Jennifer Westacott, Michael Schneider and Frank Tudor interview with David Speers, Sky News08 August 2019
Event Jennifer Westacott, Michael Schneider and Frank Tudor interview with David Speers, Sky News
Speakers Jennifer Westacott, Michael Schneider and Frank Tudor
Date 8 August 2019
Topics Northern Australia, investment, trade tensions
David Speers, host: Well, Frank, Michael, Jennifer, very good afternoon. Thank you for joining us here in lovely Darwin. I want to get your thoughts first up about the big, I was going to say national but global issue at the moment, that’s this US, China trade war. We’ve seen the impact the on the Australian market, on markets right across the region, right around the world. Jennifer, how serious is this for the Australian economy?
Jennifer Westacott, Business Council chief executive: Look, it's very serious, a very delicate situation we have to navigate here. In the US we have our greatest friend, our strongest ally and our biggest investor. In China, we have our biggest trading partner. I mean the simple reality is we can't afford not to trade with China, but we can’t afford to do it at any cost. So, this is a very delicate balancing act. So, what do we do as a country? We should make ourselves more competitive. We've got to make our businesses stronger. We've got to make sure that our economy, we do whatever we can, that we can control. Because we won’t be able to control some this, but we can do stuff to make our businesses thrive better.
David: When you say we can’t control this-
Jennifer: We can't control what happens between the United States and China.
David: So, you don’t think our government should be putting more pressure on Donald Trump?
Jennifer: Well, we can exercise influence, but we're in a very delicate position here and some of this is going to play out and we're not going to be able to dictate the terms. What we can do is control what we can control, which is our own economy. And also places like here in Darwin, make them stronger. I mean, this is a strategic part of the country and we should be looking at it not just as a, as a city, as a capital city, but we should be looking at it as a very strategic part our national identity.
David: I want to come back to that. Michael Schneider you run the Bunnings Group in Australia, a lot of your stock I’m imagining comes from China, is that right?
Michael Schneider, Bunnings Group managing director: Yes essentially.
David: Right so, how much is this impacting on you at the moment, if at all?
Michael: It's very early days. We're watching with a lot of interest. I agree with some of the things that Jennifer's saying. I think from a business point of view, the main thing to stay focused on is to continue to do the right things by our customers and continue to look at opportunities to source products from other markets. But China is incredibly important. Great quality product, incredibly important relationship. So, watching it very closely.
David: Does it make the stock, you know, does it see the price of the stock become more volatile when we do see the currencies moving around, when we see tariffs going up and down?
Michael: At this point, no real impacts. But again, as I said, it is something that we’ll watch very closely in the months ahead.
David: What about you, Frank Tudor for Jemena – does this trade dispute and the flow on impact it has around the region affect your business?
Frank Tudor, Jemena managing director: I go to Jennifer's points, there are certain things that we can control. So, where I sit, my job is to actually deploy capital from our two shareholders, Singapore Power and State Grid. Do it in a way that is, responsible, that meets the requirements of the shareholders, that meets the requirements of the customers, the community and also engages our sort of workforce, our local workforce that we work with. We’ve got a great example of that recently that we delivered in the Northern Territory, with the Northern Gas Pipeline. So, a billion-dollar investment that would not otherwise have occurred without the smart deployment of that capital. So, that's what we continue to focus on.
David: As you mentioned one of your owners, you’re 60 per cent owner is State Grid of China. How did they view Australia at the moment and what is their interest at the moment? You mentioned there to distribute capital, when they see Australia, comments about China's activities in the region and so on. Is the appetite still there to invest heavily in Australia?
Frank: I think some of that would obviously play on the minds of many investors that are looking at Australia in terms of some of the things that are going on, but certainly from our shareholders point of view, they are energy companies first and foremost. They have a long-term view and they want to constructively contribute to building infrastructure, which a country so desperately requires to solve gas problems and the disruption we’re seeing in the energy industry more broadly.
