The Australian’s CEO Survey 2024: Safety Culture, Santos to Zip Co
The Australian surveyed the nation’s top CEOs about inflation, energy and opportunities ahead in 2024. From Safety Culture, Santos and Zip Co. These are their full responses.
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The Australian surveyed the chief executives of the country’s largest companies. We asked their views on inflation, energy, industrial relations, and all the issues and opportunities for their businesses in 2024.
Safety Culture, Luke Anear
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The fundamentals haven’t changed, save more than you spend both in business and in your personal life. Interest rates will go up and down, and businesses need to manage their cash to make it through any winter.
SafetyCulture has a global customer base spread across most industries, and as a low-cost platform that improves efficiency and productivity, when times are tough, we see these customers using more of SafetyCulture, not less. In saying that, we saw the use of our products in some industries, like travel and on cruise ships, fall to zero during the pandemic, but we are now seeing customer numbers well above pre-Covid levels.
It’s like the world stopped for two years, took a breath and is now running faster than ever. There is more capital than ever in the system, and it’s looking for a home. The fundamentals haven’t changed, and I predict that businesses that obsess over the customer experience will continue to grow regardless of interest rate movements.
■ How would you rate the shape of the Australian economy as we head into the New Year?
Consumer spending in Australia has slowed, but people still make money when the cost of capital increases. The key is to be in a position to be able to buy when everyone is selling. You want to buy in a buyer’s market, not when everyone else is buying. Too often, people are following the masses and not looking for opportunities that aren’t so obvious. Mortgage stress is going to keep rising, and it will be several years till the full impact of foreclosures is fully realised.
My advice to my team is always to minimise your debt, even if that means you have to wait for your dream home for a few extra years because it will give you much more buying power. I was putting my daughters through school around 2010 after the GFC as a single parent, and I can remember my debit card being declined when I tried to buy ice cream for my daughters one afternoon. We had no money, and ever since then, I’ve made it my goal to avoid debt. I am 46 years old, and I only bought my first brand-new car this year, which was a small VW. The discipline I use in business also serves me in my personal life, and when interest rates rise, I’m ready for the opportunities that come.
Labour markets are still tight and people are looking for higher incomes because their cost of living has increased. At the same time, businesses are reducing overheads, so if employees are willing to offset income with equity, I think that’s where they will find greater rewards in the long run. Great businesses are built in lean times, so companies that can attract top talent and give them the opportunity to do the best work of their lives area the ones who will thrive.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Australia has a small population, so we need to make it easier for people to immigrate and start businesses. Our economy has benefited from decades of immigration, and we need to encourage more companies to base themselves here, particularly when it comes to high-value manufacturing.
In many cases, we’re exporting our raw materials around the world, so that someone else can turn them into a product, and we then buy them back at a premium. I believe we need to leverage technology and automation to be a world leader in manufacturing, and part of that ‘brains trust’ needs to come from removing the red tape that makes moving to Australia so difficult.
AI is a hot topic at the moment. We need to encourage it to be open-sourced so that anyone can work with it. The most successful open-source software is Linux, which is the software we use in all of our phones and what our computers are built from. Just like any tool, AI can be used for good or for bad. Over time technology has, by and large, improved humanity, and I believe AI is no different. In the future, every student will have access to an AI tutor who will be patient and answer any questions they have.
Every doctor will have an AI assistant that will help them read X-rays and diagnose illnesses. At the moment, it feels like we’re being paralysed by some of the uncertainty that AI brings, but the quicker we understand how to use it for good, the better we will also understand how to guard against it being misused. We need to develop a world-class AI capability so we don’t get left behind.
Within the tech industry, we’re closely watching the attempts to legislate for platforms such as Meta and TikTok to become accountable for misinformation. While the intent of these bills is good, the main reason misinformation is thriving is that people are financially rewarded for creating it, and the platforms are benefiting from the distribution of it in the form of advertising revenue. In my opinion, legislating against the monetisation of misinformation would be a better option, as the incentives would fall away, and so would most of the content.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Energy is fundamental to a developing nation, and the cheaper the energy is, the faster a country can develop. We are already seeing countries in Central America that are almost entirely running on hydropower, and providing next to free energy to their citizens.
In the future, we’ll need 10 times the amount of energy we have today, and it needs to become cheaper. The government has a big role to play in facilitating the delivery of low-cost power so that we can manufacture products competitively and develop as a nation. We can’t do this from coal, and we can’t do this from solar and wind alone.
We need a combination of solutions, but I think nuclear energy needs to be part of the solution, and we’ll see the countries that are building nuclear plants accelerate ahead of those who don’t. With the developments in the use of uranium over the past two decades and the additional energy that can now be extracted from spent rods, in one site in Kentucky alone, there is enough energy to power the entire world for 1000 years, including growth. When you look at a nuclear submarine being built today, it will be fuelled once and never require refuelling in its operating life. There are smarter ways to generate energy, and I believe we really need to shift our thinking on this sooner rather than later.
■ What level of adoption is your business currently at with the use of AI technology?
At SafetyCulture, we leverage AI across our products. A practical example is that a user could ask for something like a pre-flight checklist for an Airbus H130 helicopter, and the SafetyCulture AI generator can create it. However, one of the problems with AI right now, is that the outputs aren’t always 100% accurate. In this case, you would still need a subject matter expert to tweak the output, so human intervention remains important, particularly for mission-critical operations. In saying that, AI definitely speeds up the process and can free up valuable time.
Our training product is also another example of where we leverage AI for our customers. An example of how it’s used is that you can prompt for an induction training program for a new employee starting working at a restaurant in New York City that offers sidewalk dining, and our training tool can quickly produce a valuable course the new employee can complete on their mobile. Again, it might need some manual edits before finalising, but our customers are always blown away when we demonstrate this capability.
We are also looking at visual AI, where cameras in the workplace can recognise issues early and provide insights as risks are increasing. An example of this is detecting when pedestrians and machines come into close contact, which is often a precursor to avoidable workplace injuries.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
There are a lot of bespoke technology solutions being used by workplaces, and it’s becoming messy for companies to manage. I think we are going to see a consolidation of these companies and more platforms start to emerge. The one-stop shop approach will be favoured over giving teams more apps to download and use.
SafetyCulture is already looking at how we help our customers use technology to run their business without having to download and use ten different applications on each device. Thanks to the correction in tech valuations, companies that were raising money without sound unit economics are going to either close or be acquired, which I see helping to accelerate this consolidation.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
I’m incredibly proud that SafetyCulture is a company that makes the world better each day, and that having a positive impact on the world has been in our DNA from day one. As a company scaling around the world, we’re simultaneously looking for ways to make our business more sustainable. Right now, the biggest component of our energy consumption comes from the data centres we use, and we are working with our partners to ensure we can reduce this footprint as much as possible.
Our governance is better than ever, and that is a reflection of our growing team and the experience we now have on our board. We were very lucky to welcome Robyn Denholm onto the board earlier this year, and her contribution has been significant. When I reflect on the fact that I didn’t even know what venture capital was when I started this business, it’s pretty incredible to see where we are now. Each year the level of our governance and accountability continues to increase.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Our teams self-manage working arrangements. Some people are in the office every day, and they enjoy the energy that comes from working closely with others, while other team members enjoy working from home more regularly.
It’s a bit ironic that half of the developers I hired when I started SafetyCulture were working from home, and I was told in 2018 that it was too hard to manage them. Today, those roles are back again, so I’ve learnt not to get too caught up in the trends, I’m more concerned about what is best for the individuals on our team and focused on setting them up to do the best work they will do in their careers.
If the team can balance their time between visiting our customers to learn about the problems they’re facing and how they use our products, working with peers at the office, and focusing at home, then they are likely to be able to have a great impact, which is ultimately what matters the most.
We learn a lot through observing others, from role modelling and informal conversations, and it’s hard to get that from Zoom calls. I don’t think everyone working full time from home is realistic for most people to learn at the rate they need to.
Santos, Kevin Gallagher
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
I am concentrating on the factors I can control by continuing to focus on our disciplined operating model, managing costs down through efficiencies within our business, maximising our free cash flows and implementing our capital management framework. That means investing in sustaining production and backfilling our infrastructure to meet customer demand, decarbonising our business economically and building a low-carbon fuels business as market demand evolves. It also means delivering returns to shareholders. There’s a real competition for capital across our portfolio and we will continue to invest where it makes economic sense and the returns are highest.
Unfortunately we are seeing the chickens come home to roost after a long period of quantitative easing and low interest rates that supported our economy through black swan events like the pandemic and as far back as the global financial crisis. Inflation does have to be kept under control and both monetary and fiscal policy will be needed to do this. If we want interest rates to do less of the work, then spending will have to be restrained. This comes at a time when many in the private sector, and even some super funds, are out there looking for government subsidies to support their investment proposals. More than ever, this is a time when capital investments have to be productive and efficient, and stand on their own two feet.
