Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant the accuracy of closed captions. These are derived automatically from the broadcaster's signal.
ABC Asia Pacific News -

View in ParlView

(generated from captions) Good morning. Welcome to the

program. I'm Alicia Barry. In

business today, defying the

gloom. Exports and spending

boost Australia's growth.

Cautionary note - China says

unemployment is still rising.

And playing through - the new

deals being done on the

fairways. Those stories are

coming up shortly but first

let's take a quick look at the

markets.

For more on the market action

I'm joined by Chris Weston from

IG Markets. Good morning,

Chris. Wall Street was sold

down? Yes, we saw the Dow down

0.7%, the S and P down 1.3% and

I think that's going to happen.

We have seen in the last four

sessions 5.7% gains. We're

seeing a bit of consolidation

in the markets. The companies

are trading at earnings of 15.5

times which is the highest

level since October so people

looking at valuations and

saying they're probably a bit

expensive and we're due for a

bit of a pullback. That's what

we saw. We saw

weaker-than-expected employment

data and some economic data

that helped the market to a low

of 923 on the S and P. The

market was dragged down by the

oil price which fell, dragging

stocks like exon and sev Ron

down. Can you run us through

that raft of US data that was

released? We did see the ADP

private sector job numbers

coming in, about 532,000 jobs

lost, that's about 7,000 more

than expected. We saw mortgage

applications drop 2% to

negative 16.2, we saw the ISM

nonmanufacturing composite

slightly worse than expected

and saw factory orders growing

0.7% but not as good as most

people were pricing in. How did

markets react to US Federal

Reserve chairman Ben Bernanke's

comments about the economy?

Pretty positively. We picked up

on the lows in the S and P of

923, rallied 0.7% into close.

Ben Bernanke is worried the

Budget deficit in the US is

spiralling out of control and

needs to be contained. The

Budget deficit in the US by at

the end of the day of the year

could reach 1.85 trillion,

threatening the stability of

the US and US dollar if it's

not contained. That's what he

spoke about. We will have more

on what the Fed chairman said

later in the program. How is

the session shaping up on

regional markets today? We can

will see a bit of

consolidation. We did reach

4017 on the ASX yesterday.

We're looking for that to open

around 39.71, down 1.2 or 1.3%.

Weakness in oil stocks and

financials with NAB going

ex-dividends today. The hang

seng is opening around 153.60

so looking at a 183.60, sorry,

a bit of weakness on the market

and consolidation which can be

healthy. Oil has slipped from

recent highs. Where where is it

trading now? We saw the August

contract for crude down 3.7%.

We're trading just above 67

bucks at the moment. We saw the

inventory report come out worse

than expected, saw increase in

stock piles up 2.9 million

barrels, that was expected to

show a small decline. That

shows the demand picture isn't

there to support barrels at

$70. We saw weakness there and

saw the demand picture for

gasoline fall. It looks like

the short-term trend is down in

oil. And economic data, what

can we expect today? We've got

the Australian trade balance

figures out at 11:30, we're expecting a slight contraction.

In the US we're going to see

the employment figures, the

continue claim, the jobless

claims coming out tonight in

the leadup to the unemployment

rate. That's going to be looked

at carefully. Thank you for the

update. That was Chris Weston

from IG Markets. Now let's take

a look at what's happening in

currencies and commodities.

China has helped Australia

defy the global downturn and

post the best growth figures in

the industrialised world.

Chinese demand for iron ore

provided a solid foundation for

net exports which in turn

underpinned a surprise.4% ride

in GDP in the March quarter but

the result doesn't disguise the

fact the region's fifth-biggest

economy is experiencing

symptoms of a recession by just

about every measure. A positive

number in a negative world looks mighty good and it cured

the Treasurer's insomnia. I

can go to bed at night and

sleep now, knowing... Gee, I'm

glad you can. Knowing we've

made a very significant

difference here. Also coming to

Australia's rescue was the

biggest trade surplus on record

after imports collapsed and

exports held up. Resilient

household spending helped too.

