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(generated from captions) prediction. One of the most

disparating things, this

emphasis on the Opposition must

get their costings right. It's

inevitable they can't. It's

more important to have

policies which Labor have

announced but I'm sure the costings are right, but they're

bad policies. Cash clunkers is one example. The

Opposition in future should

have access months ago to

Treasury and finance so they

can have things costed and this

silly debate disappears. Karen? We focus

correctly on the marginal seats but a lot of campaigning is

going on in safe seats and this

is about the primary vote. It

helps to get the primary vote up for it's also about money. They

get $2.31 per primary vote if

they get more than 4%. These big parties are now also

campaigning in safe seats

trying to get the coffers full for next time. Malcolm? So many

things decide election results

but the seat of Dawson, the

Bowen races, this weekend will

be critical. I think there are

some events there which will possibly decide the outcome of

that election. A bit of biffo

in the campaign? A bit of biffo

at last, a bit of knuckle what

we've been looking for. The last word. for the week. An election

special next Sunday morning.

We might be trying to figure

out who won. For now, goodbye.

This week we look at

the three big privatisations of

the '90s, Commonwealth Bank,

Qantas and Telstra. All

produced vastly different out

comes for those who bought them

off the Government. It's the

good, the bad and the ugly.

Here's a graph of how they

performed as listed entities.

The Commonwealth is up,

Telstra's still 18% under on T1

and even more disastrously, 60%

down on T2. Over the same

period the All Ordinaries is up

almost 200%. So we'll take stock of where the three of

them stand today. We'll

interview CBA chief Peter

Norman and Qantas's Alan Joyce

and talk Telstra with leading

telco analyst Ian Martin of

RBS. This Program Is Captioned


In First Person, turning the

tables, how small business is

adapting to the post-GFC world.

We've had a relationship with

our bank for a long time. We've

been with them for 20-odd years

and been through a lot of hard

times but also some good times

together but all of a sudden

that history between us really

had a lot less importance.

First, with the latest business

and market news here's Jayne

Edwards. Thanks, Alan. After a

terrible week, Wall Street

investors took a breath on

Friday with the indices

drifting up and down throughout

the day on thin volumes and all

closing slightly in the red.

Figures show a slight rise in

retail sales and marginally

improved consumer sentiment

gave the US share market a bit

of a reprieve but those numbers

will be tested next week when a

clutch of big US retailers

report their earnings. The

sell-off on world markets was sparked by the Federal

Reserve's decision to loosen

monetary policy further while

saying the pace of recovery is

likely to be more modest than

anticipated. The oil price also

slid by 6% this week on

expectations of lower demand

while, in company news, the

chief executive of car maker

General Motors resigned

unexpectedly after announcing

GM's biggest quarterly profit

in six years. Over in Europe,

Germany has reported its strongest economic growth since

reunification, up by 2.2% in

the last quarter. On world

markets over the week, the US

and Japan fell sharply, the UK

and Europe had smaller declines

and our local market erased its

gains of last week. With news

on Australian shares, here's

Tom Elliott. As you've just

heard, the Australian stock

market sold off pretty heavily

during the week in line with

other share market indice said

around the world. Now we are in

results reporting season and as

always there are both good and

bad news stories out there.

Just a word, we know the market is bearish at the moment

because good news is ignored or

maybe has aed myly positive

impact on share prices but bad

news is being seized upon and

we're seeing double-digit percentage falls in big company

share prices. First let's look

at some of the bad result s two

of the nation' biggest banks

both disappoint ed the market

but did report profit results

well into the billions of

dollars but the growth figures

and outlook weren't that great

and as a result their share

prices fell heavily. Telstra

was hit hard, more on that later. Computershare told the

truth about its outlook and was

punished for doing so and

building product company James

Hardie saw its shares fall

heavy during the week. On the

positive side - and the were

some good news stories around -

two retailers, JB Hi-Fi and

Myer, actually excited the

market in a somewhat muted sense, both reported fairly

positive outlooks and saw their

share price said rise accordingly, also Coca-Cola

Amatil up strongly on a good

rise in earnings from the

previous year and good outlook

for the period ahead and

although that was somewhat Transurban had a good result

muted by the fact its chairman

David Ryan was forced to resign

late in the week. In takeover

land, Sigma was forced to deny

rumours its American suitor

aspen had decided to lift its

bid to 65c a share, remembering

aspen first bid 60, dropped to

55 and may be lifting to 65.