Our customers are industrials, power generators, gas distributors and refiners in Australia and across Asia. Most of our sales are long-term contracts to provide them with energy security and reliability for their businesses. Our products are in high demand with a supply imbalance because of years of underinvestment in new supply caused mostly by market signals from institutions and governments that have over-estimated the speed of the energy transition and anti-fossil fuel activism that has led to years of moratoriums and restrictions on new supply when demand from customers has continued to grow. The world has not yet hit peak coal, peak oil or peak gas. So there is a big disconnect between what the world say it wants and its energy consumption.
Labour markets – Australia was built on immigration and there are still skills shortages across the economy, so we need more people. At the same time, that means more pressure on housing and infrastructure, more pressure on health and education services, just when government spending needs to be restrained, especially if we want to keep interest rates and inflation down.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
I am acutely aware that our company is grossly undervalued even though operationally we have performed well. Number one on the reform agenda should be restoring investor confidence in Australia, especially in the engine room of the economy, which is still the resources sector and will be for a long, long time. It’s also important to attract investment to support the energy transition. We, along with the customers we support, emit too much CO2, meaning that we need to get on with the transition – and where it is harder to decarbonise, we need to use the best and most economic technologies available.
This means bringing more realism to the energy debate and I am pleased to see recent encouraging signs.
However, Australia is still in the midst of an anti-fossil fuels war when the real enemy is emissions. My biggest concern is for energy security and affordability, both at home and for our trading partners in Asia who rely on us for the energy that drives their economies. We cannot turn the taps off on oil and gas before there are replacement technologies.
Renewables are a big part of the solution, but we are still a long way from technologies that would replace fossil fuels in making steel, cement, fertilisers and the petrochemicals that make medicines, medical products, paint, plastics and the polymers that are the foundation for so many products we take for granted in modern life. My fear is that we continue to delay the transformation of energy markets because of a debate that centres on one solution or one technology rather than a pragmatic, market-led, technology-neutral approach that allows industry to get on with decarbonisation.
It also means regulatory approvals reform that delivers certainty for investors when they make final investment decisions. The reopening of approvals given by regulators after investment decisions have been made is an investment killer. Australia has a reputation for robust environmental standards, including assessment, approvals and compliance processes. But these processes have to be allowed to work and regulators have to be allowed to do their jobs. At the moment the system is broken, it’s being used by activists to bring novel, costly and time-consuming litigation, and fixing it needs to be a priority for the government.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Carbon capture and storage has been demonised by some, however, it has enormous emissions reduction potential, it comes with high skilled, well paid, secure jobs and Australia has a natural competitive advantage in it. CCS could be an exciting new industry that would help hard to abate sectors like steel and cement stay in Australia and that would help regional economies like Japan and Korea to decarbonise. Santos’s Moomba CCS project, due to start up next year, could deliver 25 per cent of the emissions reduction – every year – that was achieved in Australia’s entire electricity sector over the past year. And it is low cost, under A$30 per tonne of CO2, on a life cycle basis. CCS is a much better option than demand destruction that would send our manufacturers such as aluminium, steel, cement, fertiliser and petrochemicals offshore.
So a technology neutral approach to energy and climate policy that minimises the need for government subsidies and maximises affordability and reliability is really important. The thing that will put the energy transition at risk is trying to pick winners years in advance of technology development. That sounds more like an ideological approach rather than a scientific approach. And it will ultimately drive up energy costs, drive up the cost of emissions reduction and reduce energy security and reliability.
■ What level of adoption is your business currently at with the use of AI technology?
Santos is taking a balanced, value-driven approach to AI adoption. We are targeting specific use cases to prove small and then scale fast. In parallel to this, we are establishing the partnerships and digital capabilities to support the increasing adoption of AI within the business.
There are multiple initiatives we are pursuing, however, the key focus at the moment is using the technology to increase production and safety. For example, we are using AI with front-facing cameras in-vehicles to support driver safety which is one of the highest personnel risks in Santos. We are also using AI to support, model and maximise production rates. We have engaged AI to accelerate the deployment of autonomous systems for well site operations, facilities, and production activities. Santos is using autonomous operations technology to help streamline processes, reduce operational costs, and minimise environmental impact.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Australia is still in the midst of an anti-fossil fuels war when the real enemy is emissions. My biggest concern is for energy security and affordability, both at home and for our trading partners in Asia who rely on us for the energy that drives their economies. We cannot turn the taps off on oil and gas before there are replacement technologies. Renewables are part of the solution, but we are still a long way from technologies that would replace fossil fuels in making steel, cement, fertilisers and the petrochemicals that make medicines, medical products, paint, plastics and the polymers that are the foundation for so many products we take for granted in modern life.
There is a fundamental disconnect between what the world says it wants from the energy transition and what it demands in terms of energy security, reliability and affordability. Most of us today are city dwellers, freed from the arduous task of growing our own food by automation and the fossil fuels that enabled this. We don’t make the connection that our high standards of living and the free time we have to pursue activities like higher education, art and outdoor recreation is an artifact of fossil fuel use. Nor do we make the connection that the clothes we wear, the medicines, ointments, medical products we rely on, the building products in our homes – right down to the paint – are made from fossil fuels. My 3am thought is the fear that climate activism could prevail over sensible policies that maintain the strength of Australia’s economy and Australian living standards while still driving down emissions levels instead of simply turning off the taps and importing the same energy from other countries. My company has the luxury that it can invest in other parts of the world, but my fear is that Australians may realise too late that the energy transition has to be orderly and that turning the taps off on fossil fuels before there are economic and technically feasible replacements will leave Australians the poorer for the experiment.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
No, the G is fundamental to everything that a listed company does and Santos has a strong, contemporary governance framework that includes Board oversight of the policies and management systems in place to drive returns to shareholders in a sustainable way. No one would argue against the statement that Australia has among the most robust regulators in the world, from the ACCC to ASIC, the AER, CER, AEMO and more. Australian laws are also strong – think privacy, whistleblowing, respect at work, greenwashing, anti-corruption, integrity of carbon credits and competition for a start. And Australian laws are closely aligned to evolving international standards, for example the new International Sustainability Standards Board (ISSB) sustainability reporting standards that are now being introduced and will allow true like for like comparability and peer benchmarking.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
While it is important to be flexible where possible, it’s the workplace that drives collaboration, innovation and the team culture required to be a high-performing employee and, collectively, a high-performing company. The value of human interaction and interpersonal relationships cannot be over-estimated. They’re very powerful and cannot be replaced entirely by smartphone and computer communications. I say this knowing there needs to be a balance.
Santos used data analytics to try to find that balance and what we discovered is that a compressed working fortnight (10 working days into 9) is not only highly valued by our corporate employees, but productivity has remained the same or even higher. So we have adopted a “Flex-Friday’ approach across our corporate offices and we have a range of other flexible working arrangements for special circumstances, including for parents with young children who want to work part-time or are transitioning from parental leave back to full-time work. However, we are moving away from permanent work from home arrangements because of the clear evidence that human interaction and collaboration is what provides the competitive advantage in our industry. We’re also conscious of mental health-related impacts.
Scentre Group, Elliott Rusanow
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Our business is a hedge to inflation when you consider the structure of our lease escalations which are CPI-linked.
We are positively exposed to population growth. About 7% of all retail sales in Australia take place across our Westfield platform.
Our strategy to attract more people to our Westfield destinations, which includes free events and entertainment they consume onsite, is driving growth for our business. We think this is especially the case when the consumer is facing cost-of-living headwinds. We know the more customers come and spend time in our destinations, the more they interact with our business partners.
On a rolling 12-month basis, we have attracted more than 500 million customer visits to our Westfield destinations and our business partners’ sales have exceeded $28 billion.
■ How would you rate the shape of the Australian economy as we head into the New Year?
The Australian economy remains resilient. Population growth is important to our business, so while economic growth is expected to continue to moderate, employment is still high, there’s growth in nominal wages, a high savings buffer post pandemic and the recovery in net migration has eased the labour market pressure. Along with our business partners, we are optimistic on the prospects for the Australian economy.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
The more people that come to live and work in Australia, the more likely they are to be located within our communities and spend time and money with our business partners in our destinations. We’re seeking to engage with government on how we help solve the housing needs.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
We have a net zero by 2030 target and are making progress on our pathway. We encourage the energy market to continue to decarbonise and provide additional supply of renewable energy.
■ What level of adoption is your business currently at with the use of AI technology?
We apply machine learning across our business in a number of ways, including how we communicate to customers, reduce any friction points like parking and through general operations.
You could say we’re in the experimental phase of Generative AI technology. We are exploring how it can free up our people’s time to focus on higher order thinking.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
The competition for customers time and our ability to keep attracting people to our destinations. We are not complacent and are focused on improving the customer experience at our destinations. We want to create more reasons for customers to visit us, more often and for longer.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
ESG is constantly evolving in line with the expectations of all stakeholders and best practices globally. We have had a longstanding commitment to operating as a responsible, sustainable business and we balance our approach across the four key pillars of Community, Talent, Environment and Economic Performance. We see all as equally important in the execution of our strategy and how we create value for our security holders.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Our flexibility policy was established well before the pandemic and continues to be a key part of the employee experience. We have a highly engaged workforce, who understand the value of being together in person. We operate social infrastructure which by its nature provides destinations where people connect with each other in-person. The majority of our team work in our Westfield destinations engaging with customers.
