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Lateline Business -

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(generated from captions) the complete disrespect it

deserves. The rallies we attend

show that is that South

Africans are not saying

that. Yet some of the largeg

rallies in South Africa

recently have been made up of ex-ANC members. The Congress of

the People is a break away

party led by lessua MacOteda a

former officer in the ANC

Government. Honeymoon is over.

The dissatisfaction, the anger

and so on, arising from the

disappointed hopes and optimism. He believes the key

to solving South Africa's

pressing social problems is to

return people to the land. Once

that labour left the country

sides and the farms and so on

it contributed to explode ing

informal settle ams, yet the

only skills those people have

is to work the land. South

Africans like vesi and Beatrice

would like to rirn run to the

land but promised land reform

programs have stalled.

The ANC had hoped its black

economic empowerment

legislation would create

opportunities. In reality, only

a select few have benefitted.

The Government's blaming white

business owners. I think it's

horrendous that the white

establishment in this country

have made skills a barrier to

job creation. And have upped

the skills level that they

require for people to get jobs.

And it's a huge challenge for

us. We're not bitter, all we're

gonna do is to create the

skills and keep moving to have

the country taken completely

owned by black people which is

their right to do. And get rid

of the colonial mentalitiment

While the ANC is losing

support, it's still expected to

win this month's election

comfortably, although it may be

running out of time to

implement its policies. Back

to Australia now - the US

surgeon Jayant Patel has been

committed to stand trial over

the deaths of 3 former patients

of Bundaberg Base Hospital in

South-East Queensland. Patel

was extra decided to Australia

nip months ago on 14 charges including manslaughter,

grievous bodily harm and froud.

The charges date from his time

as the hospital's director of surgery between 2003 and 2005.

Former patients were in court

to hear the magistrate order

that Patel stand trial. Very

relieved. It was a huge relief.

It's been a long time coming.

To get to this point is

brilliant. During the committal

the court heard allegations

Patel omitted details of his

resume to get the job in

Bundaberg, other witnesses

testified Patel operated beyond

his surgical capabilities. A

trial date has yet to be set.

trial date has yet to be set.

The Royal Commission in into

Victoria's bushfires began its

first formal proceedings today.

Among many issues the

Commission will consider the

vexed question of fuel

reduction burns and whether

enough was done before the

fires struck. Figures presented

to a Labor dominated

Parliamentary committee showed

there were men malfires in

areas of Victoria where fuel

reduction targets were met -

minimal fires. Some of the

communities worst hit are in

regions where the Government

didn't meet its own targets for

back-burning. This Royal

Commission will consider

questions they tackled after

Ash Wednesday and Black Friday

in 1939. Why from were those

bushfires so extreme, so feral,

so catastrophic, so

devastating? On the agenda will

be back-burning, our fuel reduction burning by the agencies of the State

Government.. The purns of

prescribed burning is not

proprevent fryer - not to

prevent fire from occurring but

to reduce the rate of spread

and difficult y of suppression.

a committee recommended they

almost triple the amount of back-burning. Data presented to

that committee shows the fires

on Black Saturday were less

fierce in the regions where

fuel reduction targets had been

met. In the regions known as

Port Philip, the north-east and

Gippsland, the State's

Department of Environment and

Sustainability had trouble

reaching its burn-off targets

because of adverse weather and

others reasons. Those regions

contain the places worst hit in

February, communities like

Kinglake, St Andrews and

Churchill. In regions like the

south-west and north-west fuel

reduction targets mostly were

met in part because the forests

there are easier to get into.

The towns that suffered during

Ash Wednesday this time were

left untouched. It has been

said once a fire has start ed

fire intensity and the speed in

which fire spread are affected

by fuel loads. Of 3 factors

influencing fire behaviour, the

quality and arrangement of file

fuel is the only factor that

can be altered by man before an

unplanned fire starts. The

Victorian Government says there

has been more fuel reduction

than ever before, but they say

it's no panacea. There are some

parts of the State that I've

seen in my visit where fire

reduction, fuel reduction

burning has occurred in the

last 2, 3 years but it didn't

start the fire. There are parts

of Gippsland where it just

swept through, irrespective of

the fact there had been fuel

reduction. The Commission will also look at the firefighter

conditions predicted for the

day. On the Wednesday before

the fires emergency services

received a recorded forecast,

predicting the fire danger

index they used would hit

unprecedented levels. Fire

danger ratings and grassland

ratings will peak in the 80s in

the latter half of the morning.