David: So, the message from the three of you. when people look at trade this dispute and feel, you know, justifiably worried about it and arguably some on the market panicking a little as well, is the message that this obviously has to come to an end, but right now it's not particularly hurting, at least your individually businesses?
Frank: From my perspective we've seen this in the past where we've had in 2009 I think, a confluence of issues came together, caused a little bit of tension in the political relationship between China and Australia. And if there's one thing that happened through that period, investment and trade continued. There were big LNG projects and gas agreements that were signed with China, we'd like to continue that. That happens as we go through this as well.
David: And in terms of the trade relationship with China, we saw in this week’s trade surplus figures, record trade surplus means just how important that is, you know, it’s by far and away our largest trading partner. Do you think Australians, and the Australian government, are doing enough to maintain that relationship, grow that relationship, or do you get the sense that the Australian government is going to do what the US wants us and that's call out China more often?
Jennifer: I think you've got to separate people calling out things that are clearly problems and that’s not about taking orders from the United States. It's about protecting our sovereign interest and that's what Prime Ministers and Foreign Ministers are meant to do. But there's also a very clear understanding in the government, and you hear this time and time again, this is a balancing act. This is about us understanding that this is a huge part of our economy, a huge part of our future. And I think the government is walking a careful and constructive line on is this. And I think people would be unaware of what goes on behind the scenes at a bureaucratic level and an embassy level to maintain that relationship. You know, it's not in anyone's interest to not try and navigate between these two important parts of our economy and national identity.
David: Well, I mean the local example here too has been the Chinese investment in the port of Darwin. You would have seen a federal politician on the Labor side this week say, the government should seize control of it, they should nationalise it. The local mood here seems to be no, this is the sort of investment that’s necessary, what do you all think? Is that an example of where that balance needs to be struck?
Jennifer: Absolutely, I mean, let’s just forget who owns the port. The idea that we can say after a transaction has been done, look we’ve changed our mind, I mean that we'll just send sovereign risk shockwaves through the investment community. But I think people forget that we've got very good institutions. The Foreign Investment Review Board is a very careful organisation and we saw with the Huawei decision and the 5G network, a very clear view about Australia's national interest. We saw with AusGrid in the east coast, a very clear view about our national interest. So, I think we should have some confidence that our institutions work pretty well.
David: Well, let's turn to some of the local issues about growing this economy. The prospect of the Beetaloo gas basin being developed is, you know, the next big thing. The Northern Territory, I suppose, and this is a pretty important development for Jemena as well, Frank. Where is that at right now, the Territory government has shifted in the moratorium on fracking here, so how far away are we from really seeing development at that basin?
Frank: So, we have two very credible players, Origin and Santos that are working in that basin at the moment. They're going through proving development concepts, the productivity, the economics of extraction, which is really important. If they’re successful in doing that we'd expect them to scale up, and what we've already done working very closely with a number of companies, including PwC from the Northern Territory, is build the first leg of a pipeline that’s going to enable that gas to flow to the east coast. So, there’s two more legs of that that need to be built. And if the resource is big enough then I think it could also come back into Darwin and add to value adding industries here in Darwin as well.
David: But the talk is that there is enough gas there to supply the entire east coast market for, I forget the number of years. But we're talking about a substantial basin there, however, this is not the easiest place to access, is it?
Frank: Certainly, there are lots of difficulties, the difficulty of distance is a big, big issue. So, there's a lot that can be done. And, it started effectively with a trip that was made from here, a delegation went to the US to have a look at how it’s being exploited there. They’re probably 10 to 15 years ahead. It gives us a sense of the infrastructure, the community engagement that was involved in getting them to the point that they’re at. So, we should be taking the lessons back and starting the pre-investment to make sure that you can gradually build, as Santos and Origin and others are successful in putting up the development concepts. So, we have the broad base of community involved, we have the infrastructure being built both to Darwin and the east coast.