Seven Group, Ryan Stokes
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
There is nothing inherently wrong with inflation. It’s healthy to have inflation in the economy, provided it’s at the right level. From an SGH perspective, we have taken steps to prepare for the higher rate and inflationary environment, as we expect it to persist for longer.
In terms of customer behaviour, we continue to see strong demand across our core thematic exposures of mining production, infrastructure and construction, and transitional energy.
We have seen inflation driven higher by both transitory and structural issues. The transitory components are now working their way out of the economy. If you look at inflation around the world, it has started to trend down. Even in economies where the central banks didn’t panic, such as Japan, we have seen a similar growth rate and subsequent contraction in inflation. This would suggest that the Covid stimulus is working its way out of the system. Let’s not forget that during Covid, the total global stimulus of $US14 trillion was more than 15% of the global GDP.
The structural issue of inflation is going to be more challenging to address. We shouldn’t overlook the fact that one of the causes of the structural pressure is the dramatic increase in the cost of capital, as central banks repeatedly lifted the cash rate. In 2023 alone, the RBA increased the cash rate by 40%, and over the last 18 months it has increased at the fastest rate in our nation’s history. Ironically, increasing the cash rate increases inflationary pressure.
It is disingenuous for the RBA to link increasing the cash rate with decreasing inflation without also detailing the intermediate step of a contraction in economic growth. The objective of the rate hikes is to put negative pressure on the economy, and through that economic pain, to see spending and economic growth contract.
Given the aggressive pace of the cash rate increases, the pain it has inflicted on households is deeply concerning, and we are yet to see the full impacts of the increases already implemented.
The RBA have two levers within their monetary policy arsenal – the cost of money and the supply. Unfortunately, there is a greater inequity in the impact of the cost of money. Ultimately, successful execution of monetary policy to manage the economy should ensure the action does not cause greater harm than the original issue itself.
■ How would you rate the shape of the Australian economy as we head into the New Year?
From an SGH perspective, we remain very confident in our outlook, with strong demand tailwinds supporting our core thematics of mining production, infrastructure and construction, and transitional energy.
We have some concerns for key parts of the economy. The 18-month aggressive hiking stance of the RBA will put aspects of the economy under pressure in 2024, particularly consumers exposed to mortgages and potential impacts on the broader housing market.
The key area to watch is the mortgage stress and increasing foreclosure risk. Given the current challenges with housing affordability and rapid increase in mortgage costs, the situation is precarious for consumers.
Looking at the median house price in most capital cities, the average salary, and mortgages reset to the 4.35% cash rate, there is risk of a housing price contraction in 2024. Longer-term, population growth and housing supply issues suggest the outlook for construction activity remains robust, however we expect it could be a challenging 2024.
The infrastructure investment pipeline will also support the economy and ultimately increase productivity. That productivity gain will help to reduce inflationary pressure. Similarly, population growth is a positive economic driver. While the population growth has been rapid, our economy has required that incremental capacity to support growth.
In addition to the strong long-term construction outlook, and productive infrastructure investment, our resource exports exposure will also help support the Australian economy.
From an SGH perspective we have a positive economic outlook. However, we see the outlook as increasingly sector or theme specific, and we expect a multi-speed economy to develop.
In terms of labour pressure, it appears to be gradually easing, and we expect this to continue into 2024. However, the cost of labour remains a primary focus area.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
This could be one or two ideas across any area from education, housing, training; labour shortages, infrastructure, tax; supply chains, regulation, immigration, etc.
There are 3 areas of reform that should be prioritised – investment in productive infrastructure, planning approvals, and removing regulatory burden, particularly with the environmental approval process.
1. One of the best avenues to support productivity growth is investment in infrastructure. The right infrastructure will deliver tangible benefits to the economy, unlock productivity, and through that productivity, counter inflation with deflationary pressure. Both state and federal governments must continue to prioritise this investment in productive infrastructure to support the economy and necessary population growth.
2. There is a massive housing supply constraint that needs to be addressed. The planning and approval process is increasingly cumbersome and complex. It causes extensive delays, and the complexity adds substantial costs.
States need to take control of the planning issues and have the confidence to fast track projects. The Federal Government must also review where it can accelerate the approval process.
Beyond property, this is also the case with resource investment, where we have energy projects required to address critical supply issues constrained by government indecision and avoidance. Both State and Federal governments must address this issue as a priority.
3. In a similar theme, the environmental approval process is becoming increasingly complex and unworkable, with common duplication and excessive bureaucracy. The Federal Government has progressively inserted itself over the state approval process, adding bureaucratic steps, time delays, and material costs to projects.
While we acknowledge the importance of regulatory oversight, duplication of process is costly and inefficient. The proposed Federal Heritage laws would be a risky overlay on existing State approvals. For the energy sector, where there is a Federal approval process required, the current delays of up to two years and a broad appeal reality is impacting our sovereign risk, making Australia a much more challenging place to invest reducing our access to global capital.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Firstly, some pragmatic realism about the challenge ahead. Setting a target so far in advance, reliant on many initiatives outside our control, is more an ambition than a plan. It is going to be far more costly and challenging to make the transition than governments have assumed. We must ensure that there are some key principles that guide the energy transition journey.
1. We must look at sustainability through social and economic lenses, in addition to the environment.
2. It should be technology led, not tax led. The government needs to provide an environment that supports the development of fledgling technologies.
3. We have to explore all the options, that means considering nuclear as a potential emission-free baseload source of power.
4. When it comes to target dates, transitioning society and the economy in an orderly, rational way should be prioritised over hitting a date in a way that can’t be sustained.
5. The less political intervention and regulations, such as carbon taxes and the safeguard mechanism, the better. Taxes and punitive regulation that carry inherent risk. They may work for a period, but they are subject to a stroke of the pen risk, and most often pass the end cost down to the marginalised consumer.
Sustainability is a complex issue, too often viewed myopically through a one-dimensional environmental lens, and increasingly focused purely on carbon. This perspective lacks the necessary context and consideration of the economic and social aspects.
For the energy transition to be truly sustainable, we should aspire for the environmental benefits to also enhance the collective standards of living, while delivering better economic outcomes.
Technology is the great enabler. It’s through technology that we can achieve truly sustainable changes that are accretive to economic, social, and environmental considerations.
Gas is currently the most economically sustainable source of stored energy to support increasing variable renewable energy in the grid. In that context, it will continue to be a key transitional energy source for some time, and the government must foster an environment conducive to investment in new gas supply.
■ What level of adoption is your business currently at with the use of AI technology?
The term “AI” is broadly used, but regarding generative AI (GenAI), we are still at a very early stage of experimenting with its potential applications across our businesses.
To date, we have focused on the application of robotic process automation in workflow and supply input allocation at WesTrac. We have successfully implemented this across support activity, particularly in component rebuilding programs. We are now looking at how GenAI large language models can assist in sorting external requests and drafting responses. We will continue to explore potential applications and use cases within our business environment.
Technologies like AI are likely to bring the next wave of productivity growth. Over the last 2 to 3 decades, the rapid uptake and advancements in digital technologies, particularly connectivity related, have been one of the few sources of sustained productivity growth. As the existing wave starts to mature, the relative benefits reduce. The next stage of that growth is going to be AI and advancements in robotics.
GenAI and large language models put the advanced power of supercomputing into the hands of business and consumers. This allows for a broad scope of applications that can empower consumers and drive enterprise-wide solutions. The pace of the growth in supercomputing means we are only at the very beginning of this trend and the capability of what GenAI and AI in all its forms can do. The speed of the uptake is going to have dramatic impacts on business and society. It is staggering to think that when Instagram launched in 2010 it took 3 months to reach 1m uses, it took Chat GPT just 5 days, and within a year it has amassed 180m users.
We also expect to see an increasing trend in the application of robotics. Putting on a different hat, the National Gallery of Australia, where I am Chair, has just opened one of the most monumental works in the collection – Jordon Wolfson – Body Sculpture. It is the most sophisticated robot in Australia. It blends performance art, sculpture, and advanced robotic technology into a remarkable and emotive work of art. It is on display at the National Gallery over summer and I recommend anyone who has the chance should experience it.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
If we are talking about disruption over the next 12 months, it would be the short-term and more immediate issues relating to the headwinds on the macro-economic outlook, and the increasingly stifling regulatory impediments to the economy. Both are concerns we need to ensure we are positioned to effectively manage.
The disruptive impacts that concern us relate to the economic transition that is underway, as we pivot from a low to a relatively higher rate environment, and the consequential impact that will have on households. We anticipate the risk of a housing price correction is high, and need to be prepared for what that might mean.
