SW’s Danny Armstrong and Nick Michael join an impressive line up of experts to share their insights about how to successfully operate in international markets.

The National Retail Association and BNPL giant Klarna are proud to introduce the NRXpo. Retail is constantly evolving to meet and surpass the changing needs of customers and our local communities. The pandemic accelerated digital and ecommerce trends, and now it’s time for us to put a future-focus on the industry.

​With 11 unique and insightful sessions, networking drinks and exhibition stalls, the NRXpo is an event designed to help retailers boost their business, gain key insights, and come away with valuable takeaways to build their plan for the future.

Event details

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Praxity Alliance

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Our experts from South Korea, Japan and India:

• Explore the latest in the Australian Wine landscape with Stuart Barclay, General Manager, Marketing at Wine Australia
• Discover the tastes, competitive landscape and export potential for Australian wines across South Korea, Japan and India
• Provide practical tips via Q&A to make your export diversification ideas your reality.

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Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

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David Chu, Head of International Business, recently joined Thomas Sung (host) on the SBS Radio Cantonese Program to discuss the Reserve Bank of Australia’s diagnosis of the Australian economy as well as the problems arising from the lifting of Hong Kong’s preferential tariff status by the United States. Listen to the podcast episode in Cantonese or read the transcript of his interview in English below.

English transcript:

Host: David, the Reserve Bank decided to keep the interest rate unchanged. Everyone knows this will happen, but what else did they say?

David: Before the meeting, economic experts had known that the RBA would keep the interest rate unchanged, because the RBA had said more than once that 0.25% was already the lowest they could afford. Unless something drastic happens, their decision will not change. So, economic experts have in turn switched their attention to what the RBA has said. When the Governor of the RBA announced his decision to keep the interest rate unchanged yesterday, he mentioned a few points. Firstly, the current Australian economy is indeed in a difficult period; secondly, the upside is that the consequences of the economic downturn may not be as bad as they initially expected; and thirdly, 600,000 people were being laid off in April, a large part of whom had their working hours reduced to zero. Household consumption is also quite weak, with many investment plans cancelled or postponed. However, they noted improvements in working hours in May, but overall the outlook remains very uncertain. They said the most important is how much confidence the general public has in the prospect at this current difficult time, which will have a direct impact on how well the Australian economy will recover in the future and how long such a recovery will take. Therefore, the RBA said they will make every effort to facilitate employment, improve personal finance and promote business finances, including maintaining low interest costs and sufficient market liquidity.

Host: In fact, the Reserve Bank has mentioned confidence more than once. There is virtually not much they can do. It is difficult to improve the economy through monetary policies.

David: They also mentioned before that by lowering the interest rate to 0.25%, they have almost exhausted their available measures. If the rate cannot be cut further, it would require quantitative easing and fiscal policies. The government may stimulate employment through tax reforms.

Host: I am aware that on Tuesday, Roy Morgan also published an Australian Consumer Confidence report. What does it say specifically?

David: Yes, Roy Morgan conducts a consumer confidence survey every week. They said last week’s consumer confidence index rose to 98.3%, an increase of about 5%, marking the 9^th straight week of increase. That means this index has rebounded and been rising for nine consecutive weeks since the sharp fall at the onset of the pandemic. Among the people they interviewed, 24% said their financial situation this year is better than last year; but 36% of the respondents said their financial situation is worse than a year ago. They also asked about the interviewees’ thoughts about the future, with 38% saying that they expect their economic conditions to be better at the same time next year; and 17% saying it will be worse than now. It seems the public’s confidence in consumption is gradually improving. It is now clear that after the government spent $200 billion, the situation seems to have improved slightly.

Host: We can see that many states in Australia are reopening. In fact, the economic atmosphere and economic activities have also increased significantly. I know you are currently in Hong Kong, so I wish to ask you some questions regarding Hong Kong now facing the lifting of its preferential tariff status by the United States. Now a week has passed, has everything been settled? What is the sentiment of the business community?