Such forecasts prompted the

dire but general warnings from

Government and officials. The

sorts of figures that counsel

assisting said should've

prompted these thoughts within

government agencies -. The

intensity of the potential

fires would be such it could

not be imagined by our

generation. The first hearings

begin next month. A quick look

at the weather. showers in

smid, Brisbane and Perth.

Lateline Business coming up.

To look back at tonight's

interview with Bob Debus, you

can visit our web site.

can visit our web site. Here's

Lateline Business. Tonight -

bracing for more bad forecasts

from the IMF, but developing

nations sense a turn

around. You will continue to

hear bad news, there will be

terrible statistics, but that's

looking through the rear view

mirror. We have to look

forward. Pressing on despite a

shareholder revolt. Rio Tinto's

board again under fire over the

Chinalco deal. The directors

are not listening to the

people, they're not listening

to the public. The directors

are unwilling to be accountable

and that there is a bunker

mentality there. Taking account

of the risks, actuaries

highlight the need for reform

of the financial system. The

Chris crises we've been going

through has revealed

significant weaknesses in

bank's management practices and

weaknesses in the regulatory

capital framework. This Program Is Captioned

Live. To the markets - Australian shares closed flat

despite modest weekend gains on Wall Street.

Falls in banks and miner Rio

Tinto. The ASX 200 lost a

similar amount. The NIKKEI

finished strongly. the Hang

Seng at a six-month high.

Global mining giant Rio Tinto

says it's determined to push

ahead with the Chinalco deal

despite growing opposition from

its shareholders. At today's

AGM in Sydney many people spoke

out against the controversial

$20 billion tie-up with the

Chinese Government backed

company. Just like last week's

London AGM, management and the

board were in the firing line

over other decisions which

shareholders believe have not

been in the best long-run

interests of the company. Round

2 of the Rio annual general meeting, Australian

shareholders were looking for

answers from their board. I'm

expect ing quite a lively

meeting, there will be a lot of

people there who are very angry

of what's been going on. I'm

hoping the board will be

severely sensored and the

mecting for their - managing director for their

actions. Throw the buoy

Out? The board out? Is Why? I

don't think they've done a very

good job. The rejection of BHP

Billiton's $200 billion

takeover bid, the 2007 takeover

of Canadian-based Alcan have

caused the company's current

debt problems and also the Rio

Tinto board's proposed solution

- the $20 billion tie-up with

the Chinese government backed Chinalco. There is no need for

it, there is plenty of cash

available in the world to take

an alternative rather than have Chinese investment particularly

when we read of the backing and

the basis of the Chinese

investment. Which is Chinese

Government. Cameras were not

aloud into the meeting as

shareholders vented their

feelings at what one of dem Them described as the substantial failures of the

management and board over the

last 2 years. Outgoing chairman

Paul Skinner stood firm arguing

the purchase of Alcan would

prove to be a winner in the

long-term. A theme taken up

after the meeting by his

successor South African Jan du

pleasy. I think the Alcan

acquisition will turn out to be

an excellent investment. We

acquired some wonderfully

important assets in the

aluminium industry which I

think we will never regret. Mr

Du pleasy also strongly defend

the the Chinalco deal but

admitted the Rio board would be

listening closely to

shareholder views before vote

ong the proposal in the middle

of the year. I trust we would

not put a proposition to the shareholders if we think it

will be voted down. the meeting

moved on to the election of

directors. Frustration came to

the surface with Sir Rod

Eddington being the focus of

attention. Everybody - every

person who spoke was opposed to

his position on the board.