The other disruptive factor is the persistent impact of government policy constraints and potential risks of arbitrary and poorly thought out intervention. The business and investment community perceive heightened risks of more aggressive, arbitrary and interventionist responses, and there is a danger that it chills investment sentiment accordingly.
The rapidly expanding investment in AI will also continue to present a disruptive force. We are only at the emergent or elementary stage of AI, but with the investment in supercomputing and empowering applications it will continue to have a disruptive force across social and economic aspects.
Robotics also present some fascinating opportunities and we expect that when the advancements in computing and robotic technologies are combined, we could see very disruptive technologies emerge. We are already seeing significant investments from large technology related companies, and early trials with humanoid robots in industrial applications.
We are conscious of potentially disruptive progress in long duration energy storage over the next few years, particularly through the growing electrification of the economy. In terms of business impacts, we should see some of the first battery powered mining trucks entering our customer’s locations for trial by 2025. That said, widespread electrification in mining is not anticipated over the next decade. When it does occur, we expect it to broaden our opportunity set, not reduce it. We anticipate the maintenance requirement for battery products at that level to be as intensive as the existing technology.
One of our core values at SGH is the Owner’s Mindset. From that perspective, we have one eye focused on the short-term issues that play out over 1 to 5 years, and the other on how we prepare the Group for the longer duration issues that play out over 10+ years.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
In general, it doesn’t seem like business is getting it exactly right, but it is a relatively new and evolving area. Too often it feels at risk to be exposed to the notional ‘squeaky wheel’, where smaller stakeholders who make a lot of noise can dominate the direction. As we think about stakeholders, it’s important we take a holistic view, considering employees, customers, shareholders, and the broader community with some context to their contribution to the success of an enterprise.
In relation to environmental objectives, businesses have commonly set long-term targets and absolute goals that are in effect more ambitions than plans. In many of the pathways, there is a reliance on technology that is either yet-to-be created or needs to be adopted at a faster rate to achieve the targets.
Long-term targets are important ambitions. However, we shouldn’t be concerned about resetting targets as industries evolve, as long as we are making progress. And we should encourage the setting of intensity-based targets rather than absolute targets, which can in some cases lead to perverse effects. The energy transition is complex, and while it may take longer than initially expected, it is important we keep moving forward.
It is also important to look at ESG across each of its attributes of environment, social, and governance. As mentioned previously, we are increasingly seeing the focus shift to just the environmental component, and within that, purely on carbon. For sustainability to be truly effective and enduring, it must consider environmental, social, and economic impacts. The idea of implementing sustainability measures that inhibit a business’s ability to compete, to where market share is lost is counter-productive.
In terms of governance or ‘G’, the Australian legal and regulatory system ensures that most Australian corporations are relatively strong on this element. In fact, there is a danger that it is over-egged: strong corporate governance does not have to mean risk-averse boards or failing to show the agility or owner’s mindset that is required for outperformance.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
The work from home experiment has not delivered productivity improvements or enduring benefits to the work environment. The early euphoria of potential productivity increases from WFH have evaporated, and the data highlights a decline in productivity and adverse impacts on team cohesion and effectiveness.
Flexible work is important, but it must be considered on a case-by-case basis, as well as work for the company. The majority of our 15,000 employees operate in the industrial area, where our activity must occur at our own or on customer sites. Given that, we have been mindful of workplace inequality, and expect a strong in-person presence for our office-based workforce too. Over time we expect the trend will continue toward that approach.
Having said that, we remain supportive of flexible work arrangements where it works for the individual and the company. The difference between flexible work arrangements and the work from home is the responsibility and accountability of the manager to consider requests and provide the approval.
More broadly, where roles can be done remotely it opens up the opportunity for offshoring. We suspect firms will emerge offering global co-sourcing of functions that can supplement business activity.
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South32, Graham Kerr
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
We continue to focus on driving cost performance to mitigate industry-wide inflationary pressure. During the September quarter we commenced a Group-wide review designed to deliver a reduction in expenditure across our operations and functions in financial years 2024 and 2025.
During FY23 our Group operating margins remained above historical levels as our recent portfolio improvements underpinned strong growth in copper and low-carbon aluminium, however rising input costs compressed margins for some of our commodities.
Significant inflationary pressure has also had an impact on our development projects. To give an example, in the United States, where we are developing our Hermosa project, which has the potential to become a globally significant producer of metals critical to a low-carbon future, we are estimating higher costs for key inputs such as steel, cement and electrical components because of inflation.
■ How would you rate the shape of the Australian economy as we head into the New Year?
At present, our base case is a soft landing for the Australian economy in 2024 but we will continue to monitor and review relevant data carefully. Strong population growth and resilient private consumption is expected to support GDP and the ongoing relatively tight labour market is likely to generate wage growth. However, we are seeing a slight easing of the labour market as forward-looking indicators, including job vacancies and advertisements have fallen.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
We share the concerns of our industry peers regarding the Australian government’s changes to industrial relations laws. While we are continuing to assess the same job, same pay reforms following their recent passage through federal parliament, we expect the legislation could materially impact our costs, productivity and global competitiveness. At a time when more investment is needed to produce the commodities required for the transition to a low-carbon world we think this is a negative outcome for our industry.
We and many of our peers operate in global markets so it is important that Australian governments have stable policy and regulatory frameworks and make decisions that ensure the country remains competitive and a good place to invest and do business.
We would like to see the Australian government continue to prioritise support for commodities critical to a low-carbon future, encouraging investment while ensuring proposed reforms to the EPBC Act are efficient and appropriate.
To highlight an example of where we think this is done well, in the United States, our Hermosa project in Arizona was the first mining project added to the FAST-41 permitting process, which aims to create a more efficient and transparent permitting pathway for approvals.
In addition, we continue to assess opportunities to access grant funding from the U.S. Department of Defense and U.S. Department of Energy to advance our battery-grade manganese development opportunity.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
At South32, we have a long-term goal to achieve net zero greenhouse gas emissions across Scope 1, 2 and 3 by 2050. We also have a medium-term target to reduce our operational GHG emissions by 50 per cent from FY21 levels by 2035.
Our approach to decarbonising our higher-emitting operations consists of three elements – efficiency initiatives, transition to low-carbon energy in the medium-term, and technology solutions in the longer-term.
Decarbonisation of some of these operations is connected to the transition to lower-carbon energy. For example, the decarbonisation of our Worsley Alumina operation will require a significant scale-up of the South-West Integrated System, Western Australia’s main electricity network.
The transition does create some challenges but there are also opportunities which is why it’s important there is strong collaboration between government, industry, NGOs and community groups.
We encourage increased investment by state and federal governments in electricity transmission and storage infrastructure to facilitate greater penetration of renewable energy in the grid. We would also support increased investment from governments to help support the fast-tracking of new technologies that can address hard-to-abate emissions.
■ What level of adoption is your business currently at with the use of AI technology?
At our GEMCO operation in the Northern Territory we are using artificial intelligence and machine learning to improve processing plant performance. More broadly, we are in the preliminary stages of understanding the positive role that artificial intelligence and machine learning could play within our business.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
The geopolitical landscape continues to evolve and remains uncertain, and this is something we will continue to monitor closely in the months ahead.
From our perspective, we have diversified product placement and have strong relationship management with strategic customers and suppliers so that we can adapt to the changing environment and stay competitive.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
At South32, our purpose is to make a difference by developing natural resources, improving people’s lives now and for generations to come. We are trusted by our owners and partners to realise the potential of their resources.
Sustainability is at the heart of our purpose and we believe that when done sustainably, mining can make a real difference in people’s lives.
We engage with our stakeholders to understand and respond to their views on a range of matters, including ESG. Through this process, we aim to identify ways we can create enduring social, environmental and economic value, in a way that aligns with our purpose and values.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Our view on working from home hasn’t changed. Covid-19 showed us that there simply isn’t a one-size-fits-all approach. Bringing people together in our offices creates good opportunities for growth, learning and collaboration and a sense of connectedness. But Covid-19 has shown us we can achieve great outcomes working remotely too. The key is finding and facilitating that balance of what works for each person, their role, and the business.
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Suncorp, Steve Johnston
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
We continue to see inflationary pressure through our supply chain along with the dislocation of global reinsurance markets, does flow through to insurance premiums. Across the insurance industry we are seeing customers looking at ways to save, such as increasing excesses or bundling policies. In our bank we continue to monitor both our home lending hardship and arrears volumes very closely and have a strong priority on supporting our customers.
■ How would you rate the shape of the Australian economy as we head into the New Year?
While the Australian economy continues to demonstrate its resilience through strong labour markets, robust savings rates, rising house prices and relatively low loan arrears of banks, we expect the full impact of the RBA’s rate rises to be felt into next year.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
This could be one or two ideas across any area from education, housing, training; labour shortages, infrastructure, tax; supply chains, regulation, immigration, etc.
