Treasurer Josh Frydenberg wants to lift the nation's productivity rate.Credit:Alex Ellinghausen
The government's challenge to corporate Australia follows a string of substantial buyback offers aimed at boosting share prices by reducing the amount of equity on issue. Companies have also favoured investors through special or increased dividends. Boosting shareholder returns can reduce the amount of capital available for investment.
Qantas will have bought back nearly a third of its shares in the past four years following a fresh $400 million offer last week. while packaging giant Amcor on Wednesday unveiled a $740 million share buyback in Australia and the United States. Amcor will buy back its own shares using the proceeds from its recently sold packaging plants in Europe and America. AGL earlier this month announced plans to buy back up to 5 per cent of its shares over 12 months.
Perth miner Fortescue Metals Group will hand down its full-year results on Monday,which are tipped to feature a bumper dividend on the back of surging iron ore prices.
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UBS analyst Pieter Stolz told investors last week that while earnings season had been marked by"soft"earnings performance,large companies have been providing bigger than expected returns.
"The main upside surprise this reporting season has been to dividends. We find that 36 per cent of large cap companies have beat expectations on dividends,while only 8 per cent of large caps have missed,"he said.
Mr Frydenberg's speech will include a promise to make productivity an agenda item at the next meeting of state and federal treasurers in October. He will also reveal the government is actively considering which projects from its $100 billion 10-year program can be brought forward to stimulate the economy.
Reserve Bank governor Phil Lowe told a summit at Jackson Hole,Wyoming,on the weekend that central bankers now have a limited ability to cushion the global economy from the fallout from"major political shocks"like Brexit,pro-democracy protests in Hong Kong and the worsening trade dispute between US President Donald Trump and Beijing.
Mr Lowe told his international counterparts that infrastructure investment and structural reform in economies would have much greater impact than cutting interest rates but warned politicians were reluctant to act.
Minutes from the RBA's last meeting note dividends"could"provide more incentive to spend and stimulate the economy.
Former RBA governor Glenn Stevens warned in 2014 that a focus on returning cash to shareholders may have stifled the investment in new production needed to rebalance the economy away from mining.