I'm not criticising Sir Rod

Eddington, the person, I'm crit

issing the decisions the boards

on which he has previously sat

and sits, like the Alcan

decision, were not in the best

interests of shareholders. When

the votes were counted, Sir Rod

Eddington had only 65% support

from both large and small

investors in one of the biggest

protests against a director for

some time. Rod, in all my

association with him has always

spoken up for Australian

interests. That should be of

interest here. That may be true

but some shareholders left the

meeting as unsatisfied as when

they arrived. The directors are not listening to the

people. This meet ing left me

feeling that the board is not

listening, that the directors

are unwilling to be accountable

and that there is a bunker

mentality there. Rio Tinto's

remuneration report hardly

generated discussion but the no

vote was 19%. While Jan du

pleasy has denied suggestions

Rio has been in recent

discussions with BHP Billiton

about another takeover bid.

Wesfarmers says contract

prices for steel making coal

will fall by up to 59% as the

global recession continues to

kerb demand. The fall is in

line with the price struck last

month by Xstrata with a Japanese company. The

prediction worried investors,

Wesfarmers closing 4% lower at

$20.40. For a look the today's

trade on the local market I

spoke to Charlie Aitken, the

executive director at scost ek

shall - Southern Cross ex

equities. Another day of profit

taking. Market was down about

30 points most of the day,

finished down 7. The market's

trying to consolidate the huge

move off the lows we've had.

Defensive stocks, like

Woolworths, Telstra, Westfield

did a little bit better. BHP

and Rio came off a little. A

day of consolidation would be

my view of T Woolworths up,

Wesfarmers down, how much of

that relates to Wesfarmers'

announcement of lower contract

plies Price - prices for its

coking coal snmple I think the

move was more to do with

Woolworths sales figures

Friday, they were better than

expected. Up 8.8% for the first

quarter, which is quite amazing

considering the economic

inveerment. I think people were

thinking when Wesfarmers

addressed the market tomorrow

it might show that Coles'

numbers, not coal, Coles, the

supermarket, numbers were not

as strong as anticipated. The

Rio Tinto attracted heat at its

AGM over the Chinalco deal.

Have the company's responses

helped clarify market thinking

on the deal? I think a few

shareholders wanted to vent at

the AGM. Apparently it was

quite an aggressive event. It's

pretty hard for Rio to defend

by buying Alcan at the top of

the cycle then selling some of

the its assets at the bottom to

Chinalco. I think this deal

with Chinalco is not done yet.

I think the markets would like

to see the Fish - FIRB off on

the deal first. Rio shares were

under a bit of pressure after

big run. I don't think the AGM held

helped. Are The market rumour

is Asciano's received 3 full

takeover bids for A'Its assets.

The price paid for that would

be higher than the share price

we'd value Asciano at - I think

area' at is.54 - I think

they're at $1.54 this

afternoon. Paladin energy

surged 10% after production

began at a new uranium mine in

Africa. PMP continued its run

of losses dropping 10%. The

Commonwealth Bank shed nearly

1.5% along with ribal Westpac,

it's raising rates on its fixed

rate home loans.

As reported on 'Lateline', the Prime Minister has

confirmed Australia will join

the United States most of

Europe and Japan in recession.

However, the global economic

crisis is presenting an

opportunity to reform financial

systems. Actuaries are playing

a key role in pioneering best practice and risk management.

They're Australia's crucial number crunchers, actuaries

weigh up the financial impact

of risk and uncertainty. At

their by enial meeting in

Sydney, the focus was on bank

regulation and the global

financial crisis. We have in

fact been living through a

major experiment in financial

regulation of banks. Former

Australian ambassador to the

United States, Don Russell says

that experiment includes Alan

Green span's deregulation of

financial markets, and the

removal of the glass steegle

act of 1933 which had prevented

banks from owning other

financial businesses. The root

problem that lies underneath

all this is the fact that US

and European banks were under

capitalised. An attempt to

address that was made bits the

Basil 2 accounting accord

published in 2004.. Basil 2 is

attempting to strengthen the

risk capability in Banks banks

and make sure the capital

they're holding at a minimum

relates to the risk more

closely than previously. The

complexities of the new Basil 2

system have led to delays in

its uptake and round the world

am The crisis has revealed some

very significant weaknesses in banks' risk management

practices and weak o weakens

notice regulatory capital framwork. The President of the

Institute of actuaries of

Australia says the

international body has produced

a framework which it believes

will prevent future cries cease

and narrow the gaps in the

Basil 2 flins. I think we're

going to see all these rules

and regulations evolve over

time to a more appropriate

structure that can accommodate

much greater volatility in the

reality of the world in which

we operate (one of the ak ud

villains of the credit crisis

is the hedge fund industry. The

business had become overheated.