Suncorp has long advocated for greater focus on making our nation more resilient in the face of a changing climate. While we have recently seen positive government and insurance industry action – we need to maintain momentum. This includes improving local and regional mitigation infrastructure, ceasing to build homes on flood plains, providing incentives for people to make their own homes more resilient to extreme weather and removing inefficient taxes like stamp duty from home insurance policies.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
As an insurer we are at the forefront of the impacts of climate change, and we are passionate about building Australia’s resilience to extreme weather. Across the industry, we’re making progress against our Climate Change Roadmap, and Suncorp has undertaken a range of measures to progress to Net Zero by our targets.
Action by governments, including through setting strong national emissions reduction targets and implementing a comprehensive set of policies to decarbonise key sectors is vital. Importantly, we need to strive for bipartisan support to ensure we have confidence and consistency in the transition.
■ What level of adoption is your business currently at with the use of AI technology?
Suncorp is well-advanced in the adoption of AI. It is exciting for us as we can see the benefits flow through our whole value chain, from improving how we sell insurance, supply chain optimisation, natural disaster management and, of course, in improving some of our back end administrative tasks.
It’s something our people are embracing and looking at through the lens of how we can better serve our customers. We’re also looking at how we adapt the way we work – identifying areas of growth and providing development opportunities for our people to ensure we’re fit for the future.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
As an insurer we are always preparing for the next major natural disaster. With a changing climate, we do expect an increase in the frequency and severity of major natural hazard events.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Suncorp continues to proactively engage with and advocate to governments at all levels on issues that affect the community, our customers and shareholders. Recently we worked collaboratively with governments to design and deliver policy solutions including the Queensland Resilient Homes Fund to support homeowners to complete flood resilience works. We are active members of the Hazards Insurance Partnership to share our data and insights to help inform Commonwealth government investment, as well supporting key mitigation infrastructure projects including the Bundaberg flood levee.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Suncorp was one of the pioneers of flexible working and acknowledges that hybrid working is a key driver of our people’s engagement, attraction and retention. In an organisation as large and diverse as Suncorp, we know that a one size fits all approach simply won’t work, so we have introduced hybrid work plans for our leaders. They are empowered to determine the right balance for their teams and the work they do, be that at home, in the office, in a branch, or on the road interacting with our customers and partners.
Telstra, Vicki Brady
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Inflation and higher interest rates are having an impact on all businesses and it’s something we’re very focused on for two reasons. We have to minimise the impact on our business but we’re also very sensitive to the impact of increasing cost of living pressures for our customers. Inflation is proving stickier than anticipated and we’re seeing some impact on capex and service contracts where we are seeing rate card increases for new contracts. In terms of the impacts on our customers, given the importance of connectivity, telco is fairly inelastic and we’re yet to see any significant changes in customer spending or retail foot traffic.
■ How would you rate the shape of the Australian economy as we head into the New Year?
While there are some clear and consistent positives in the Australian economy, such as
unemployment remaining very low, inflation is going to continue to be a key challenge in 2024. Controlling inflation will take pulling a range of levers and getting the balance between those right. That’s easy to say, but not easy to do. Our experience is that the labour market has eased, but shortages remain in key technical areas.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Lifting Australia’s productivity is vital and it will require us working together across the private and public sectors.
One big opportunity to be unlocked across industries and sectors is leveraging connectivity and digital technologies to boost productivity right across the economy. It is important that this digital transition is supported by further progress on the energy transition, strong national cyber defences, the development of the necessary skills within the workforce and a supportive
investment environment.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Achieving these baseline targets requires the government and the private sector to work hand-in-hand to support the transition to renewable electricity. We need increased investment in
renewable energy projects and storage as well as the deployment of technology and innovation to drive decarbonisation across different sectors.
■ What level of adoption is your business currently at with the use of AI technology?
We have been using AI extensively across our business for many years, from reducing network energy consumption to helping solve customer issues faster. This new era of AI opens up further opportunities and requires us to think differently.
The projects that excite me the most are where we can see tangible benefits for our customers.
Scams, for example, are costing Australians $3.1bn per annum. We are applying AI and machine learning to identify scam texts, calls, emails and websites through our Cleaner Pipes initiative. Currently we are blocking on average every month 11m texts, 9m calls, 280m incoming scam and unwanted Bigpond emails and tens of millions of malicious domains. AI is playing a critical role in helping us to protect more Australians from scams reaching them.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
The ethical development and application of data and AI is front of mind for many leaders I speak to and I expect on the agenda for many boards.
The rapid growth in data and AI presents immense opportunity and risk for business and society more broadly. It’s crucial that over the next 12 months we continue to work to get that balance right across everything from data protection and security risks to mitigating bias and
discrimination. We take this very seriously at Telstra and have set ourselves a high bar. We’re partnering with the Australian Government, and with telco and business organisations around the world to help set and adhere to ethics principles for AI. We’ve also set up a series of robust governance policies and guardrails internally, including the formation of a Risk Council for Data and AI.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Companies have an enormous responsibility to do the right thing for customers, shareholders,
and the broader community. Balancing the sometimes competing objectives of these
stakeholders continues to be one of the more challenging parts of doing business, and
expectations on how we meet this responsibility have never been higher.
I would argue that rather than being left behind, governance and operating as a responsible
business has only grown in importance, and is central to achieving the social licence that any
company needs to build trust with all stakeholders.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Flexibility and choice have long been core to how we work at Telstra – we know our people are at their best when they have choice. Our focus now is on ensuring we are brilliant at hybrid working. We continue to experiment, learn and adapt our hybrid model and our workspaces to support our people to be highly engaged and productive.
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The Lottery Corporation, Sue van der Merwe
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Most of our debt is fixed interest, which has softened the direct impact of higher rates on our business. Inflation has increased pressure on our operating cost base, a large part of which is wages. We are focused on managing this effectively.
Higher rates, along with stronger economic head winds, are resulting in a dual impact on many Australians. In terms of customer behaviour, lotteries have been robust through economic cycles, with no real correlation between macroeconomic conditions and sales. We aren’t seeing anything significant in recent turnover trends that indicates something different this time around.
■ How would you rate the shape of the Australian economy as we head into the New Year?
We believe, barring unforeseen circumstances, Australia will manage to avoid recession despite the current challenges. High levels of employment are helping to cushion the blow of inflation and higher rates and the economy is proving resilient.
In terms of the labour market, while there are still shortages in a few areas - cyber security professionals is one example - skills shortages and labour market pressures are beginning to ease. Having an engaged workforce and relatively low employee turnover has helped us to manage through the period of imbalance in the labour market.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
While it’s not a major economic reform, the government’s proposed changes to gambling regulation in areas such as advertising and credit cards will have widespread impacts. In some areas these reforms are needed and we’ve been able to contribute our views in the consultation process.
We’ve been encouraged by the approach taken by the government in treating lotteries as a product with wide community acceptance and a lower harm profile than other forms of gambling and recognising that reality in the reforms it is proposing. It shouldn’t be underestimated how important lotteries are – lotteries taxes make up circa 2 per cent of state government tax revenue.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Our own emissions target is net zero by 2030 and the roadmap to achieve that will continues to be developed. Our level of emissions is relatively small alongside companies in carbon intensive industries, but we recognise importance of carbon reduction.
■ What level of adoption is your business currently at with the use of AI technology?
We have some foundational implementations of machine learning AI that we’ve deployed to deliver on priorities such as enhancing the customer experience . This is about tailoring our offers in real time to customers’ anticipated preferences based on data. This helps make our marketing more efficient and effective.
We are in the process of implementing governance to guide any future implementation of Generative AI. Generative AI is a rapidly emerging technology; we need to carefully balance strategic and productivity advantages with risks and our regulatory commitments.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
Like most major companies, we’re focused on ensuring we have the right protections to manage cyber security risks in an environment where significant attacks on corporations have been occurring and privacy and protecting customer data are priorities. We have seen many examples of the substantial impact these incidents have had on businesses and they do give executives and boards something to think about at 3am.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
ESG and the focus it requires is obviously evolving fast. The amount of time management and boards are dedicating to ESG considerations today has changed markedly even in the space of the past three years. The environmental and social pillars can lend themselves to being more visible than governance activities, but my perspective is that we are getting the balance right. The nature of the industry that The Lottery Corporation operates in has meant good governance is something we have prioritised over a long period of time.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
As a relatively new ASX company, we’ve had a consistent approach throughout. That’s been about facilitating flexible working and allowing leaders to develop their own ways of working in conjunction with their teams but making them accountable to achieve agreed outcomes in doing so. For example, some teams work predominantly remotely and come together at set times for to collaborate in person.
Other teams aim for a minimum number of days in the office/workplace, while for others the nature of the role necessitates working at their workplace all week. This approach has served us well operationally, and in terms of employee engagement. While our employees have embraced flexibility, they also tell us they value the collaborative benefits of catching up face to face.
Tyro Payments, Jon Davey
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
“We’re seeing small and medium sized businesses feel the cost-of-living pinch faced by many Australians. About 40% of our cafe and restaurant merchants have adopted surcharging to recover the cost of accepting a range of different card types from their customers who are opting to use premium and international cards. Small business resilience is going to be key to the economy in 2024.”
