Thursday, June 04, 2020

Race to shore up La Trobe University as cash crisis bites

La Trobe University has over 30,000 students

La Trobe University is at risk of going broke in a matter of weeks unless it secures a financial lifeline from the banks and an agreement from staff to cut wages.

La Trobe's cash reserves have been reduced to the minimum required to meet a single month's operating expenses as it grapples with the loss of overseas students because of the coronavirus crisis, which has wiped $16 billion from Australia's university sector.

Vice-chancellor John Dewar, in a briefing to staff on Tuesday, said the university had “no money tucked down the back of the sofa’’ and that unless they agreed to a 10 per cent salary reduction, La Trobe would resort to forced redundancies.

La Trobe sources told The Age that ANZ bank had declined to extend by $100 million an unsecured credit facility it holds with the university and that the university had already sold $29 million in shares to find more cash.

Professor Dewar denied the university had been unsuccessful in securing credit and said negotiations were continuing with the banks. As part of these negotiations, “the banks are interested to see actions around balancing our books over time'', he said.

Asked whether the university was at risk of insolvency, Professor Dewar said: “The actions we are taking are about setting up the ongoing financial sustainability of the university.’’

The university’s chief financial officer, Mike Smith, told staff in a 90-minute webinar that La Trobe was facing a revenue slump of $400 million to $520 million between now and the end of 2021. To date, only $207 million in savings had been found to fill the anticipated funding hole, he said.

Mr Smith said that in the absence of the proposed wage reduction, 450 positions would be made redundant.

La Trobe’s 2019 calendar accounts tabled in Parliament on Tuesday showed that before the pandemic interrupted the international student market, the university’s finances were already deteriorating.

Last year’s trading surplus of $19.4 million was down from $30 million recorded the previous year, and $75 million in borrowings for new student accommodation had trebled the debt-to-equity ratio.

A quarter of the university’s 2019 revenue came from overseas students.

Hannah Robert, a law lecturer who helped organise a Monday-night meeting of staff to discuss the university’s financial predicament, said the situation was difficult.

“The picture the CFO paints is dire. "I have been on boards before and if there is uncertainty over whether you will have cash reserves for a month's operational expenditure that is really scary.

“But I don't think it is fair to ask ordinary staff to carry so much of the losses through pay cuts.

"The fact that the federal government is hanging universities out to dry like this when we are the biggest service export industry in the country, it is just unbelievable. You have got a serious prospect of universities going under.”

Ms Robert said there was anger in Tuesday’s meeting at the refusal of university management to entertain larger salary cuts for executives. Professor Dewar has accepted a 20 per cent cut. He was last year paid between $970,000 and $980,000.

La Trobe staff have already rejected one offer under the Australian University Jobs Protection Framework, a variation to the university’s enterprise bargaining agreement negotiated with the National Tertiary Education Union.

Under a revised offer, staff would receive a sliding pay cut, depending on their classification, reduce annual leave to 10 days and receive no pay increases until 2022. There would be involuntary redundancies in “very limited circumstances.’’

NTEU members will vote on the proposal this week and non-union members next week, with the result to be known on June 17, subject to Fair Work approval.

Universities have received no federal government financial assistance to weather the COVID-19 fallout and cannot access the JobKeeper scheme. The umbrella group Universities Australia said new four-year modelling showed that universities were facing a combined revenue loss of up to $4.8 billion in 2020 and, at worst, a $16 billion hit by 2023.

In his address to staff, Professor Dewar quoted from a Melbourne University research paper showing that of all Australian universities, La Trobe and the University of Canberra were at greatest risk from the drop-off in international students.

“La Trobe is one of the two most financially vulnerable universities in this group,’’ said Centre for the Study of Higher Education honorary fellows Ian Marshman and Frank Larkins. “Its available reserves are not sufficient to cover any of the predicted loss situations.’’

Higher education expert Andrew Norton, of the Australian National University, said La Trobe was in a “wobbly situation’’ before the pandemic because it was struggling to attract domestic students and had lost prospective students to free TAFE courses.

Professor Norton raised the possibility of a federal government bailout, saying there was provision in the Higher Education Funding Act for the Commonwealth to advance money to universities against future years' grants. He also suggested the Victorian government could become a guarantor on the university’s loans, to ease the concerns of banks.