David: Can you guys do that alone? I remember in the election campaign, Bill Shorten was talking about using the Northern Australia Infrastructure Facility to finance some of this gas pipeline, to get the gas from here to the east coast. Will that be necessary?
Frank: So that would be helpful, I think encouragement from the government to almost set this up as policy, would be certainly important to recognise it as a nation building project, a Territory building project-
David: And put federal funds into it?
Frank: And federal funds would always be welcome. I think it's beyond any one company. So, everybody will play their part, the developers and the producers, the transporters, ourselves, the local community, they play a very big part in actually servicing and you know, developing the project and looking after it in its operating phase. So, it really is a nation building project.
David: Let's turn to retail, for Bunnings here you have three stores in the Northern Territory, often and I'm sure you get this often, there’s a view that while we all go to Bunnings, we all also complain, you know, what about the old corner store hardware shop, or garden nursery, all the stores that you've replaced. How does the arrival of Bunnings in a local area impact on that area?
Michael: Bunnings has been in the Northern Territory for a long time and we're really excited by the opportunities for growth and some of the things that Frank and Jennifer have talked about around infrastructure investment are fantastic for the service industry in general, they’re fantastic for consumers. And I think they draw investment from business to the market, both local business and business from around the country. And that in itself helps stimulate competition. I think that's the most important thing because creating that value for your consumer is really what the focus, certainly at Bunnings has always been about. And we've found throughout Australia and New Zealand where we operate, when we arrive in a market it tends to stimulate competition. There is a very competitive market outside of the format that we predominately operate. Particularly independent players and some of the other chain businesses that operate. So we sort of see this really sort of intense competitive ecosystem. And, you know, we have to compete just as hard as everyone else. But we are very optimistic about this particular market. We've got a $50 million investment in a new warehouse that comes online to replace our Palmerston warehouse next year. And we also create significant employment opportunities to 350 Northern Territorians, you know, call Bunnings home from an employment point of view. And that's providing a lot of support for families in the community as well.
David: You guys have not been an early mover when it comes to online retail, you’ve very much been, you know the bricks and mortar, or the big warehouses, as everyone knows. But you are now starting to make a move into online, what’s it called, click and collect?
Michael: Yeah, click and collect.
David: So is this going to be the future, are we going to see continued warehouse expansion or is this now a new direction? Are we likely to see less or the big Bunnings warehouses?
Michael: I think it's a combination of best of both, David. I think it's really about customer saying, we’d like a little bit more convenience. The rollout is well underway, we’ve got the Tasmanian and Victorian network up and running. The Territory goes online early October, which will be fantastic for this market, not only the Northern Territory but the islands to the north as well, which is really exciting for us. And I think you know, alongside the sort of convenience of the format, the warehouse format and our small stores as well, we really get nice and close to the customer. That convenience whether you're doing things around the home or you’ve got a project or you're running a small business, is so important.
David: Yeah, I'm sure you don't want to lose the customers like me who go in to buy one thing and end up walking out with a dozen other things.
Michael: We love, absolutely.
Jennifer: Don’t underestimate how much people do that online, though. If the site is good-
David: That’s true, guilty.
Jennifer: And you start clicking through and you think, I want one of those, don’t underestimate the same kind of consumption psyche applies in the online space.
David: Generally, you know we talked a little about US, China trade, but the Australian economy at the moment, you’re pretty exposed to how the economy is going, as to how your business is going to go, I mean how would you describe it at the moment?
Michael: I think it’s a mixed economy, I think different markets perform at different points in time and we certainly see that. I think everyone has seen that for a long time that Western Australian market's been a really challenging one. There's lots of talk, in NSW and Victoria about the housing market, but the thing that we've always talked about, not only the resilience of the Bunnings model but we’re exposed to the trade as well as the consumer side, but also the habit as Aussies that we tend to have around, if we're not buying or we’re renovating, so we sort of see our way through that cycle reasonably well.