One of the longest running

rumours on the Australian stock

market, will Alcoa finally mop

up the minority in Alumina,

Alumina's share price rose

strongly in anticipation that

that might occur. Winner of the

week is AXA Asia Pacific, up

7.5% after the ACCC said it

would take more time to have a

look at NAB's revised takeover

bid. Loser of the week,

however, is Telstra, down

almost 12% after the company

disappointed many with its

earnings outlook. What's a poor

banker supposed to do? Coming

out the worst financial

maelstrom in 80 years, the Commonwealth Bank this week

delivered a record full-year

profit of 6.1 billion and an

unexpectedly large jump in

dividends, up almost 50% but

no-one's happy. Investors

dumped the stock and the public

called for a bank superprofits

tax. I spoke to the

Commonwealth Bank's boss Ralph

Norris after the dust from his

results had started to settle.

Ralph Norris, you've had a big

record profit of 6.1 billion

but it was all in the first

half, wasn't it, the second

hoofl wasn't so if good? No

Doubt the second half has been

difficult on two counts. The

first count the pricing has

been significantly more

competitive in the second half

particularly in the first

quarter of the second half and

then as the half progressed we

did see a slowing in demand so

there's been a softness in

business condition as well so

those two things together have

put a bit of pressure on the

business during the second

half. And is that why you're

quite cautious now about the outlook? I think it's more

about prevailing economic

conditions and I think if you talk to most people that over

the last couple of months

there's No Doubt there's been a softening, we've seen a reduction in the demand for mortgages and overall I think

that there's been a lot of

issues internationally that

have obviously compacted upon

local sentiment and business

confidence is obviously down.

One of the things that we do

find a little hard to

rationalise is the very strong

consumer confidence but that's

not really translating into

expenditure or into house

sales. Is there also a

structural overlay as well as a

cycle, by which I mean that

households and businesses are

reducing their debt, restructuring their balance sheets at the same time as the

economy is softening a bit so

there's two things going on at

once? I think we have a situation here where there are

a couple of factors at play. I

think No Doubt we saw during

the last year a significant

pay-down of debt by the bigger

end of town, there's No Doubt

that there were a lot of equity

raisings which led to a lot of

debt being repaid. I think it's

also fair to say that we have

seen an improvement in arrears

rates on consumer loans, we

have seen an increase in

deposits so there's No Doubt

that I think that people are

being a bit more cautious in

approach to personal balance

sheets and I think small

business and the like are

taking a view that economic

conditions are still somewhat

uncertain and therefore are not

embarking upon any major

project et cetera so I think

there's a combination of

factors there but when we look

at the underlying performance

of the Australian economy it is

performing very well. Trade

surpluses are very strong and

all the leading indicators are

that we would expect to see

some improvement in the second

half. That's not particularly

relevant to you if you're not -

if no-one's borrowing any

money. I think we're going

through this period where

obviously there's been a lot of

choppiness in the news out

there and while I think that

there is a degree of caution,

looking at the forward economic

forecasts by our economists

here, they're still reasonably

positive about their growth in

the economy, growth and credit,

but I think it's fair to say

that we're going through a

period of some caution. And

there's been a lot of

unhappiness with the amount of

money you made, $6 billion

also. You would probably say

you've gut to relate that to

assets and capital and so on

but in fact the number has got

the politicians jumping along

with everyone else. I think,

as I made the point at the

results presentation, this is a

very big business, it has

assets that is loans of

approaching $650 billion and if

you look at what is regarded as

the international benchmark for

reasonable returns by banks, 1%

return on hose assets after tax

is recorded as being reasonably

appropriate and in our

situation we're a little bit

under that so I don't see that

the profit is exorbitant in

relation to the size of the

business. The business is a

very big business and as a

result of that you'll expect to

see a profit number of

comparative size. Oveling you

would say that but the

Government has shown a

propensity to impose a super

profits tax on the mining

companies. Do you have concerns

they'll do that to the bank s?