Certainly the combination of

cash from the Government and

the China factor has been a

support to the economy. But

the overall number on domestic

activity showed a shrinking

domestic economy, dragged down

by collapsing business investment which doesn't auger

well for jobs and surveys

suggest it isn't going to

improve. Next two to three quarters, business investment

will be under considerable

pressure. Right now, most parts

of Australia are under

pressure, with SA the only

State to grow during the

quarter, while demand and

spending in NSW and Queensland

went backwards for two quarters

in a row. Some analysts expect

the national economy to follow

as weaker commodity prices work

their way into future numbers.

So what we can see there in

exports is that that strong

picture will start to

deteriorate quite rapidly. We

have maybe another couple of

quarters of negative growth

before we can actually put this

recession well and truly behind

us. Financial markets didn't

get hung up on any gloomy

details, that positive GDP

number gave both the share

market and the Australian

dollar a healthy boost. In

contrast to Australia's rewill

havegrant growth, China has

issued a fresh statement on a

Government website, China's

State council has acknowledged

unemployment is worse scpning

the likelihood of a quick

rebound in exports is fading.

3.6 million juBs were created

in Chinese cities in the first

four months of the year, down

from last year. The registered

urban jobless rate was 4.3% at

the end of March but doesn't

take into account un employ ed

migrant workers. The outlook

for exports remains bleak for

the rest of the year. The US

Federal Reserve chairman Ben

Bernanke says the US economy is

moving towards an expected

recovery. Appearing before a

House of Representatives

committee in Washington, he

gave a relatively upbeat

assessment of the US economy,

saying now is the time to start

reining in deficits, with signs

of growth expected by the end

of the year. Maintaining the

confidence of the financial

markets requires that we as a

nation begin planning now for

the restoration of fiscal

balance. But Mr Bernanke says

concerns remain with a recent

rise in demand for longer term

Treasury securities and

fixed-rate mortgages, a move he

believes indicates worries

about the large Federal

deficit. Signs of a turn-around

in the UK have some economist s

calling a bottoming of the

economy in the first quarter.

Service industries from banks

to airlines unexpectedly grew

in May for the first time in a

year and there's finally some

reasons for optimism in the

construction industry. The

builders are back. On this site

just outside Cambridge for it

first time since the autumn, their employers are confident

enough to start building new

homes again. Last October, we

came here and found that work

had ground to a halt, little

more than a third of the

planned 900 homes had been

finished. The decision was

taken to down tools and

concentrate our efforts on

selling. But the climate's

changed and this local estate

agent has told the builders he

thinks the buyers are back.

They can see for themselves

stock has sold out, we're in a

position where we've almost run

out of everything we have to

sell and so they're in the

business of building houses to

sell. We want to start

building, which they are. Last

summer we visited this site in

Northamptonshire. They were

finishing off these

million-pound homes, knowing

they wouldn't sell in a hurry.

And nearly 12 months on, they

haven't. Just one of the eight

houses has gone, there's one

fed offer but the rest are, for

now, empty and unwanted.

Confidence is returning

slowly. The boss think there's

may be tentative signs of an

upturn. If I was gloomy last

year, I'm a few steps up the

ladder now. We're not over the

top by any means. Clearly the

house-building industry

believes that there are signs

of improvement but nobody's

talking about any marked

increase in sales and at many

sites like this one there's no

prospect of building beginning

again any time soon. And the

couple of workers still on the

site are under no illusions

about how bad things are.

They've had to take a pay cut

to hold on to their jobs. I've

never known it as bad as this.

I've never known so many of my

friends out of work and

everybody's saying they're

suffering the same, down to two

or three days a week and some

are also taking wage cuts the

same as ourselves. Industry

leaders say visits to sites by

customers and reservations of

new homes are up a bit on last

year so not quite as grim as it

was but there's a long way to

go before the building trade is

back to business as usual.