David: When Hong Kong announced the national security law at the time, a bit of shock followed in the market, and now the public is also waiting to see what the legislation will look like. Some people said that in fact, many developed countries in the world have similar national security laws. It is nothing special for Hong Kong to have one as a special administrative region of China. Of course, there are also people worrying about how this law will be implemented. Do they have confidence with this law? There is worry at this stage. The business community said that national security law will secure peace for the market so that everyone can conduct their business, which is not bad. Let us recall that it has been almost one year since last June, from social unrest to the pandemic. It has become very difficult to do business in Hong Kong. So, how much can the public can tolerate this? No one knows. To be frank, no one wants turmoil.

Host: An incidental issue is that there has been a recent rumour about Hong Kong dollars being decoupled from US dollars. The Hong Kong dollar has twice been targeted and attacked by foreign funds, but neither attack succeeded. Does this actually reflect the strong status of the Hong Kong dollar?

David: Yes, in fact the linking of the Hong Kong dollar to the US dollar does not require the approval of the US government. Everyone knows this now. Nonetheless, it remains unknown whether the US government will create a lot of trouble for Hong Kong. You see that in the current Sino-US controversies, from the trade war to the technology war, many economic experts also commented that a financial war is inevitable. As part of such a financial war, will the United States make trouble in Hong Kong, as the financial centre of China? This may have also been expected. For example, the Hong Kong Economic Journal quoted a BNP Paribas report that from 2010-2018, 73% of the overseas fund-raising of Chinese companies was done through Hong Kong, and 60% of bond issuance was done through Hong Kong. Therefore, Hong Kong holds a very important position to China. Earlier, you mentioned that foreign funds had twice failed in attempts to hit the Hong Kong dollar, and the reason lies in the mechanism of the link between the Hong Kong dollar and the US dollar. In other words, whenever someone from outside of Hong Kong exchanges US dollars for Hong Kong dollars, the Hong Kong government always meets the exchange. In turn, if you bring in Hong Kong dollars, the Hong Kong government can also exchange them for US dollars. The policy of the Hong Kong government is that every single Hong Kong dollar circulated is backed up by the corresponding US dollar. Technically, if you want to wrestle the Hong Kong dollar to the floor, you have to keep buying US dollars and selling Hong Kong dollars. The challenge will be a matter of whether Hong Kong actually has enough US dollars to cope with matching every single corresponding US dollar, unless you have other channels to secure sufficient Hong Kong dollars. Therefore, although foreign funds have twice attempted to short sell Hong Kong dollars, the Hong Kong government understands how much Hong Kong dollars are circulating in the market. The only option left for foreign funds is to borrow Hong Kong dollars for exchange settlement. Therefore, in the last two attacks, the HKMA raised the interest in borrowing Hong Kong dollars to 10-20%, resulting in the foreign funds spending a lot of money simply paying the interest. Their attacks were in vain. Therefore, the Hong Kong dollar should be relatively stable. However, if you want to start trouble, there is always a way. Since many companies do business or financing in US dollars, it will be another story as to whether there will be sufficient US dollars when repayment comes due. The Hong Kong government also signed an arrangement with the Chinese government some time ago, to ensure that if the Hong Kong government runs out of US dollars, the Chinese government will lend their US dollars to the Hong Kong government for settlement.

Host: Then we have to see if this financial war will really break out. It seems that everyone is now trying to find out about it. Okay, big thanks to Mr. David Chu, Head of International Business of ShineWing Australia, for his analysis of the RBA’s diagnosis of the Australian economy and the problems arising from the lifting of Hong Kong’s preferential tariff status by the United States. Thank you!

David: Thank you Thomas! Thanks everybody!

Get in touch

David is attuned to the Asian listed company market, international taxation issues, corporate regulations and various stock exchange requirements and is highly regarded in the market place. Reach out below to discuss how we can support your business during this challenging time.

The post Economic insights: Australia, Hong Kong and the U.S. appeared first on SW Accountants & Advisors.

David Chu, Head of International Business, recently joined Thomas Sung (host) on the SBS Radio Cantonese Program to discuss the current state of the Australian economy and what it’s future may look like. Listen to the podcast episode in Cantonese or read the transcript of his interview in English below.

English transcript:

Host: On Tuesday, both the Chairman of RBA and the Minister for Finance separately issued statements to the public on Australia’s financial policies. What exactly was said in the statements? How do they  feel about Australia’s economy? What is the reaction of the financial community? To answer these questions, we once again welcome Mr. David Chu, Head of International Business of ShineWing Australia, to share his analysis.