Certainly as far as profit

taxes on miners et cetera, that

was all about resources that

are fundamentally owned by

Australian citizens and I it's

fair to say that the commentary

the Treasurer's made this week

is he would not see a necessity

for placing a super tax on

banks. The other question is

Bankwest, the acquisition, you

lost 10% of their loan book or

at least 10% of their loan book

has disappeared. You mustn't be

happy with that I'mrapher not

happy about that obviously but

it's fair to say we bought that

bank at a very good price. The

price of the book after the

post-acquisition adjustments

was 0.7 times book, this has

effectively taken it back to

the original offer price of 0.8 times book and while I'm not

happy about that it's still a

good buy and if I had the

opportunity to buy more banks

at that start of priceven with

the problems we've obviously

found inside Bankwest I'd do it

all over again. Are you sure

you've found all the crook

loans in Bankwest? I think

it's fair to say that when I

found at that we had problems

there I indicated very directly

that we needed to undertake an in-depth review of the whole

book at Bankwest, all of the

performing loans, and this is

ready the situation where we

found that loans were

inappropriately rated from a

credit quality perspective.

We've adjusted those rates and

the security supporting those

loans in some respects was

overvalued and I think it's

fair to say that the people

that have done that are a team

that have gone from Sydney to

Perth, we've used some external

advisers as well through that

process because it was

obviously a process that took

some time and a lot of effort

and I have to say that I think

the people that have undertaken

that task have done a very

rigorous review so I'm

confident that we have that

pretty much nailed down. Thank

said for joining us, Ralph Norris. Thanks very much,

Alan. A day after the

Commonwealth's effort, Qantas

reported another fall in

profits, down about 4% to 117

million and again failed to pay

a dividend yet investors were

reasonably happy. I spoke to

Qantas chief Alan Joyce about

the outlook and whether there

are at last some blue skies

ahead. Alan Joyce, it looks

like the improvement in profit

is mainly down to cost cutting.

Is that right or has there been

a pick-up in air travel? We've

seen a good cost performance

for Qantas this year with our

key futures program dlifrk more

than the 500 million we

outlined to the market at the

start of the year. It achieved

a $533 million improvement.

Pleasingly, we are seeing an

improvement in the yields. The

first half of the year was

impacted quite severely by the

GFC. In the second half of the

year, as the business market started travelling again and

the premium markets came back,

we've seen the Qantas airlines

yields improve. For example, in

the last quarter Qantas

International yields were up

12% on the prior year so

there's a combination, I think,

of good news stories in these

results, good cost containment,

good cost management but at the

same time there were an uplift

in revenue as a result of

what's coming out of the GFC. When we spoke this time last

year you told us that the

London and LA routes were losing money and that was

causing in facthe whole Qantas

airline to lose money. I notice

you've cut capacity in the

international by 10% but are

the London and LA routes still losing money? That's right,

Alan, and you're absolutely

right, we did talk about the

international business being

more impact ed by the global financial crisis than any other

part of our business because

the UK and the US are a huge

proportion of that business and

those two economies were also

more dramatically affected by

the GPC we did see those routes

go on to losses. If it wasn't

for the volcanic disruptions

that cost us $46 million in the

last quarter of the year the UK

route would have gone back into

profits and it's pleasing we're

seeing an improvement in the US

route where our Australia to LA

service is getting close to

break-even again a big

improvement to where it was

originally. Overall, the international routes are still

running down the Qantas

numbers. Domestically, we're

seeing a big improvement on

Qantas, international is

depressing the numbers a bit.