You had 12,000 to 15,000 managers

running trillions of dollars

worth of assets. Bob jager has been involved in the business

for more than 25 years and says

the days of excess are over. I

think the fundamental problem

is both the people running the

hedge funds and many of the

institutions investing in those

hedge funds, really

under-estimated the challenges of the hedge fund

business. While the party may

be over, Bob Jager believes the

competitive business is still

very much intact and that there

is still opportunities for

surviving hedge funds but what

rules they have to play by are

still undecided. I spoke to Dr

Don Russell, chairman of New

South Wales State Super.

Welcome to Lateline

Business. It's a pleasure. You

don't think Alan green span

should carry the can for the

crisis, the great expert in

global banking regulation was

flawed, how so? Greenspan is a convenient cull prismt we've been living through

unfortunately, a major

experiment in how we reg laeg

late the financial sector,

banks in particular. This dates

back ten, 15 years,

unfortunately this experiment

has led to the regulatory

arrangements in the developed

world - Europe and theist drve

leaving the banking system

under capitalised and

over-lempaged. Where did Basil

2 fall short? Basil 2, the key

assumption in that is that ts

possible to model risk and to

model risk in a way that

enables a regulator to make a

reasonably accurate estimate of

the likelihood of a loss in the

banking book or trading book of

an individual bank. When they

feel that this loss can be held

to a very remote possibility -

they tend to work on # 9 en -

999% chances. Blsh 99.9%

chances. they felt they had

these losses sufficiently

accurately estimated that they

could allow the banks

themselves to participate in

the process in which they

estimated their own capital.

Snsh p You had bank capital

adequacy ratios being assessed

based on risk which was wrongly

assessed? In the event it

turned out risk was

wrongly'sside. - assessed.

Before the event you could've

seen there was a great pobt

these estimates were on the low

side. Where did the credit

agencies fall down? One of the

key aspects of Basil II is the

regulators took the

assessmenters of the rating

agencies as gospel. In other

words the banks themselves

didn't have to do their own

credit analysis on these

particular securities, they -

if they could get a rating

agency to rate it as a triple-A

t was a triple-A. In particular - this is something that will

have to be remedied and is in

the process of being remedied,

Basil I ismt did enable a

rating agency to give a

particular security a triple-A

rating on the basis. Bank's own guarantee. That's

circular. That is circular. It

explains to some extent why a

lot of these assets which the

banks had passed off their

balance sheets came back to

them because in fact they were

at the end of the day

responsible for them. Why is Australia appeareded to have

done better? I think it's a

combination of things. One I

think is the four pillars, I

think the four pillars

prevented our own banks from

doing foolish competitive things woof which would've

boosted our balance sheets in

ways which would've led to


consequences. Taking over other

banks and leveraging

up. Exactly. Building their own

balance scheets to try and make

themselves less attract foiv

takeover a or taking over other

banks like we saw in Europe and

the UK. I think the other thing

is that Basil II did turn out

to be flawed. We for reasons

I'm not quite sure why, didn't

introduce it until the

beginning of 2008. Which was

really after the events. Basil

II effectively lowered the

capital burden on banks. Was that good luck or good

management? I d I'd like to

think it was good judgment

amongst Australian

regulators. Our regulators have

been relatively tough, haven't

they. They have. We've never

really emhe embraced the notion

of the soft touch. We've

believed the regulators should stie stay close to the

institutions they reg laight.

