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(generated from captions) Department say to me, And when the guys in the Math-s "Hey Rob, how'd it go?" "Helpful is not the word." I'm going to be able to tell them, Don't get up. Please. No, no, but I... Sit back down!

"Math"!

CC Tonight, a handful of

dust. All of a sudden we've

had this bloody catastrophe

that's happening now and I

don't know that anyone knows

how to deal with it. On the eve

of an election, the drought has

united political enemies. We

will be providing additional

help because this drought has

gone on much longer than people

ever dreamt likely and I know

how hard it's hitting. I don't

want to be Prime Minister of

Australia and of a country

where we no longer have a

viable agricultural sector.

Good evening. Welcome to

Lateline. I'm Virginia Trioli.

After the parliamentary

theatrics, now it's all about

strategy. There's a lot about

Labor at this election that

feels like what there was about

the Liberal Party ahead of the

1996 election. They want to

stay on message, they want to

win the election. Last week,

when John Howard looked strong

t was because he had Peter

Costello's measure, it wasn't

because he had krOued's

measure. It was able to stare

down Peter Costello, as he's

done before. Later we'll talk

to John Howard's biographer

Peter Van Onselen and Labor

Party strategist Bruce Hawker

about the week in politics. First, strike action. New

information about Israel's

mysterious air attack on Syria.

Louisiana burning. Racial

tensions reignyted in the deep

south by charges laid against

black teenagers. And former

Labor Senator Bob Collins dies

in the shadow of unresolved

child sex challenges. Far from

the tumul tuous scenes of yesterday, the nation's

political leaders have focused

on the drought today. Political

rivalry was even put aside

briefly to mark Kevin Rudd's

50th birthday. Hayden Cooper

reports. There's nothing like a

dusty dose of reality to

sharpen the senses. We haven't

had water for two years. How

you managing? Holding up. Had

to sell one property already.

Leaving the bitterness of parliament behind, the politicians are back in the

real world and in regional NSW,

Kevin Rudd was given a blunt

briefing. This is an absolute

prick of a drought. If you look

around the faces of these

blokes you'll see what we're

talking about. We're sick to

death of the thing. We can't

make it rain. I don't want to

be Prime Minister of Australia

and of a country where we no

longer have a viable

agricultural sector. Saving

rural Australia is front and

centre for both parties.

Labor's offering $60 million to

help farmers deal with climate

change. Any more? Back in

Canberra, the Prime Minister

revealed he's softening the

assets test to make it easier

for farmers to get help. We

will be providing additional

help because this drought has

gone on much longer than people

ever dreamt likely and I know

how hard it's hitting. If

this drought continues and you

start to be in 5, 6, 7 years of

continuing drought, we've got

to start to look at the over

all underpinnings of how we

provide drought assist ance in

the future, look at how we

cause our farming commune to

survive long-term. And in the

cities where the State

Governments are grappling with

water shortages too, the

Treasurer is pushing his own

game plan. This is now very

serious. We had a situation

where our capital cities are

running out of water. And I

think we should have a

desalination plant for every

capital city in Australia. We

will get through this only if

we work together. Good

morning. Good morning. Where

do you all come from? Saint

Kevin's. Saint Kevin's was the

answer. How appropriate on the

Labor leader's 50th birthday.

Yay! (All laugh) Putting

aside the sound and fury of

yesterday's parliamentary

show-down... Put your hand up

and challenge. ..it was good

wishes all round. To a point.

life as Leader of the I wish him a long and healthy

Opposition, and I know it's a

very important milestone in

anybody's life. There's another

milestone Kevin Rudd would

rather be celebrating but still

there's not even a date set for

the election. The corridors of

parliament have fallen silent

and the Prime Minister is back

in Sydney tonight revealing

little about his plans for the

weekend. A trip to see the Governor-General is not

expected but not out of the

question either. I wouldn't

try and work yourself up into a

lather for Sunday. I'm fought

gonna get into that. The

waiting game continues. More

evidence has emerged of North

Korea's possible involvement in

supplying nuclear material to

Syria. Israel launched air

strikes into Syria earlier this

month and the target was a

facility Israeli and US

officials say may be part of a nuclear weapons program.

Intelligence sources quoted by American media suggest the

program is being supplied by

North Korea. The Israeli

Government won't even confirm

the air strikes took place but today Opposition Leader

Binyamin Netanyahu offered the

first official acknowledgment

Israel did attack a military

target in Syria. "I was

involved in the matter from the

beginning ask I gave it my

backing." The report says a

North Korean ship made a

delivery to Syria on September

3. According to what it called

US sources, the Israelis showed

American officials evidence

that the North Korean shipment

contained material for a

nuclear program. Was it the

North Koreans emptying out the

nuclear cupboard before an

agreement with the United

States and international

community? Were they providing

some nuclear technology that

would have advanced the Syrian

program in a serious way?