Are you going to leave the international capacity where it

is? Any signs of increasing

capacity there? We are

planning to stay at that

minimum network now. We don't

plan to take any more capacfy

out and when we see the market

returning, which it is starting

to return as I said in the last

quarter we started seeing

positive signs there, we will

look at growing international

markets. As we have in domest

ic, for example this year in

the Qantas domestic business

we're going to grow it by up to

8% because the premium market

has returned and the returns

have returned to our Qantas

domestic operation. And is

business travel picking up

generally? It is coming back

generally. There's been

patchiness. The Australian

market is very strong and the business and premium market

here is coming back pretty fast

and we're seeing patchy results

around our international

network but there are very

strong returns to business

traffic in the Asian markets as

well. The UK and the US are lagging behind the other

markets, as you would expect with

with the lagging recovery of

those economies. Airlines had

an unfortunate habit of

flooding the market with

capacity any time there's any

sign of an up turn. Do you have

any concerns this will happen

this time? I have to say during the global financial

crisis we had a huge amount of

capacity being added to the

Australian market from a lot of

our competitors anyway, Alan.

There wasn't any difference.

The international capacity

growth into Australia was double digsote I don't expect

any change. We've been coping

with huge additions of capacity

into this market. What's very

important for us though is

we've maintained our corporate

market share on the key markets internationally and for

internationally and for us it's

all about that corporate market returning and starting to flow

again. That's where we get the

best leverage so we think that

particularly in the UK and that market's starting to come back,

it will probably be a bit slow

with the UK recovery but we're

fairly optimist ic about the international markets coming

back into profits. Jetstar's

also growing quickly, now up to

350 flights a day on 98 routes

which is about five times the

volume that it was five years

ago. At what point does Jetstar

start to cannibalise Qantas,

the main airline? I think they're absolutely

complimentary and there's no

discussion favouring one over

the other because we believe

they both can grow. I remember

in the midst of the GFC people

were saying to the preme - that

the premium market's dead and

will never return. We committed

our selves to investment in the

premium market, committed

ourselves to get $100 million

last year in developing

Qantas's product in

infrastructure because we knew

the premium market would come

back. At the heights of the

fuel crisis people believed the

low cost model was dead when

fuel reached $145 a barrel

because low cost carriers had

difficulty coping with it and

now look at the returns the low

cost carriers are generating.

Do you think the move to low

cost carriers will provide a widening differential between

the front and back of the plane

on Qantas so the back of the

plane becomes more like a low

cost airline? No, I'm

continuing to invest and make

sure the back of the brain on a

Qantas brand is differentiated

from low cost carriers. People

are willing to play a premium

for Qantas, it for the service,

entertainment, meals that are

all encompassed in the air

farz. We see that every day.

Look at Melbourne-Sydney,

Qantas carries more leisure passengers, economy carriers

than any other carrier yet it's

a route that has Tiger, Virgin

and Jetstar. People are willing

to pay more for Qantas because

of the brand and product. There

is a market for there that and

it's clearly there in one of

the bickest markets in the

world and I think Qantas will

continue to enhance the market

to ensure people pay the

difference. Are Tiger still

driving pice prices down?

Certainly on the leisure mark that competition has, in the

last quarter, become more

intense. Jetstar is holding its

own. We believe Jetstar is more

profitable. It's the second

most profitable after Qantas

carrier operating in the

domestic market and it's still

very small compared to the

Jetstar operation. Jetstar is

an operation now that's going

to grow to $2.8 billion and

it's growing at over 20% each

year so we're very comfortable

with Jetstar's economic

performance, its market position, its growth prospects

and we think everybody else is

playing catch up. Thanks for

joining us, Alan Joyce.