That there is a two-way

interaction that goes on. they

should not feel intimidated in

coming forward saying we don't

like what you're doing. I think

other juksr jurisdictions

abandoned this level of close

encouragement with the

financial institutions. The Australian Government

introduced bank guarantees,

partly to help market

confidence. Were they a good

idea and should they stay in place? It was the right thing

to do at the time. In October

last year the global system was

teetering on the verge of

collapse. It was important to

overreach. the comprehensiveness of the

guarantee was right. It

continues to be right. Regs laters do need to understand

the longer the guarantee stays

in place, the flate greater the

negatives appreciate sorted

with - associated with having a Government guarantee there will

be. The regulator s need to

have arrangement s in their

mind for scaling back. It's a

system that can be abused? If

it's there for a long while

institutions will game the

institution. unfortunately

that's what happens when

governments put in place

guarantees. It's a necessary

part of safeguarding the

Australian banking

system. Thank you for talking

to us. It's a pleasure. While

much of the business media's

column inches track the

economic fall-out in developed

countries, emerging markets are

experiencing something of a

rally. I talked with Mark

Mobius, Executive Chairman at

Templeton Asset Management, a

leading player and analyst in

emerging markets based in Hong

Kong. Mark Mobius, welcome to

Lateline Business. Pleasure.

Emerging market have had a bit

of a rally recently. Where's

the action and are you

optimistic this is indeed the

turn around? The action is all

over the place n every emerging

market a round the world, we've

seen positive moves from the

lowe pointses of those markets.

In some cases the moves have

been as much as 50 or 60%. So

we are very optimistic going

forward, now of course the

markets don't go up in a

straight line. You're gonna

have corrections along the

way. But what we're gonna see

is a channel, a bottoming up

process in up ward trending

channel which will build a base

for the next full market in

emerging markets. How dependent

is this on consumption coming

back and in particular the

American consumerer? Well, the

key to what is happen ing is

all about money supply. The

Americans are pumping money

into the system at a very rapid

rate. The printing presses are

running overtime norkt only in

America but in other parts of

the world. China is pumping

money into the system. They've

told their banks to increase

loans, you can see loans sky

rocket ing. It's happening in

India and other parts of the

world. We're seeing a positive

money supply flow into these

countries. A lot of that ends

up in the banks and stay there

is so far because people are

fearful, they don't want to

move into equity markets. But

as interest rates continue to

come down a yield of 3-4%,

which is what we're seeing on

the average in emerging marts

is going to look attractive

when you're getting less than

1% for US dollars. ... Come out

in the next couple of days.

Dominic stras Carne has

forecast worst - he said the

forecasts are going to be worse

than the previous outlook. Has

the market factored in more bad

news? Events. The market

has. Yes. That's the reason why

we had this terrible market

last year because the market as

you know, looks at leave 1 year in

advance, the market reacts 1

year before the fact appear in

the economy. We are now looking

1 year in the future and the

markets are now beginning to

discount that going forward.

You will continue to hear bad

news, there'll be terrible

statistics, but that's looking

through the rear view mirror.

We have to look forward. Of

course, China is the great hope

to create this engine that will

push the world economy forward.

You expect the Chinese economy

to grow 7-8% in 2009, were the

latest GDP quarterly figures consist ent with that

view? Yes, the quarterly figures were dune. Going

forward you will see the boost

that the Government is giving

to the economy, taking effect.

That included as I mentioned,

more bank lending,

infrastructure spending, a very

big program of spending in

China. That's being implemented

very rapidly, as you know with

the command economy you can

move very quickly. But don't

overlook India. We expect India

to grow 4, 5%. When you

consider the two most populated

countries in the world growing

at those rates then you see the

impact on the global economy as

well. Tougher global market

regulation is inevitable. How

is that going to affect

emerging markets given this

seems to be more of a developed

market problem than an emerging

market problem? I don't think

it's going to have very much

effect in emerging markets

because I think many of the

regulators in emerging markets

realise the danger of

over-regulation. I realise in

the US there will be a trom

tremendous push to add new

regulations, but our feeling

that stha the regulations in

force now should be sufficient

if they are implemented, that's

the big question mark. As you

know, the regulators were

asleep at the switch, so to

speak and didn't regulate under

the rules they had in their

hands. The danger, of course,

is that these regulations,

added regulations, means added

expense for us and other

players in the market. And of

course that means that the

clients also are charged extra

expenses as a result of

talking to Lateline that. Mark Mobius, thanks for

Business. Thank you.

The Reserve Bank has been

given more scope to lower

interest rates with a clear

sign inflation is slowing.