David: The RBA will keep the interest rate unchanged at 0.25%. In fact, this is within everyone’s expectations. Economic experts said that the change in interest has been determined, but the most important thing is to hear what the RBA Chairman says in his speech.

Host: So what exactly is disclosed?

David: Yes, the RBA Chairman was ‘cautiously optimistic’ in his statement. Economic experts also found that the Chairman was calmer this time than on the last two occasions. It seems that he also feels that the impact of the pandemic on the Australian economy has been alleviated, so their conclusion is that the Chairman believes the impact of the pandemic on Australia has almost reached its peak.

Host: This is a good thing. If the Reserve Bank does not add  more measures, it would mean that the current monetary policy is functioning.

David: You can say that again. At the same time, however, economic experts say that the RBA has almost exhausted its ammunitions, and the interest rate has fallen to such a low level of 0.25%, which is already right down the bottom. Australia and Europe are in different environments and it is impossible for the interest rate to go to negative figures in Australia. Therefore, the interest rate, as a tool, at 0.25% has already reached its limit. The Chairman also mentioned that they have another set of measures, which is quantitative easing.

Host: That is buying bonds.

David: The question is what kind of bonds to buy? Bonds also have credit ratings.

Host: Yes, yes.

David: In the past, if the RBA wanted to buy bonds, they could only buy A1 rating bonds for short-term ones, and now they can buy A3 rating bonds, which is a category of lower quality and higher risk. In the case of long-term bonds, the RBA would only buy the AAA rating bonds in the past, but now they have lowered it to BBB rating bonds. That  means, if further quantitative easing measures are used, the RBA will be willing to buy some lower-quality bonds to increase liquidity. This is not a bad thing, but after all it is hoped that liquidity can be maintained without buying that much.

Host: Many people say that in buying these bonds, the RBA is in fact helping some companies. Since in a very volatile situation, many people will sell their bonds, regardless of their grades, for cashing out. If your bond itself is rated low, plus in a very volatile situation, no one is willing to take over, and then there could be a crash, and once the crash happens the company may collapse. Is the RBA now trying to help these companies?

David: In fact, the RBA’s action this time is mainly to help some financial institutions, because these financial institutions and investors are the main buyers of the bonds issued by companies. If the financial institutions have got these bonds which have a lower liquidity, they cannot dispose them without a big loss. If the RBA buys them that will allow these financial institutions to get some liquidity back for further lending. That’s why it is mainly to help some financial institutions. As to what kinds of bonds they are (like you just asked), we would recall that the 2008 Financial Crisis was caused largely by some junk bonds collapse. Whoever was holding those bonds was in trouble. That led to a lot of financial losses in the market in that situation.

Host: Due to time constraints, let’s change the topic. The Treasurer attended a national press conference on Tuesday. The picture he portrayed for the Australian economy was pretty bad, right?

David: The Treasurer estimates that the unemployment rate will reach 10%. The figure released by the Australian Bureau of Statistics last time was only 5.2%, mainly because that 5.2% was based on statistics in early March. Now it will reach 10%. He said that if we did not have our own stimulus package in Australia and had instead followed Europe, our unemployment rate would have risen to 17%. Take this as giving credit to himself. However, others from the financial sector, such as ANZ Bank, believe that the unemployment rate may actually rise to 12-13%. As for the government’s stimulus packages, a total of $320 billion has been used, equivalent to 10% of GDP. Without these measures, if the economy would have continued to slump and Australia would have suffered $4 billion economic loss per week. Therefore, the Treasurer said that through these economic stimulus packages, Australia is managing to stabilise its economy, with the hope of a rebound after the pandemic. Let’s see how the situation will evolve. Economic experts have already begun to say that the pandemic is close to an end, and it is time to think about how to make the economy start again.

Host: Did the Treasurer say that once the economy starts again, what preparations we should make now, such as some forward-looking policy deployment?

David: They said there might be some measures coming out. Many economic experts have proposed many different strategies. It is like, for example, when a car does not start due to a faulty battery and you want to make it start again. You need to jump start it by connecting a cable to another battery. What are the specific measures or methods in consideration? In general, economic experts say that there are three most important points.