Professor Dewar said the university’s problems would not be fixed by the banks alone. “The banks are willing to lend to us and we are pursuing additional debt. However, this would be a short-term loan; borrowing in the longer term is not the solution to the financial situation we face.”


Paper bags are back

Woolworths shoppers across the country will now be able to carry out their groceries in paper bags for the first time in four decades.

From today, all Woolies stores will offer customers the option of a paper bag option alongside reusable carry bags.

The old-school bags are being rolled out after a successful trial in 20 stores late last year and to meet increased demand from customers for easily recyclable bag options.

In decades gone by, paper bags were a common sight in Australian supermarkets, but they haven’t been widely available in most stores for around 40 years.

The new bags are made from 70 per cent recycled paper and will be sold for 20 cents each, while Woolies’ existing reusable plastic bags, foldable bags and Bag for Good options will also still be available at the checkout.

They will be able to hold up to 6kg of grocery items per bag, and are made from responsibly sourced paper certified by the Forest Stewardship Council.

There are plans to offer the paper bags to online customers for home delivery and pick-up in the future.

Woolworths Supermarkets managing director Claire Peters said the bags were already proving to be a hit with shoppers. “While the vast majority of our customers bring their own bags, we know customers sometimes drop by a store unplanned or can forget their bags when they’re on the run,” Ms Peters said.

“For some time, customers have told us they’d like the option of a strong paper bag option, so we’re pleased to now offer that choice at our checkouts, alongside our existing reusable plastic bags.

“These paper bags resonated really well with customers when we trialled them in 20 stores last year and we expect to see a positive response from the customers who’ve been asking for this option nationwide.”

Meanwhile, each Bag for Good costs 99 cents but can be replaced free of charge if it is damaged, no matter when it was purchased.

The proceeds from those bag sales go to the Woolworths Junior Landcare Grants program.

Woolies’ reusable bags cost 15 cents each, are made from at least 80 per cent recycled plastics and can be returned to the store, along with other soft plastics, for recycling in REDcycle bins.

And in another major bag shake-up, shoppers will have an eco-friendly alternative for holding their fruit and veg, with reusable nylon plastic bags launching today.

They will cost $4 for a three-pack, are compatible with Woolies checkout scales and can be found in the fresh produce section at all Woolworths Metros and selected Woolies stores.

Woolworths began phasing out single-use plastic shopping bags in 2018, and the company claims since then, more than six billion of them have been removed from circulation, with just 15 per cent of customers now purchasing new bags when doing their grocery shop.


Quad bikes now effectively banned by onerous safety regulations

A blow to the farming sector

Honda announced it would stop selling quad bikes in Australia from October next year because of the Federal Government standards, which require all quad bikes to be fitted with rollover protection at point of sale by October 2021.

Earlier this year, Polaris and Yamaha said they would also stop selling quad bikes in Australia if the regulation did not change.

The Government introduced the new regulations last year in response to an ACCC report outlining the risk of quad bikes rolling over and crushing riders.

Under the rules, by October this year quad bikes will also have to come with a warning sticker about the degree of slope at which they overturn.

ACCC deputy chair Mick Keogh said the decision by the three major manufacturers was unfortunate.

"We had to look at the safety of these vehicles, the continuing deaths that are occurring, and the injuries and take whatever steps that were practically useful in reducing those," Mr Keogh said.

The ACCC said nine people had died in quad bike and side-by-side related accidents in Australia so far this year, including two deaths in Central Victoria last month.

In a statement, Honda said the Australian Government standards could not be met by any quad bike in the market today.

"It's unlikely to be met by anything in the future and forces Honda to exit the ATV [all-terrain vehicle] category," Honda said.

But Mr Keogh said that did not accord with conversations the ACCC has had with the market.

"We've been advised by a number of manufacturers that they do not have any perceived difficulties associated with meeting the requirements of the standard, so what manufacturers do is up to them," Mr Keogh said.

Honda has been critical of the standards since they were announced last year arguing mandatory helmets, rider training, and banning children under 16 from riding adult bikes would be more effective.

Mr Keogh said that although helmets and training were important, the ACCC report found good evidence that rollover protection saved lives.