Australia's producer prices

fell for the first time in 36

years last quarter. The index

dropped nearly half a per cent

in the March quarter defying

forecasts of a rise of 0.6%.

The decline was mainly due to

a steep drop in construction

costs, together with smaller

falls in petroleum refining and dairy product manufacturing.

The index looks at the final

stage of production with the

more important consumer price

or CPI report out on Wednesday.

Now a look at tomorrow's

business diary. Reserve Bank

Governor Glenn Stevens speaks

at a luncheon in Adelaide.

Staying with the RBA - the

minutes from the board meeting

earlier this month are

published. Wesfarmers holds an

investor briefing in Sydney, slot machine maker Aristocrat

Leisure hosts its AGM. Finally,

the International Monetary Fund

publishes it's late est

financial stability report. It

will include Andren dren the

toxic debts still lying on bank

balance sheets. - it will

include updated estimate of the

toxic debts still lying on bank

balance sheets. 'The

Australian' says Paul skinner's

five-year term at Rio Tinto has

end ed in frst traight and

blind self serving arrogance.

an examination of Rio Tinto's

investors meeting. The 'The

Australian Financial Review'

leads on the goofed admission

the economy is about to enter a

recession. Bank America has

just reported a stronger than

expected first quarter profit

of $6 billion. Shares in the

bank have fallen in pre-market

trade on a warning it continues

to face extremely difficult

challenges. That's all for

tonight. The Dow Jones is down

just over 1.5%, the FTSE is

down nearly 2%. I'm ticky

Fullerton. Goodnight. Closed Captions by CSI GUNFIRE world is on the eve of breaking. MAN: The greatest battle in the

OMINOUS MUSIC successfully for us. Please, God, it may terminate it will be a walk-over. We were told to be sniped at by a stray German... Of course we might expect ..naturally.

Suppose one should lose one's head, and get other men cut up. Wait! Suppose one's legs should take fright and refuse to move. 'On the morning of July 1, 1916, 120,000 British soldiers, most of whom were volunteers, prepared to fight the greatest battle of the First World War.' SUSPENSEFUL MUSIC

'This is the story of the bloodiest day in the history of the British Army, told through the letters and diaries of those who were there.' RAPID GUNFIRE SORROWFUL MUSIC 'At the end of 1915, the Great War was not going well for Britain and France. After a year and a half of huge effort and heavy losses, large parts of France and most of Belgium remained under German occupation.' SORROWFUL MUSIC

'Both sides had dug in, and a line of trenches stretch from the Channel to Switzerland. In early 1916, in an attempt to break the stalemate, the Allies agreed to a joint Somme offensive. The area they chose was a 26-mile section of the Western Front in Northern France by the River Somme.' SOFT ORCHESTRAL MUSIC BIRDS SQUAWK A superior view up here, sir. This is more like it.

Very good drainage, sir. No more sitting in the mud in Flanders. 'The man in charge of Britain's part in the Somme campaign was newly-promoted Commander of the Fourth Army...' (WINGS FLUTTER) 'General Sir Henry Rawlinson.' RAWLINSON: It is capital country in which to undertake an offensive, for the observation is excellent, and with plenty of guns and ammunition, we ought to be able to avoid the heavy losses which the infantry have always suffered on previous occasions. 'The Allied and German trenches were divided by an 18-mile strip of no-man's land, running from the village of Serre in the north to the River Somme in the south.

Rawlinson's objective was to drive the Germans from their trenches, and liberate the territory they had held for the last year and a half. This would be his battlefield. BIRDS TWITTER INSECTS CHIRP (BEE BUZZES) 'Under Rawlinson's command was a brand new army.' DISTANT SINGING (SOLDIERS SING)

'The Fourth Army -

made up largely of civilians who had volunteered 18 months ago at the outbreak of war. Typical of this new army was the 22nd Manchester Battalion. They had arrived in France in February 1916. Captain Charlie May was an aspiring author

with a wife and baby daughter back in England. He kept a diary of his time on the Somme.'

MAY: We go because it is right and proper we should. One is supposed to have, as a soldier going into action, no other desire than some high-souled ambition to do or die for his country. Reality, I'm afraid, falls far short. Oh.