slowing down with these elevated rents. You mentioned the federal budget and the tax changes. We all thought that would cause investors to flee the market, not buy as many properties. But is it really not having too much of an impact on rents? Not so far. Now that's not to say it won't. It still may.

20:47Now, let's consider this is the year where it's been announced, but it doesn't really come into full effect until next year. So on the ground, there's been not much change other than the announcement itself. And then landlords are changing their behaviour. But as mentioned before, so far we haven't seen that knee jerk reaction. But no, we're not ruling out that we will see a change or an acceleration of rents due to the property taxation changes. So we're just simply pointing out how it hasn't happened as yet. Louis Christopher, thanks for coming on the show. Thank you. After break, we've got our weekly property segment where we show you the top properties go to auction this weekend in a special Lux listing in Queensland. Welcome back. There are 2,062 auctions scheduled across Australia this week. Sydney will hold about 700 Melbourne, also about 700 Brisbane, about 190, Adelaide about 150 and Canberra 66.

21:49Take a look at the most viewed properties going to auction this weekend and in New South Wales, the address is 28A Greenway Parade Reefsby, asking price 1.2 million. The top property in Victoria is 824 Tennyson Street, Lwood. This art deco apartment has two beds plus either a third or study, asking price up to 960. The top property in Queensland is 220 avalanche-sheldon. This 25 acre property has an established four bedroom home plus the former residents which are not allowed to live in. The top property in South Australia is 59 Windsor Avenue Woodville Park. This four bedroom looks like a classic sandstone Adelaide residents from the front and a huge cathedral-like mansion from the back. The top property in Canberra is 7 Pedrail Place Dunlop. This large four bedders right on the edge of the ACT New South Wales border, asking price about 980,000. The most viewed property on the RAA Group website this week is not the glamorous looking mansions we're used to showing you. The address is 777 Road, Road, Curmside, West.

22:54Now this is a cost of living focus special. The property has five bedroom home plus a two bedroom granny flat. It's brand new. The agents are talking it up as a home three generations of the family can all live in to save money. It sits on 700 square metres. OK, it's time for our special Lux listing segment of the week. The address for this one is 6 Entrance Island, Boca-Rena, Queensland. I hope I pronounced that right. Let's bring in here the agents selling the property Michael Stack from Stacking Co property consultants. Michael just talk us through some of the features of this home. Well, thanks for having me and what an exceptional opportunity that is available in this market. A gated island community. You just don't see that on the Sunshine Coast. You think Sunshine Coast, you think Beachfront, you think Waterfront, you think fingers and sand and toes on the beach, but this property gives an exclusive opportunity for 17 residents. The blocks are all 2000 square metres, so just under half an acre and the home itself is just over 700 square metres under roof. So again, just following on from your last segment, multi generational living is certainly suitable for this. This home has six bathrooms, five bedrooms and every obviously bedroom is on-sweeted, but the lifestyle is exclusive. It's 800 metres to the beach.

24:16Boca-Rena, as you know, if you've been researching the Sunshine Coast is about to go through a bubble of expansion with the new life rail, the Boca-Rena train station will be literally 500 metres from this house. And you've got all the new infrastructure, the Olympic infrastructure improvements to the Coana water and aquatic centre are all at the footsteps and just across the lake. Fantastic, Michael Stack from Stacking Co property consultants. Thanks for coming on the program. Thank you. And that's all for today's show. Thanks so much for your company. Now it's time for the Bond report with Caleb Bond.