"We conducted a very detailed examination, including using expert advice from engineers … and looking in great detail at the statistics associated with fatalities on quad bikes," Mr Keogh said.

"By far the biggest issue from our observation was the fact that these vehicles were inherently unstable, and even very experienced riders that just happened to have that one unfortunate situation seemed to be over-represented in fatalities."

Mr Keogh said there had been no fatalities associated with bikes fitted with rollover protection.

In a statement made earlier this year, Polaris said it would be transitioning to the side-by-side market due to a decreasing demand for quad bikes.

Mr Keogh said that while there was some evidence that side-by-side bikes were less likely to tip over they were still dangerous.

A side-by-side farm vehicle can carry two people

The Victorian Automobile Chamber of Commerce (VACC) has raised concerns that motorbike dealers in regional areas would not be adequately compensated for losing one of their biggest-selling items.

"A lot of their business revolves around the sale of [quad bikes]," VACC motorcycle industry division manager Michael McKenna said.

"At the moment we are seeing really good sales in those products. But … we know it to be farmers and dealers stocking up on these products because they will become more and more scarce as we move forward."

Mr McKenna said dealership owners had bought or built businesses based on quad bikes adding significantly to their business model.

However, he said they were concerned side-by-side vehicles, touted as the replacement product for quad bikes, would not bring in the same amount of income.

Mr McKenna predicted they would sell fewer units as side-by-side vehicles were more expensive than quad bikes.

"We may see a bit of an upsurge initially because farmers have had a good season. But again, [dealers] are only one bad season away from the breadline. And they've been there for quite a while."


Australia's great recession escapes

Australia has escaped a technical recession three times during a 29-year run of growth and avoided it 20 times since GDP figures were first tracked in 1960.

A technical recession, defined as two consecutive quarters of negative economic growth, is being forecast by all the big four bank economists, who have factored in a negative June quarter from the COVID-19 restrictions.

However, there are some who expect Australia can replicate the luck – or good economic management – it had in December 2000, during the dotcom crash; December 2008, during the global financial crisis; and March 2011, as a result of the Queensland floods.

Deutsche Bank chief economist Philip O'donaghoe is expecting a 0.1 per cent growth figure in the March quarter, which would bring up Australia's 21st escape from technical recession.

"I don't think the 20 times we escaped recession is just luck," he said. "It's good economic management and governments and banks being in a good financial position."

The last negative quarter in 2011 was due to the weather, but avoiding a recession during the financial crisis was purely down to economic management.

"The stimulus package in the first quarter of 2009 after a negative quarter in December 2008 was entirely designed to ensure a positive March quarter," Mr O'donaghoe said.

He said the Morrison government has had less time to respond to the shock of COVID-19 than the Rudd government had for the GFC.

In 2000, the shock of the dotcom crash and the introduction of the GST sent economic growth in the September quarter slumping to just 0.2 per cent, before the December quarter registered -0.4 per cent.

But before that there hadn't been a negative quarter of growth since the country's last recession of 1991, where the June and September quarters took a -1.3 per cent and -0.1 per cent hit respectively.

During the 1980s, there was a smattering of negative quarters - in 1989 there was a one-off -0.3 per cent hit in the December quarter, while in 1985 the December quarter took a -0.3 per cent hit, and in June 1986 a -0.2 per cent hit. But none of them ended up in recession.

In March 1974 - widely regarded as the end of the oil embargo, which led to oil prices rising 400 per cent - Australia's March quarter flatlined at 0.0 per cent, and was followed up with a 0.2 per cent decline in the June quarter. But at 0.0 per cent economists do not consider that part of a technical recession.

"If we get a zero in the March quarter this time, we will be saying we have avoided a technical recession," Mr O'donoghoe said.

Bank of America is another of the five economists - out of 24 - forecasting a positive number in March.


 Posted by John J. Ray (M.A.; Ph.D.).    For a daily critique of Leftist activities,  see DISSECTING LEFTISM.  To keep up with attacks on free speech see Tongue Tied. Also, don't forget your daily roundup  of pro-environment but anti-Greenie  news and commentary at GREENIE WATCH .  Email me  here

1 comment:

Paul said...

LaTrobe University was always a centre-of-excellence for producing middle-class female communists with depression and daddy issues.