■ How would you rate the shape of the Australian economy as we head into the New Year?
“Broader economic pressures have meant consumer spend is moderating in discretionary verticals such as hospitality and retail. Despite this we’re on track to continue our growth trajectory, driven by non-discretionary verticals such as health and services. We remain optimistic that Australia will avoid recession and are pleased to have seen some easing in labour markets, particularly in the tech market following implementation of cost reduction programs by several global and domestic tech leaders.”
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
“To reach the 2030 targets, we believe that Tyro has an important role in collaborating with the government, other businesses, and the broader community to urgently address climate change issues. For Tyro, working with data centres with a demonstrable commitment to using renewable energy for its workloads has been key. One of our providers achieved a remarkable 96% renewable energy usage in FY22. We’re pleased to be partnering with like-minded businesses when it comes to renewable energy.”
■ What level of adoption is your business currently at with the use of AI technology?
We expect AI to disrupt the business landscape. We see significant potential for AI to play an important role in customer experience improvements and the realisation of commercial benefits through automation. At Tyro we’re in the early stages of adoption, with our use cases based on automated customer support and technology productivity improvements.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
“Nothing keeps us up at night more than thinking about our customers, and how we can support them to remain resilient over the next 12 months. Australia’s small and medium sized businesses are the backbone of the Australian economy, and we are committed to listening to them closely so that we can continue to make payments and cashflow management as easy as possible while they focus on running their business. Already we’ve delivered new innovative products including Tyro Go and Tyro Pro, as well as being an Apple launch partner for the Australian launch of Tap to Pay on iPhone payment acceptance. We’re focused on continuing this innovation trajectory for our customers and excited about what’s to come.”
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
“We remain focused on strengthening our ESG approach each year, aiming to minimise our environmental footprint while building on our foundations for a sustainable business model. We’ve built a diverse and inclusive team, with more than 50% of our employees born outside of Australia and we’re proud that our Board is one of the most diverse of ASX-listed companies with 67% female representation of our Non-executive Directors.
“We’ve seen first-hand the benefits that diversity in experience, thought and gender bring to help support high performance and a great place to work. The diversity around our board table also helped us deliver the robust governance that has, and continues to, serve us well.”
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We have a hybrid working approach at Tyro and this year we’re pleased to see our teams take advantage of in-office collaboration more and more. It’s great to see our leaders driving a culture of predictable flexibility across the business in 2023, our meeting rooms certainly come alive between Tuesday to Thursday each week.
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UBS, Anthony Sweetman
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
UBS continue to expect inflation in Australia will remain relatively sticky, above the RBA target band until 2025, forcing the RBA to keep interest rates ‘higher-for-longer’. The impact is relatively indirect on the UBS business, with many listed companies reporting significant cost pressures, but overall are managing to adjust.
While activity levels in financial markets declined meaningfully in 2023, UBS remains resilient and well-placed as the clear market leader.
■ How would you rate the shape of the Australian economy as we head into the New Year?
UBS continue to expect Australia’s economy to remain relatively resilient, and avoid a ‘technical recession’. While the RBA’s rate hikes will likely result in a further slowing over the year ahead (with real GDP growth forecast by UBS to be 1.6 per cent in 2024), activity is strongly supported by the ‘twin peaks’ of: 1) record migration; and 2) older households spending, supported by higher wealth and drawing down from superannuation/savings; as well as 3) ongoing booming public sector demand.
Meanwhile, the labour market is easing, but remains remarkably resilient for now.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
The key pressure point for the Australian economy is managing inflation. Key policies that would be most helpful include: 1) easing the pressure on the housing market, by a better co-ordinated approach to improve the supply of housing; and 2) ensuring Stage 3 household tax cuts are maintained, to incentivise and encourage workers to further increase labour supply.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Australia has reduced its emissions by roughly 20% to date – largely through the implementation of the previous Renewable energy target (which was achieved in 2021) and the Emission Reduction Fund – i.e. carbon offsets for landholders.
Australia’s largest emitting sectors are energy and industry. The introduction of the new safeguard mechanism climate policy this year was a pivotal moment in the development of Australia’s climate policy. Supported by industry leaders, it covers large industrial emitters responsible for c. 20% of Australia’s emissions, incentivising emissions reduction through a quasi emissions cap and trade scheme. This policy is critical to reaching the 2030, target acting as key instrument incentivising investment in decarbonisation technologies in industry.
For energy – namely electricity, there is no shortage of capital looking for investment opportunities in greening Australia’s grid. The main issue is ensuring the right risk return profile given the high level of uncertainty in future wholesale electricity prices. The Federal Government’s recent announcement to boost the Capacity Investment Scheme (CIS) expands federal investment to underwrite a massive target of 32GW of new storage and renewable infrastructure, is a step-change in national decarbonisation ambition. However, the details will be important in determining how effective it is in practice at accelerating decarbonisation of the grid and closure of end-of-life coal plants.
The physical development of the grid to support new projects and transport continue to be significant challenges. Mobilising the electricity grid build out is the main impediment to the speed of execution. The government should consider legislated transmission / distribution policy setting to speed up the approvals process and the build out. For transport, clear targets for EV sales, deployment of EV chargers and the introduction of mandatory fuel efficiency standards to bring Australia in line with the rest of the world would assist meeting targets.
■ What level of adoption is your business currently at with the use of AI technology?
Our firm is a responsible and active user of AI, for example, to make advisers more knowledgeable and effective in their client interactions. This application mirrors one of the most common uses of AI in business today: automating workflows based on customer data to improve efficiency, draw analytical connections, and safely predict behaviour.
More such applications will come as AI develops further. To ensure that our firm successfully navigates this transition, we recently published important guidelines governing how AI and Machine Learning (ML) models are developed and tested.
Our new Group-wide guidelines will help our developers deploy models that perform ethically and effectively, preserving trust among clients and remaining in line with regulations. They reflect the UBS Code of Conduct, which address issues like fairness, accountability, security and respect for human autonomy. These guidelines will naturally evolve as we embrace developments and as our regulators adapt with the technology and use-cases and provide more succinct requirements and direction.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Market conditions generally are likely to have the biggest impact on our business in 2024, with the main catalysts being macro-economic and geopolitical shocks.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Generally businesses are finding the right balance but ESG expectations continue to evolve rapidly from investors, customers/clients, government and society. This is likely to continue and, as with any rapid change, there will be times where businesses find it difficult to change as quickly as expectations. That being said, businesses are generally very focused on each element of ESG and recognise the importance of meeting the expectations of all stakeholders.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
UBS has long supported flexible working whenever possible, and we implemented hybrid working protocols firm-wide in 2022. As a result, considering various role and regulatory restrictions, around 93% of our employees globally are eligible to work at home several days a week.
Locally, we have a large number of our staff working flexibly. Each department and team determines their own level of flexibility (based on their roles and regulatory restrictions) and determine their days as appropriate.
To date this flexibility has worked well across all divisions but the majority of our people work from offices for the most part of their time and typically 5 days per week for those in client facing roles.
Wesfarmers, Rob Scott
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The impacts of inflation on costs of living and costs of doing business are making households and business customers more focused on value. Households are eager to find ways to stretch their budgets further and are more discerning about where and how they spend their money. There is also some concern about the risk of future interest rate rises, and more persistent inflation, that is weighing on investment.
Higher mortgage rates are impacting different people in different ways. While some have seen a material fall in disposable income, some people without a significant mortgage, or that benefit from higher interest rates on savings, still have the capacity to spend.
Wesfarmers benefits from having a conservative balance sheet and businesses that are well regarded for offering low prices and great value, and we are confident of performing well relative to our competitors in this environment. Our new OnePass membership program is resonating with customers that are looking to save money shopping across multiple channels and brands.
■ How would you rate the shape of the Australian economy as we head into the New Year?
There are several challenges facing the Australian economy right now, including slowing productivity and rising costs. Despite these pressures, Australia more broadly continues to benefit from population growth, low unemployment and strong demand for many of our exports.
There are risks of further cost pressures in 2024 with additional regulation and compliance costs, and less flexibility in the workplace to adjust to dynamic changes in the market, which will ultimately increase costs if we are not careful. While putting pressure on inflation in the short-term, there is a medium-term risk to jobs, wages and hours worked from the proposed IR reforms.
Compared to many other developed nations, Australia is in a relatively sound economic position, but we need to be careful we don’t make it harder for businesses to invest, take risks and hire or we will see capital and job opportunities flow to other countries.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Australia has the potential to benefit from opportunities in critical minerals, global decarbonisation and our growing population. We also have fiscal challenges to address with an ageing population, rising healthcare costs and weak productivity.
Seizing these opportunities and funding future costs mean we need to create the settings for more private sector investment and entrepreneurial activity. We also need to challenge ways of working and doing business to work smarter and create more value from which we can fund our future obligations.