Returning now to Australia's

GDP figures and to look at the

impact of that good economic

news on the Australian dollar,

I'm joined by Richard Grace,

senior currency strategist at

the Commonwealth Bank. Good

morning, Richard Grace, welcome

to the program. The Aussie

dollar shot up on news we

dodged a recession so investors

think Australia's a pretty safe

bet? Is Yes, I think that's

part of the is story

definitely. Currencies are a

relative price and Australia's

economy is showing remarkable

resilience to the global

recession. For instance, the

0.4% growth we saw in

Australia's GDP compares to

close to 2% contraction in the

major G7 economy those the

relative performance of Australia's economy is certainly helping the

Australian Dollar. Two other

factors are also giving a lot

of support to the Aussie, that

is the improvements in the global economy which means

commodity prices remain

elevated, leads to income if

flows into Australia's economy

and the expected growth down

the track is also supporting

the Australian Dollar and the

third factor is the weaker US

dollar. And another thing I suppose that might be helping

it is it's at an 8-month high

against the yen. We're really

seeing that carry trade ramp

up? Yes, but let's not forget

we're at an 8-month high

against the Euro, against the

Canadian dollar, against the

Swiss frank, against the

Singapore dollar, we're at an

8-month high on a broad trade

weighted index which means the Australian Dollar is doing well

against a host of major currencies with which we

trade. Could we see that our

soaring currency might hurt our

exports? Yes, it's possible.

That didn't show up in the

March quarter, in fact

Australia's real exports rose

2.7%, defying the export trend

we're seeing around the rest of

the world. Most of the

appreciation in the Australian

Dollar has come since early March so it would be very

difficult to repeat that very

strong export performance in

the June quarter and subsequent

quarters. Having said that a

lot of the countries that

Australia exports to, and

mainly the Asian region, are

growing much better than we're

seeing in the European or US

region so that is a reflection,

that the underlying demand is a

reflection more than

Australia's currency price of

Australia's better export

performance. No doubt there

will be head winds going

forward. How sustain sble the

run in the Australian dollar

and where can we expect to see

it in the short-term? It is

pretty susanable. Our forecastvise the Australian

Dollar going to 89 cents by at

the end of the day of June next

year, so and 12 months from

now, that's based on the major

three factors - further

weakening in the US dollar,

Australia's relative

outperformance and further

improvements in the global

economy even if the

improvementerise somewhat slow

and sluggish. Just a reminder

the Asian region will be the

first region to come out and

that's where Australia exports

most of its goods. Now so you

say the US dollar weakness has

really worked in the Aussie's

favour. How so? As the US

dollar weakens, it pushes up

all currencies and that of

course includes the Australian

Dollar and there's a number of

reasons why the US dollar's

weak but think of the US dollar

as the benchmark currency

globally so as that falls all

currencies tend to rise. And

let's look at the reasons the

US dollar is weak at the

moment. I mean, the main theme

in the currency market seems to

be a bit of a revolt against

the greenback? That's right

there, is concern over US debt

sustainability levels which our

Fed chairman addressed last

night, somewhat helping the US

dollar temporarily. The

overwhelming trend tends to be

to a weaker US dollar over

concerns about debt

sustainability levels. We saw

the UK credit ratings are firm

and there are concerns over the

UK's debt levels and the US's

debt levels are larger. For

eight of the last 10 months the

US hasn't been able to fund its

current account deficits

through portfolio inflows, it's

had to rely on FDI. The third

factor weakening the US dollar

is a little bit of temporary

deflation in the US which makes

financial assets in had US, particularly those associated

with the housing stock or

corporate bopedz, a little less

attractive so investors are

diversifying out of that. Think

of the US dollar in terms of

world reserve currencies, more

than 65% of central banks hold

their reserves in the US dollar

and they're diversifying that

level out a little bit into

Euros which make up 25%

stirling makes up 4 and yen 3%

and a mixture of other

currencies. It is a little bit

of caution, is the major reason

we're seeing the US dollar

weaken. There were reports

some Asian Central Banks will

maintain their investment in US

securities even with the US

ratings downgrade. That helped

the greenback overnight, didn't

it? Yes, they have. To you

have got to think of the big

picture. The US is still the

world's major reserve currency,

it has the world's deep and say

most liquid financial markets

and while Central Banks and

other reserve managers will

look to diversify out of US

dollars, there's a limit to

where they can go. They will be forced by nature to hold some

in US dollars. Even a small

portfolio shift will be enough

to push US dollar down by a

good few per cent . The outlook now, can we expect it to hover around these lows and how will it impact a global recovery if it does? I think the low US dollar will assist the global recovery because the world economy needs the world's largest economy, that the US economy, to improve and a lower US dollar gives the US a competitive depreciation so further strength through the export channel in the US economy will benefit the rest