Thanks, Alan. Great to talk to

you again Telstra's been an

absolutely appalling stock for

most of its life as a privatised company but an

Friday it plumbed new dechths

when its share price hit 2.82,

lowest price ever. CEO David

Thodey forecast a high single

diggalt fall in profits next

year. I spoke to Ian Martin

from RBS. You had Telstra as a

buyer about 3:30 and now it's a

hold so you've downgraded it.

Did you get it wrong, didn't

see coming what happened on Thursday? We didn't see it

coming. The temptation to spend

some of the free cash flow the

company's been targeting for

the last five years, the

temptation to spend that to

rebuild its market position in

mobile and fixed line was too tempting for the company.

Perhaps we should have seen it

but we didn't. There's no

obvious catalyst coming up

until they get the strategy and

explain it and demonstrate it's

going to work. You weren't

alone in not picking that.

Virtually the entire market

didn't see it coming. Is

everyone angry now at Telstra

for not keeping everyone

informed? There's a degree of

anger, if you like, but there's

more a sense of confusion and

is this the right strategy or

would it have been better to

spread that spending over a

number of years to manage the A

the EBITDA margin instead of

just taking it down in one

step, perhaps managing it down

over years. You mentioned in your report you were particularly disappointed they

weren't able to find costs

other reductions in costs to

pay for the investment that

they need to make in growing customers. They've already

started cutting costs. What

else should they do? Telstra

have been talking about

managing down their resources

to reflect the change in their

business. That's been the talk

out of the company for many

scmnths right throughout the

transformation, that we would

see the resource base come down

and see a period of good cash

flow but now we're going into

another mini transformation.

Do you think they're

panicking? I don't think they're panicking. I think

thris is quite a deliberate

strategy. It's not necessarily

voluntary but it's quite

definite and quite deliberate

that this is, in their point of

view, the best way forward to

deal with the market structure

as it is. They have to do

something. The decline in the

PSTN is accelerating. It not

just a steady decline, it's

starting to get away from them,

isn't it? Potentially, the

decline in the PSTN has been

coming for six years. The

public switch telephone

network, I should explain, the

decline in the ordinary phone

network is declining? It

peaked at 8.2 billion in 2004

and it's been declining since.

It's been a steady rate of

decline, lower this year than

in previous years. What's

interest ing now is the decline

has really accelerated in

calling rates, particularly

local calls down 14, 15% and

long distance calls down 10%. That begs the question if

people aren't using their

phones for calling anymore are

we going to see the rate of

switch-off of phones

accelerate? What causing

Senate Mobile growth has

accelerated and people are

using mobiles and getting more

value out of mobiles and using

for things like internit access

and also using it more and more

for calls and we've got - had

lot of competition in mobile

packages in the last year.

Telstra's now met the market

with its $49 cap and $79 cap so

the expectation is what we've

seen in terms of migration from

fixed to mobile will probably step up a notch in the year

ahead. How much of your 3.60

value now on Telstra is

accounted for by the $11

billion they get for the NBN

deal? It's around about 20% so it's quite an important

component to get that. I

believe the $9 billion of the

11 that comes from NBN is a

guaranteed amount and there's

another 2 billion in off sets

but that looks more attractive

now given that it's a

relatively known amount,

relatively reliable amount,

whereas the alternative to that

is you've got a decline in cash

throw nat is very hard to

forecast. In fact to some

extent the company becomes a

renter of infrastructure to the

Government business, NBN.

That's right. That's pretty

steady cash no, just collecting

the rent. That's right. It's a

nice business to be in if

you've got the infrastructure.

So should shareholders be angry

with the Government over with the Government over the

NBN as they were still or

should they be more angry with

the management and the board

for stuffing things up? I

don't thin there's much point

being angry either way y

doesn't help as a shareled

holder. You've got tattoo look

lodgely at what's happening in

the industry. Whatever justification there was for

being angry a year ago at the

new legislation they'll put

into place now if the deal goes

ahead. Nono point being angry

with management. Management are

what they are. What are they?