This requires a rethink of our tax system and aspects of regulation across the federation that were designed for the last century and not fit for purpose today or in the future. The vertical fiscal imbalance means that state spending is more than twice their tax revenue, so states keep drawing on some of the most inefficient and damaging taxes, such as payroll tax and stamp duty, to raise revenue. At a federal level, our taxes are disproportionately focused on workers and companies, and create a disincentive for investment.
Tax reform is politically challenging, especially when it requires co-operation across the federation. To drive meaningful change, perhaps it is time to promote federally-funded productivity payments that encourage states to drive the types of tax and regulatory reforms that will encourage growth, investments, jobs and productivity. The benefits from these changes will flow to the Federal Government through higher profits and taxes which will fund these payments, and set Australia up for the next decade and beyond.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Industry and business have led the way in Australia’s efforts to decarbonise and it is important for the government to continue supporting this momentum, as well as playing its part through policy reform and incentives. By making progress towards its 2030 emissions target, Australia is playing a vital role in global decarbonisation.
Unlocking some of the regulatory burdens across the federation, such as environmental approvals, to accelerate projects without cutting corners would make a big difference. We also need to be mindful that we are in a competitive global environment for investment to fund decarbonisation, and Australia is lagging other major markets, such as the US with the Inflation Reduction Act. An investment allowance directed towards capital investment to support the energy transition and decarbonisation would really accelerate progress in Australia.
For Wesfarmers, we are fully committed to meeting our own emissions plans. Our businesses are making meaningful progress in this space including three of our divisions committing to use 100 per cent renewable electricity by 2025. As a large organisation we understand the importance of supporting global efforts to transition to a low-emissions economy.
■ What level of adoption is your business currently at with the use of AI technology?
Many of our businesses have adopted artificial intelligence and are implementing machine learning and predictive analytics in a range of different areas including supply chain management, inventory availability and product design capability. Improving customer service and providing team members with tools to improve productivity are also key areas of focus.
We will continue to consider the most meaningful and impactful way to use AI and generative artificial intelligence in our businesses. If applied in a considered and ethical way, these technologies can help support improvements in our businesses.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
It is hard to predict the unpredictable, so we tend to focus on the things we can control that will help us navigate external shocks. This means maintaining a strong balance sheet, having numerous platforms for future growth, keeping costs as low as possible and building resilience into our supply chains.
We are very concerned about the potential for further unnecessary and damaging IR reforms in the new year, given the rushed process we observed in recent weeks that has created more complex and costly regulation that many businesses will need to navigate going forward. Any regulatory change that makes it harder or more risky to hire casuals, and reduces the ability for casual workers to benefit from the flexibility and higher rates of pay will be very bad for workers, especially young Australians.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Wesfarmers has been focused on all parts of ESG for many decades and it is embedded in how we run our businesses. We also see that ESG is aligned with our core objective to deliver satisfactory returns to shareholders over the long term.
ESG as an area is evolving fast with changes to reporting, particularly around the environment and sustainability areas. While this may be what attracts the headlines, governance must be part of any company’s foundation and plays a critical role in underpinning broader ESG goals.
We are concerned that the regulatory and reporting obligations with ESG are often targeted towards listed companies, by virtue of being listed, rather than by reference to scale or impact. Regulators should ensure there is a level playing field and not create additional costs and make it more challenging for listed companies.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Flexibility at work continues to be an important part of the way we work and integral to retain and attract talent. As with many other businesses there are certain jobs that can’t be done remotely, especially in retail stores, distribution centres and chemical manufacturing.
There are many roles that benefit from face-to-face engagement. Whether it be benefits in creativity or culture and development, our highest performing teams across the Group are committed to in-person interaction.
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Westpac, Peter King
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The economy has performed stronger than we thought, and this reflects demand being stronger for longer. If demand continues to be strong interest rates will probably need to stay higher for longer to address inflation pressures. That’s the risk.
There’s no question consumers are feeling cost-of-living pressures, meaning many have no choice but to adjust their spending. While there has been an increase in hardship, the vast majority of customers have displayed resilience.
■ How would you rate the shape of the Australian economy as we head into the New Year?
My starting point is simple – I’d rather be in Australia than anywhere else. A slowdown in the economy without a larger reduction in the workforce appears to be in sight.
The key question as I look forward is what happens to unemployment – or what does employment look like, do you have a job, and can you get the hours you need? Strong employment is solving a lot of the issues now.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Shortening the time it takes for development to get off the ground will make a big difference. At the moment, layers of development approval are probably taking too long, so we can improve things there. We need to make it easier to invest and simpler to get projects off the ground.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
We’re well advanced on meeting our own targets and we’re well progressed in setting targets to support our customers, so nothing changes there.
In terms of the nation’s energy transition, the most important thing is to ensure it’s coordinated. It is a massive undertaking but it’s about working collaboratively with government, with industry bodies and businesses to meet these commitments.
Every country in the world is changing their energy mix, so there’s massive global demand for what will probably be scarce resources. So we need to coordinate the buying power of the country to get access to the materials and the labour.
The same applies for the infrastructure projects here. Projects underway should be completed but we don’t necessarily want to embark on big new developments right now in case it puts further pressure on inflation.
Broadly, we need a mix of energy sources and that’s what we’re focused on. Then we need to support customers to transition.
■ What level of adoption is your business currently at with the use of AI technology?
I view artificial intelligence like all technology - how does it help us serve our customers and how does it help us run our business? We use AI in many areas, such as predicting customer needs, providing customers with self-service capabilities and preventing fraud and scams. We’ve been doing this for some time and across the bank we have 400 machine learning, AI and analytics models serving 12 million customers. We’ve been using AI chat bots for many years, and they’ve proven to be a great tool to help customers to get answers to simple questions quickly so our people can focus on helping customers with more complex matters.
Generative AI poses significant opportunities and we’ve invested in a dedicated financial service large language model which will assist our people to access up-to-date information quickly and easily. We have around 1000 engineers using AI to help write code. There’s a number of new initiatives in the pipeline, but responsible implementation is critical. It shouldn’t be innovation at the expense of the security of our people, our customers or the community.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
We’re in an era now in which geopolitical risks are always present and it’s something we watch closely. The most important thing we can do is prepare our business to respond quickly to developing situations as you can’t predict exactly what the event might be.
We’ve provisioned appropriately for credit losses, well above the expected base case. We’ve held strong capital and are well funded. We’ve set the balance sheet up for a more challenging environment if it eventuates.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Westpac has long taken a holistic approach to sustainability – and today that includes taking action on climate change, but also on social risks such as scams and customer vulnerability.
Running a sustainable bank is the expectation of customers, regulators, investors, ratings agencies and shareholders and it presents an opportunity for lenders, like Westpac, who have the expertise to support customers through the transition.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We have a hybrid model at Westpac in which our people are expected in the office 2 – 3 days per week. We believe this strikes the right balance and we trust our people to manage their workloads in the right way.
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Woodside, Meg O’Neill
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
All Australian households are feeling the impacts of inflation and higher cost of living. That’s why it’s so important that we have policy settings that support reliable and affordable supplies of gas. Given its increasingly important role in supporting renewables, we need more gas to help ease the pressures on household energy bills.
Globally, further investment is required to ensure LNG markets remain in balance into the next decade, but rising financing and construction costs are challenging new investment in supply. With most new supply coming from sources outside our own region, Asia Pacific markets are likely to continue to be the premium global market and a source of strong demand for Woodside’s Australian assets.
■ How would you rate the shape of the Australian economy as we head into the New Year?
I’ve been impressed by the resilience of the Australian economy to date, but government needs to remain strongly focused on creating an investment environment that supports new gas supply for the domestic energy and manufacturing sectors. Without that, Australian businesses and the jobs they provide are at risk as the economy slows. Australia is competing for scarce capital globally, so we need an investment environment that assures our trading partners we remain a trusted and reliable supplier of the resources the world needs.
At Woodside, we keep a close eye on costs across our business and at our growth projects like the Scarborough Energy Project we are currently developing in Western Australia. With Scarborough and other projects like Sangomar in Senegal and Trion in Mexico currently in execution, we’re able to build deeper relationships with our contractors and be well informed of any changes going on in industry.
Thorough project execution planning is critical to what we do, but our view of risk is not static and our team actively manages the emerging risks and adapts plans to protect and deliver value.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Reform is needed to resolve ongoing policy uncertainty related to timely approvals of much-needed investment not only in new gas developments but across the energy and resources sectors more broadly. Without certainty around project approvals, Australia’s position as a globally competitive investment destination is challenged and we risk missing the opportunity to demonstrate leadership in the energy transition.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
The biggest shift required to achieve Australia’s 2030 targets will be moving away from coal and towards grids powered by renewables, backed up by gas. So ensuring Australia has access to an affordable, reliable supply of natural gas must be a priority. Woodside’s own emissions reduction targets are aligned with the national goals and we are on track to deliver on them.
■ What level of adoption is your business currently at with the use of AI technology?
Woodside has a long history of embracing technology and building digital capabilities. We believe it improves safety and reliability and reduces costs.