of the world as the US in turn starts to import from the rest of the world. That will ensure the global economy recovers so the thing that we're seeing with this low US dollar, while I think there's further down side, it's a good thing in the scheme of things. We have to leave there for today. Richard Grace, thanks very much for your time. Thank you, Alicia. The fact that Australia has dodged a recession for now has the retail industry breathing a sigh of relief. At a national conference in Sydney, retail bosses credited the Government's stimulus measures with helping their sector to do better than expected in sales in the first quarter. It could have been the winter weather or

the chilly economic climate

that kept shoppers away from

the start of half-year sales.

Enfact it appeared there were more staff than customers and

in a bid to improve the ratio,

the David Jones boss was trying

to drum up customers at an

industry lunch. We are open

late tonight so that's still

available to everyone here.

While consumers appear sales

weary, confidence among

retailers has been lifted by

retailers has been lifted by

GDP figures. I think the

overall numbers you have to

take some degree of reassurance

from them. The head of

Woolworth said the Government's

cash handouts kept the economy

going. There will be debate on

whether all the money was spent most efficiently or not but you

have to give them a great deal

of credit for getting on the

front foot and making sure the

economy didn't stall. The head

of Coles, Woollies, Bunnings and

and David Jones hope the growth

numbers will crack the cycle of

bad news and boost consumer

confidence. The way we come

out of this little downturn we're going through at the

moment will be led by consumer

confidence, as it has done every other time in a

recession. Mr Luscombe said a

fee factor in any recovery was

employment and Treasury

forecasts of an unemployment

rate at 8.5%

rate at 8.5% by 2011 might

prove pessimistic. If we have

another quarter of positive

growth, I would think it would

be a good case to go back and

relook at those numbers. If we

can manage to keep as many

Australians in jobs as possible

then I think, given that China

has sent a signal to the world

that they're up and in business

again, then the $is no doubt we

can actually come out, in my

personal belief, a little bit quicker and a

quicker and a little bit

stronger than perhaps we

thought a week ago. But

judging from the lack of

traffic at the start of the

winter sales, consumers will

take a while to warm to an

improving outlook. Many large

corporations may be in the

midst of deep cost cutting but

it's been a bumper year for

executive salaries. Australian

unions are calling for a cap on

executive pay at 10 times the average worker's salary,

average worker's salary, while

in the US a survey has revealed

that despite huge job losses,

bankruptcies and collapses,

executive pay keeps going up.

As the queues grow at job

centres in major developed

economies, anger is building

that the top end of town does

not appear to be sharing the

pain. Look what happened with

Telstra, $30 million paid to a man who spent

man who spent four years here,

complaints went up by 250%,

8,000 workers got sacked and

40% of the shareholder value

crashed. Is that reasonable?