Those remain question

marks. President Bush wasn't

offering any answers. I'm

saying I'm not going to comment

on a matter and it means I'm

not going to comment on the

matter. He offered a warning to

North Korea which is currently

engaged with talks with the US

over their nuclear program. We

expect them to honour their

commitment to give up weapons

and weapons programs and to the

extent that they are

proliferating, we expect them

to stop their proliferation. A

former US ambassador to the UN

told Lateline North Korea had

work would rogue states before

to further its nuclear

interests. While North Korea

got great propaganda value

saying no launch testing from

the peninsula, they were

getting the positives of a

Iranian program. They have used

the game plan before and it is

logical they might try to

outsource all or part of their

nuclear program to avoid

scrutiny on the peninsul a. One

of President Bush's main allies

on the Warren terror is coming

under increasing terror. Pervez

Musharraf is facing a

constitutional challenge in the

Supreme Court. Opposition group

want the court to stop him

seeking another 5-year term. It

comes as Osama bin Laden issued

an audio tape calling on

Pakistanis to over-throw the

President. In the tape, Osama

bin Laden says Musharraf's

decision to storm the red

mosque in Islamabad and his

submissiveness to America make

removing him obligatory.

Musharraf has face said

violence since storming the

mosque in which many militants

were killed. In a scene

straight out of the '60s, tens

of thousands of civil rights

protesters have descended on

the tiny US town of Jena,

Louisiana. They're out raged at

the treatment of six black

teenagers, charge would

attempted murder after a school

brawl. The story has ignited

deep racial tensions. Even the

President's been drawn into the

case of the Jena Six. They

arrived by the busload from all

over the country, flooding a

town so small it has more

churches than traffic lights.

In just a few hours, Jena's

population swelled from 3,000

to more than 30,000. They

continue to dispickably use

bigotry and racism against my

people. Justice is justice.

It's not gonna be business as

usual. The row began when

black students asked if they

could sit under a tree normally

reserved for whites. The next

day there were three nooses

hanging from the branchs and

racial tensions boiled over.

One fight left a white student

injured and the black attackers

were charged with murder. The

charges have been reduced.

This case is not, and never has

been, about race. It is about

finding justice for an innocent

victim. The protesters simply don't believe that. They want

to know why one boy was tried

as an adult, why he's still

locked up and why white

students weren't charge would anything. What do you call

hanging the nooses on the tree

but racism? They didn't bring

race m into this. The events

in Louisiana have saddened me

and I understand the emotions

and all of us in Americament

there to be fair ness when it

comes to justice. Many Jena

residents believe their town is

unfairly portrayed. This is a

reminder that some of the civil

rights battles of the '60s are

still being fought. New Zealand

authorities are fast track the

custody process to enable Qian

Xun Xue to be quickly resettled

with her Chinese grandmother.

The 3-year-old's mother was

found dead in the boot of a car

in Auckland on Wednesday. The

Chinese community there

observed a minute's silence for

her today. Michael Schumacher

is expected of murdering Anan

Liu and the search for him has

widened, with US police officially involved. We

believe he's had some

associates in the LA area.

We're try to run some of those

things down. Michael Xue

arrived in the United States

last scbkted was report lade

seen catching a bus to

Chinatown in LA.

Well, it all got a bit willing in Federal Parliament

yesterday. The gloves came off

and the suletoes came out and

in the midst of this cathartic

street fight, the Treasurer let

slip this bead the last

Question Time before the

election. The week tarted with

a positive Newspoll for the

Government. A the mere 10

points behind Labor, it

seemingly avoided Armageddon.

With Mr Howard's trip to see

the Governor-General predicted

to occur in the next few weeks,

is the still time for it

Coalition team to get back into

the game? Joining me is Peter

Van Onselen, associate

professor of political science

at Edith Cowan University and

the co-author of 'John Winston

Howard: The Biography'. He's in

our Perth studio. And here with

me in Sydney is Bruce Hawker, a

form were Chief of Staff to NSW

Premier Bob Carr and managing

director of public relations

company Hawker Britton which

has worked on many Labor Party campaigns. Welcome. Peter Van

Onselen, the John Howard we've

seen this week, pug naings scps confident, he'd be very well

known to you, but the PM we've

seen recently after the

leadership wobbles and his

public begging of the

electorate to give him one more

chance, is that the same Prime

Minister who went so

successfully into previous elections? That's the Opposition Leader of John Howard. He came back out

briefly for a period last week.

Now that he's got the

leadership in order, as you

say, he's back on his became

and he's ready for the fight of

his life at this election. For

a short period where it looks

like he was under pressure and

his leadership wasn't as

assured as it has been, we saw

glimpses of the under-confident

man he had grown out of. Were

you surprise by the begging

turn, him looking down the

camera and pleading for the

voters for one more term? I

don't think he was pleading to

the voters so much as plead to

his back bench and marginal

seat MPs. The extension of that

was when he turned around and

made the pointed comment he

wasn't going anywhere and he

was in for the political fight

of his life. John Howard has

been in a difficult decision in

recent weeks. He got it

together this week. The week

before he was try to talk to

marginal seat backbenchers and

who were start to wobble and on

the other hand he's got to talk

to the electorate and he's

doing that now. Hawk oc Hawker,

-- Bruce Hawker, we have seen a

rattled Kevin Rudd this week,

can he afford to show this much

raw emotion at a time when the

Prime Minister steams be

getting his groove back? ? I

think people have gotten used

to Kevin as being confident.