Would have been nice to get a greater share of the cash flow

but they've got to weigh up is

this the right strategy and

listen to what Telstra's

saying. We'll hear more about

that at their investors day at

the end of September and see

over the next 12 months cl

whether the strategy pays off

and offers greater dividends.

You've got a 360 valuation on

it. At what price would it be a

buy? Our 12-month price target

is 3.24 so there's a 10%

discount to the valuation and

that's because there's no

obvious catalyst to drive that share price towards its

valuation, at least until we

get to the NBN deal some time

next year. Thanks for joining

us, Ian. Thank you, Alan. The

GFC sent many businesses

involved in the construction

industry into a spin as the

banks put the brakes on credit

but one small Australian ecport

company believes the days of

growth are about to return

despite the hurdles of the

worldwide downturn.

# You spin me right round

# Baby, right round... The

economic crisis actually

changed the way business is

gonna be done in the future

definitely by us and in the

Middle East in general. As I

say, cash flow is really king.

That's been belted into us recently. The Australian

Turntable Company was

established by the Chapman

family 25 years ago. Really

the way we see our company is

that we provide solutions using

rotational movement. We produce

truck turn tables for loading

docks, we provide product for the mining industry right

through to revolving

restaurants around the world,

we've provided half a doesn't

in the Middle East. Turn-over

was about $4 million a year

thanks to healthy exports when the financial crisis hit. We

saw a dramatic drop-off in

international inquiries. They

just almost stopped entirely

for about a 9-month period.

We also saw a slow-down in the

construction side of things in

the large developments here in

Australia. The bread and butter

product, which is the driveway

turntables, was probably our

best performer over the past 12

months. It was good to have

that regular product going

through the factory. We sort of

used the time to develop new

products and investigate new

markets. Some hard lessons were also learnt along the way.

We've had to look at ways of

securing debtor payments at

certain times which wasn't in

place at the time so it put us

at a lot of risk but during

that time in the Middle East

business was flying and some of

those risks were worth taking

but now that that has

definitely changed for the

future. Just before the

crisis hit we were going

through a fairly substantial

growth phase and to cater for

that we had to expand on our

factory site and went into that

fairly significantly. If we had

have known we were going to go through this financial crisis

for the next 12 months we

definitely would have slowed

that down and managed that a

little more sustainably. Difficulty accessing extra

finance is one of the more

frustrating legacies of the

GFC. Because we're dealing in international projects and our

product are a little bit

different, it creates a lot of

risk and uncertainty for the

banks. We've had a relationship

with our bank for a long time.

We've been with them for 20-odd

years and been through a lot of

hard times but also some good

times together but all of a

sudden that history between us

really has a lot less

importance. Ben Chapman sees

the credit clamp-down as ironic. We're less risk

because of the crisis. We've

spent so much time on our contractual and payment terms

and we're a lot stronger in

negotiations regarding those

factors and we will actually

turn down jobs that don't suit

our payment terms. There's

often a lot of R and D

requirements for our products

and we've definitely had to

slow them down rather than

being a little bit more proactive getting our product

out there. But the market is

starting to pick up with

international interest growing

again. We're being recognised

as leaders in our field and

people are starting to

understand the benefits that we

can bring to a development and

they're starting to really reap rewards. That's it for the

program. Transcripts and a

video and vodcast of all

today's stories and interviews will be available on our

The AFL's moving

forward is more than just a slogan, having formally issued

the licence for Greater Western

Sydney it's now negotiating the next television rights amending

the laws of the gaft and

contemplating a Collingwood Premiership. Our studio guest

this morning is the league's

leader Andrew Demetriou . Meanwhile, on the field Geelong last night rebounded in unambiguous fashion delivering

its very own rain of goodies.

COMMENTATOR: It's only getting uglier, away he uglier, away he goes, Gary

Ablett, from a long way,. They