First is that there must be some measures to help SMEs, because SMEs are almost the driving force of the Australian economy. If they cannot start again, there will be an impact on the entire economy, especially employment. In terms of SMEs, the most important thing is to target the hardest hit industries, i.e., tourism, leisure, retail, restaurants, etc., to help them start again and hire new employees.

Second is that, as some economic experts suggest, to allow international students or foreigners holding short-term working visas to return as soon as possible. That is because, due to the pandemic, 300,000 people on short-term visas have now left Australia. If you think about the total population of Australia that is only 25 million, 300,000 comprise a relatively significant group. Some experts say that we may need to allow these people to return as soon as possible. In the first place, they will create consumption in Australia; second, we need to generate export income provided by foreign students for Australia. It amounts to tens of billions of dollars.

The third is, as some economic experts suggest, to take this opportunity to change the tax system. Despite so many investigations on tax reform, no substantial changes have been made. They also mentioned that, for example, when buying a house, we need to pay stamp duty. This stamp duty actually goes into the state government’s treasury, but economic experts suggested that the every dollar of stamp duty may have an adverse effect equivalent to eighty cents on the gross national product.

Another thing is the Australian corporate income tax. The corporate income tax rate is now 25%. Economic experts also say that every dollar of corporate income tax going to treasury will have a fifty-cent impact on the economy. So do these types of taxes, which have a greater impact on the economy, require some sort of reform? In their view, it is certainly impossible to simply cut taxes. After all, the government needs money to spend. They may consider starting with changes in GST, because this tax is only paid when something is bought. In this way, the reduction in stamp duty and corporate income tax can be compensated by an increase in GST. This provides more encouragement for people to engage. By making more money and paying less income taxes, they increase their after-tax income. If the local government receives less money from one source, it will make up for it from other sources. So there are different approaches, depending on what measures the government will take to get Australia’s economy back on track as soon as possible.

Host: Yes. David, you are a professional accountant. A lot of people are discussing one thing. Even when Australia is in a good economic condition, the reporting regulations, tax arrangements and accounting requirements are quite burdensome, making some companies spend a lot of money in compliance. What is your opinion on this?

David: Yes, the tax system in Australia is really complicated. The more the tax regulations, the higher the compliance reporting requirements. This has caused the public to spend a lot of energy and money on tax compliance. Therefore, business groups say they hope that the tax system can be simplified, so that the general public can save their energy for more constructive activities, such as doing more business or even spending time with their families. This is a good thing.

Host: Yes, yes. Big thanks to Mr. David Chu, Head of International Business of ShineWing Australia, for sharing with us his opinions on the Australian economy and the statements made by RBA and the Treasurer issued on Tuesday, as well as the forward-looking views of the financial community. Thank you!

David: Thank you Thomas! Thanks everybody.

Get in touch

David is attuned to the Asian listed company market, international taxation issues, corporate regulations and various stock exchange requirements and is highly regarded in the market place. Reach out below to discuss how we can support your business during this challenging time.

The post What can we expect from the Australian economy? appeared first on SW Accountants & Advisors.

David Chu, Head of International Business, recently joined Thomas Sung (host) on the SBS Radio Cantonese Program to discuss the current state of the property market in Australia following reports of an expected fall of up to 32%. Listen to the podcast episode in Cantonese or read the transcript of his interview in English below.

English transcript:

Host: After looking at the global securities market, let’s get back to the situation in Australia. The Commonwealth Bank said in its recent announcement that Australia’s property market may fall up to 32%. The news gave many a terrible fright on its release. Later, many analysts stepped out to provide their analyses with the belief that the Commonwealth Bank’s forecast seemed too conservative. What is the situation? We have David Chu, Head of International Business of ShineWing Australia, here today to share his opinions.

David: When the Commonwealth Bank mentioned real estate in the release of their annual results, they estimated that it will fall by 32%.  But if you look closely, you will find that they were mentioning 32% from March 2020 to March 2023. That is, it will fall by 32% in three years, not 32% in one year. It is definitely startling if you just see the headline.

Host: On what basis did they make such a guess?