We have already deployed a beta program called Woodside ChatGPT, and are experimenting with other AI tools.
We also see the potential for image and video analytics to provide insights to our operators and technicians, without them manually processing the data.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
The uncertain regulatory environment is creating the greatest external pressure for Woodside at present. Businesses need certainty so we can continue to invest and deliver our much-needed products to customers in Australia and around the world and to ensure we are internationally competitive.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
There are differing and often competing views when it comes to a company’s social licence, and these are sometimes challenging to reconcile across stakeholder groups. But Woodside recognises our operations and growth strategy depend on maintaining our social licence.
Sustainability and ESG performance have always been key to our culture and we welcome evolving stakeholder expectations.
From Woodside’s perspective, integrity, accountability and transparency drive our ESG aspirations and guide decision making at all levels of our business. Woodside’s commitment to these principles ensures we are able to meet the higher standards being set as regulatory oversight of corporate governance increases.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
I believe working and interacting together in person is essential for effective teamwork, collaboration and innovation. We have great office spaces around the world to encourage this. But I know our people value flexibility and believe it’s important to offer it. So we encourage our office-based people to work out a flexible schedule that best suits them and their team.
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WiseTech Global, Richard White
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
For WiseTech, we’re fortunate our growth opportunity is not reliant on market growth which could be impacted by continuing rate rises. The bulk of our growth is from customer wins and expansion of our product offering and we see this continuing.
Our solutions drive efficiencies in international cargo logistics so they resonate with customers in both growing and contracting economies.
In a buoyant economy, our customers get value from our CargoWise product to manage high volumes of trade. Whereas in a challenging economy, our customers adopt our technology to drive efficiencies and enhance productivity, while maintaining their customer service obligations. This makes our business resilient through the economic cycle.
■ How would you rate the shape of the Australian economy as we head into the New Year?
We’ve seen the tight technology talent market ease significantly this year which has substantially increased the number of inbound employment applicants. We receive thousands of inbound job applicants a month and we are actively hiring every month and intend to continue. We continue to work hard to attract the brightest minds to WiseTech and to develop our staff extensively so that they can solve complex global logistics problems.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
We need to reform our education system to ensure that we have a long term pipeline of skilled local talent, particularly software engineers, to support businesses and fuel Australia’s future economic growth across all sectors.
To do this we need to find what prevents students engaging in STEM in order to create much stronger attractions. How do we get more school students to study STEM? How can we support teachers and parents to ensure students are aware of the tech career opportunities open to them? It is essential to provide high quality opportunities for all students to receive world-class digital skills education in a way that sparks engagement and awareness of the opportunities in a digital career. This needs to start early and build throughout primary school and secondary school where it can shape what subjects students study and what high value careers they can therefore choose.
Simply proving computers and internet access to schools is not nearly enough. We need schools, education departments, governments, and businesses to collaborate and invest in developing things like a digital learning platform with a library of high-quality content-driven resources that is engaging, easily accessible and prepares our children for the jobs of the future.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Shoring up the electricity grid so we can get more renewable energy into the system is key to reducing our emissions.
■ What level of adoption is your business currently at with the use of AI technology?
There is a lot of hype about AI. Much of what is described as “artificial intelligence” is not actually intelligent in the human sense. That said, Microsoft has done a great job of taking what is effectively chat GPT, and embedding it across the Visual Studio and the Office Suite as “co-pilot” – we are an early adopter of this feature.
In our own products, we have used machine learning, big data, data analytics, NLP and various other automation techniques for more than a decade. We are using sophisticated event driven automation, workflows, rules engines and data to help companies complete and comply with the detailed classifications and compliance obligations that are required buy, sell and move goods internationally.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Anyone not focused on cyber security as a critical need is risking major disruption and reputational damage. No-one is completely impervious and no single approach is enough. We have been steadily building a “defence in depth” approach and continue to work hard and being as strong and as complete as possible.
Ransomware is a big risk for businesses and a huge motivated for cyber criminals. There are two key things we can do as a nation to make Australian organisations a less attractive target for cyber criminals.
Governments could help massively by banning the payment of ransoms that incentivise criminals and the use of crypto currency to pay the cyber criminals as this is the mechanism by which the ransomware actors can get paid anonymously, secretly, and undetectable.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
We aim to ensure we have the right focus and emphasis on all of ESG and we will leave nothing behind.
However, the materiality lens is really important when it comes to business and its approach to ESG. One of our principles at WiseTech involves prioritising the environmental and social impact areas that are both value drivers for our business and important, long-term challenges for which WiseTech can help drive solutions. Based on this criteria, the priority impact areas we’ve selected are: Education, People & Culture, and Net Zero Carbon.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We have a hybrid working model that combines coming into the office with purpose with the flexibility to work remotely. This blend ensures productivity, supports collaboration and reinforces our culture.
Most of our Australian team members come to the office a few times a month, and many attend more regularly, it depends on the specific requirements of their work type, role and team. It’s not just about having time in the office, it’s about the purpose of that time. For example, we find new hires do better and prefer to do their on-boarding and early experience in the office, so we have built that into our program.
“In addition, voluntary attrition is very low, our employee engagement surveys show our people like the flexibility.
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Zip Co, Cynthia Scott
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
During times of inflation and in a higher-for-long interest rate environment such as we have now, we see demand for Zip’s products increase as customers seek the ability to smooth cash flows and expenses over time. For our merchants, offering Zip at checkout provides an opportunity to deliver new and repeat customers and higher order values.
In FY23 and 1Q24, Zip delivered strong profitable growth in its two core markets of Australia and New Zealand (ANZ) and the US, with cash transaction margin for the core business expanding, supported by higher revenue margins and improved credit performance. These results were achieved despite a significant rise in interest rates, reinforcing the increasing relevance of Zip’s products to its customers and merchants.
■ What level of adoption is your business currently at with the use of AI technology?
Zip already uses predictive AI across several aspects of the business and has done so since the company’s inception. Areas of strong adoption include underwriting models, real-time fraud detection, and personalisation through propensity modelling and our merchant recommendation engine. Our data and machine learning capabilities play an important role in credit decision processes, ensuring Zip’s products are fit for our customers and enabling us to safely process over 72 million transactions a year on our payments infrastructure.
In addition, we’re actively building a road map of generative AI (GenAI) opportunities and piloting a number of use cases across ANZ and the US, including in areas such as ‘plug and play’ productivity tools and a conversation-based application that provides real-time responses to questions about Zip. As GenAI tools gain traction and become more powerful, we’re also committed to ensuring we have the right protocols and safeguards in place across the organisation. This includes educating Zip employees on new GenAI capabilities in a safe way before launching customer and merchant facing use cases.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
In designing and delivering our business strategy across our two core markets, Zip carefully balances the needs and interests of a wide range of stakeholders, including customers, investors, merchant partners, and employees. We also consider our impact on the planet and the broader community, seeking to ensure we meet the expectations of all our stakeholders and create positive, meaningful impacts where we can.
Over the last three years, ESG has evolved to become more integrated across our business strategy and operations. We know that our commitment to areas such as diversity and inclusion, data privacy, cyber security resilience, responsible lending and financial wellbeing benefits our business objectives and contributes to our bottom line.
Another way that ESG is evolving is through the gradual introduction of mandatory reporting frameworks. Given the increasing focus by all stakeholder groups, we see benefits of measuring and reporting on progress against targets.
For example, Zip has improved transparency and accountability by publishing and reporting on our Group DEI measurable objectives (of 40 per cent women, 40 per cent men and 20 per cent of any gender at our Board, Executive, Director/VP, and Manager cohorts by FY26), gender pay equity and gender pay gap.
In FY23, representation of women at all leadership levels either increased or remained stable and we achieved 40 per cent representation of women at Director/VP level. Representation of women on our Board is currently at 60 per cent, including a female Chair and a female Managing Director/CEO. Beyond representation, we also measure how employees of different genders experience life at Zip and seek to close any significant gaps in areas such as engagement and wellbeing. Pleasingly, we found that the difference in employee experience, as measured by our recent employee engagement surveys, had closed between genders.
At all times, governance plays a critical role to ensure alignment of our business and stakeholders and is something Zip is firmly focused on. Our governance approach is founded on accountability, effective delegation, and robust oversight to facilitate informed decision-making.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
During the pandemic, Zip like other organisations needed to adapt quickly to changing circumstances including where and how people worked.
During this time, we embraced a fully flexible approach and prioritised giving our team flexibility and choice while aiming to ensure all of our approaches were equitable and accessible no matter whether working from office, remote or a combination of both.
While the majority of our US team works remotely, in ANZ we have recently evolved our way of working to adopt a blended model which prioritises flexibility but also confirms a minimum expectation of at least two days in an office location.
Our head office move to a new, NABERS 6-star energy rating building in George St, Sydney was a deliberate choice to create an office environment that fosters team collaboration and connection.
We regularly check in with our team, including through quarterly pulse surveys, and this feedback enables us to keep evolving our practices.
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