No. The Australian peak union

body, the ACTU, has called for

a cap on executive pay of 10

times the average salary, argue

that workers' salaries are

already regulated. We want to

see a base salary, we want to

see no taxpayer dollars go

see no taxpayer dollars go into

amounts of salary more than a

million dollars. We want to see

transparency and we want to see

the rules that the Prime

Minister himself has proposed

that decouple short-term

profit-taking bonus payments

from the longer term sustainable responsibilities

that a CEOhead have. Business

groups have described the

proposal as

proposal as unworkable but in the United Kingdom the

Government is under pressure to

act, linking performance to

pay. A recent survey there

found the opposite is

happening. While the value of

Footsie 100 companies fell by a

third, CEOs took home on

average cash bonuses of a

million dollars each. In

principle, executive remuneration should be linked

to pay, however, what we have

seen in recent years is a number

number of share schemes have

paid out at only average

performance or below average

performance. The reason chief

executives are paid so much is

they're supposed to create

valuen a long-term basis. Unfortunately in the short-term

some of this hasn't worked out

but on a long-term basis

hopefully it will. The other

factor is you have to attract

these people in the first place

and it's a high pressure job

and if the rewards aren't there

people aren't going to do

people aren't going to do

it. The rewards keep coming

with shareholders of Britain's

biggest advertising group, WPP,

giving the thumbs up to a new

bonus scheme despite internal

opposition. Sir Martin Sorrell,

the new chief executive, stands

to make more than $100 million

from the deal, further fuelling

concerns that good despite the

biggest recession for decades,

for the leaders of Britain's biggest companies the streets

and are still paved with gold.

The region's biggest information technology trade

fair is under way in Taiwan,

showcasing the latest in mobile

computing tools. Nearly 5,000

exhibitors are vying for new

contracts with a range of net

books, touch screen technology

and budget convs gadgets. Net

books are velatively small

books are velatively small

laptops designed for budget and

technology. Apple are unveiling

slim laptops with more

processing power and bigger

screens and for the first time Chinese companies have a

presence, with 100 companies

displaying their wares. Despite

the bullish growth figure,

corporate Australia is still

very much in belt-fighting mode

ask that means

ask that means businesses will

continue to scale back

indulgences like corporate golf

days and interstate

conferences. Mark Twain once

quipped that golf is a good

walk spoiled. While some might

agree, the corporate golf day

is often seen as a way to build relationships and clench a deal

but that thinking is being tested in the current economic

climate as firms look to cut

discretionary spending. There are a lot

are a lot of people that aren't

coming to golf days, who think,

"Hang on, we've just got rid of

40% of our people in our

office. I can't be seen going

out doing a golf day." Matthew Laverty has been running

corporate golf days since 1995,

hosting around 120 events each year. While the number of

functions is holding up, his

clients are often choosing to

run them with fewer

participants. In the current market, there's

market, there's very much a

demand for smaller events,

companies don't want to go out

and spend the $25,000, $35,000

running a golf day. They're

more inest forred in small

groups from 20 to 32, getting

their key clients out on the

course. He argues there's no

other event where a business

can mane tain a captive

audience in a relaxed

environment for a day. I

environment for a day. I have

got a couple of complaints at

the moment who have spent more

money than they normally spend

on a program because they feel

it's an ideal time to get

market share. It's not just on

the golf course where companies

are scaling back entertainment

budgets. Leanne Wilson says

there's been an 18% drop in

demand for her company's event

management services since

November. Some companies,

rather than going to an island

rather than going to an island

destination for their

conference, they're staying in

major cities. They're spending

the same amount of money but

it's more the perception of how

they're looked at. Sales conferences and Government

meetings are resilient but

Leanne Wilson had to rethink

her business strategies. Staff

are actively marketing to

clients and Happenings is

offering specials in conjns

offering specials in conjns

with hotel chains. It is a

matter of trying to keep

covering costs of our fixed

costs for Happenings so I don't

have to put off staff and I can

keep the staff employed. But

Leanne Wilson and Matthew

Laverty are both optimistic

about the future, confident

that their services will

continue to be needed. I have

no doubt we're in for a hard 18

months or two years but I

believe once it comes

believe once it comes back,

corporate golf being very good

value for dollar, I think it

will always be around. And

even in a downturn, ha Matthew Laverty still has enough

customers who think a bad day's

golf will always beat a good

day's work. Well now let's take

a look at what's making

headlines around the region.

The Standard reports on yesterday's 1% rise in Hong

Kong shares, take the index close to the 19,000

close to the 19,000 mark. The

'Financial Times' examines

comments by the US Federal Reserve chairman Ben Bernanke

that Congress needs to act now

to bring down long-term Budget

deficits. The Wall Street

journal looks at the same

story, saying the US Government

couldn't borrow in definitely

to meet the growing demand on

its resources. That's all for

this edition today. I'm Alicia Barry. Thanks for joining

Barry. Thanks for joining me.

Enjoy your day.

Closed Captions by CSI