David: They said if the pandemic led to the economic recession and the recession continues for a long time, that is what will happen. Nevertheless, be careful while listening, the expression they used is “prolonged crisis”, which was referring to what it will be like if the current situation continues. Their point of view is assuming the economic growth these several years, for example, in 2020 to be -6%, then an increase of 6% in 2021, with the unemployment rate of 8.25% in 2020, which will stay at 8% in 2023. They said if that is the case, the property market will fall by 32%. Some economic experts commented that this might be “the worst case scenario”.

Host: In that context, what would be a more balanced estimate? How will the property market develop? Will there be support?

David: Of course there are other economic experts who agreed that the Commonwealth Bank’s plan should be the worst case scenario. Some economic experts estimate the economic growth in 2020 to be a bit worse, -7.1%, but in 2021 it may come back with a rise of 0.3%. The unemployment rate will be 9% in 2020, 8.5% in 2021, and for 2022 and 2023 depending on how things evolve. With this in mind, home prices may only fall by 11% from 2020 to 2023. Some experts also said that as an investment tool, buying a home and leasing it out for rent is not really that bad, which gives at least 3-4% return, better than putting the money in the bank, which yields at most 1% interest. After all, the RBA interest rate is only 0.25%. Relatively speaking, the return on real estate investment should be good enough to support home prices, so some economic experts have a more optimistic view. Nonetheless, experts do agree that housing prices will fall, and it is just about how much it falls by.

Host: I know that experts have different opinions on home prices. What do they say?

David: Some experts believe that if the pandemic caused the economic recession, and if growth can be resumed as soon as possible, home prices should not fall by as much as 30% in three years. Experts from some other Big 4 banks said that only a 10% drop on average might take place over the next 12 months. UBS’s estimate is a drop by 10-20%, and Morgan Stanley believes it will drop by about 15%. AMP Capital is relatively pessimistic, saying that it may drop by 25%. Of course, these are all estimates by various institutions at such an early stage. As for whether it will fall by 32% in three years, this is of course based on some of the more conservative assumptions just mentioned.

Host: So during this pandemic, I know that some tenants have found themselves in difficulties. One report said that close to 10% of the tenants across the country asked landlords to reduce rents. I know that rent reduction has been voiced and demanded overseas, such as Hong Kong. I heard someone has made it happen. Is this common in Australia?

David: In fact, this is quite common in Australia, and it may have even been requested by more people in Australia than in Hong Kong. The main reason is the introduction of some regulations in Australia. Firstly, landlords of both residential and commercial buildings can’t evict tenants for these six months, because if you lose your job, it is naturally difficult to repay your mortgage and rent. On the payment of rent, some leases clearly stipulate that after two or three months of default in rent payment, the landlord can request termination of the lease and demand vacation of the property. The same is true for commercial properties. Therefore, the government issued a rule that tenants should not be evicted for six months. Second, if you have difficulty repaying your mortgage, you can also apply to the bank for deferring your repayment. On loans, the Commonwealth Bank also mentioned in their release of annual results last time that they received 140,000 applications on home mortgages and 70,000 applications on commercial loans. On personal loans, like credit cards, the Commonwealth Bank received 25,000 applications. The general public has also made requests to reduce their burden. Some of my friends lease out their shops and tenants are asking them for rent reductions. It depends on how their negotiations with the owners go. Some just don’t want to waste a large amount of time negotiating and go ahead to halve the rent; some say that the rent can be reduced, but in exchange for an extended lease, so that the loss will not be significant. So everyone deals with it their own way. Getting back to your question whether this is common, it is indeed more common in Australia than in other countries, and the situation may be much better than that of the United States.

Host: We also expect these measures to give some relief to the tenants who are now hit by the pandemic. We are very grateful to Mr. David Chu, Head of International Business of ShineWing Australia, for taking the time out of his busy schedule to share with us his analysis of whether proper prices in Australia will fall by 32% under this pandemic. Thank you!

David: Thank you Thomas! Thanks everybody.

Get in touch

David is attuned to the Asian listed company market, international taxation issues, corporate regulations and various stock exchange requirements and is highly regarded in the market place. Reach out below to discuss how we can support your business during this challenging time.

The post The impact of COVID-19 on Australia’s property market appeared first on SW Accountants & Advisors.