Obviously there times when

you're not as on top of things

as on other occasions. I don't

think anyone would have seen

parliament yesterday and

thought he was not in control

of the debate. I think he was

taking it right up to the

Government. I didn't really see

him floundering in any sense.

No, but it was a new Kevin

Rudd. He'd mastered the

technique in parliament this

year of turning his back on the

Prime Minister and screening

that hoo-ha out. He bit, he

responded to the-T this week.

They had a debate. Obviously,

it was require offend him to go

in there and have it and take

it up to the Government. I

think he's been a successful

Opposition Leader because he's always kept the Government off

balance and that's an important

thing to do if you're

Opposition Leader. That's part

of the reason why the Prime

Minister has been so

uncomfortable with him for so

long. He goes in, makes an

announcement and generally

keeps the Government off

balance and I think that's been

a very effective technique.

It's a bit like a guerilla

leader in a war, you go in

there with your light movement

and light forces and you make

an announcement, you get the Government to respond and

before they're ready to do

something else you're making

another one. That's been his

style and I think it's been

effective. Peter Van Onselen,

what do you see in the namer of

Kevin Rudd as a political a--

nature of Kevin Rudd as a political opponent of John Howard that's bringing this out

in him? I think Kevin Rudd has been a successful Opposition Leader but his Opposition

period f it's only a short time

to go, will be one of two

halves. It will be interest to

see how he goes once the

election is called. The

Government is a long way

becommienled they're being

optimistic when they say they

think things will change with

when the campaign is called.

Even so, once the campaign is

called, we'll stop talking

about who will win and talk

about who should win. That's

where Kevin Rudd's media

management might start to look

more slippery rather than

something we simply think is

effective at the moment. Voters

will switch on more and the

Government will have to pick up

its act. What do you mean media

management more slippery?

He's very good at the media

management and at the moment

that's something that behind

the scenes, political analysts and the Government themselves

are saying he's doing very well

and they are finding it

difficult to respond to him,

but he's doing that by being

very strategic, slippery is

perhaps too perjorative. He is

very strategic. If the voters

think he's strategically try to

play his way into the Lodge or

Kirribilli House, they may not

be as positive towards him as

they have been. He has to be

careful to manage that. The

Government will try to bring

that out. Whether they're

successful or not will come

down to whether they're too far

behind in the polls. Does that

mean Hawker Britton has there

paws too much over Kevin Rudd?

John Howard has suggested he is

Plastic Man and too managed. Is

this from your firm? If we

did all inthings John Howard

accused us of, we wouldn't have

time to think. Kevin Rudd is

announcing policies and getting

on the front foot. That's been

part of the appeal for him for

the past nine months and

something the Government has

struggled to keep up with. In

the election campaign I think

you have more set piece presentations to the

electorate. It is a much more

organised and structured part

of your campaign during the

election itself. So I think

there will be even more

opportunity to present policies

and to be presenting yourself

as the true alternative Prime

Minister of the country in an

election campaign than you

would, say, in a parliamentary

debate when you've got all the

hoo-ha going on with

interjections and points of

orderer and the Government

using its majority just to vote

you down. He has to be careful

that he puts some meat on the

bones of these policy announcements because at the

moment it tends to be more

about the way he announces the

policy rather than the substance behind it. For

example, look at the problem

gambling issue. He has talked a

lot about the need to go down

the line of cooperate chk

federalism. That's something I

agree with. Most people who are

smaller Liberals should agree

with that. John Howard has

attacked the idea of

cooperative federalism but he's

not interested in the idea of

engaging with the issue of the

vertical fiscal imbalance, the

problem of the State

Governments not having revenue streams other than poky

machines. He's said he's not

going to get involved with that

sort of thing, other than

providing us with rhetoric. He

needs substance to come. I'm

sure his staffers and he is

doing that but he's waiting

till the campaign happens that

we have more policy discussion.

The meat on the policy has to

come out. I think that's quite

true but I think the poker

machine announcement was very

much a symbolic statement as

well about where his values are

and that's an important thing

for the electorate to get to

know about him. This a pretty powerful statement about where

he thinks some of the failings

are in our dependence on

gaming. So, yes, I take Peter's

point, but I do think that in

the course of the campaign

you're gonna see much more policy development and

announcements. That's what

campaigns are all about and we

will see more substance, but

having said that, he's made

some very definitive statements

on climate change, which we've

seen Al Gore talk about in the

last few days vyrz positively.

We've seen very serious

statements about WorkChoices.

Nobody can say his policy

surrounding WorkChoices is

nothing if not detailed. No,

but it's the financial stuff

that gets to the heart of Peter

and other people's argument of

what's lacking from the policy.

Without recounting the entire

policy, in your view, Peter Van

Onselen, John Howard's a great

performer in campaigns, he's dispatched other opponents

before but does Kevin Rudd

rattle John Howard? In my

view, he has rattled him and

rattled him significantly. He's

done it in a very - I borrow

his term - he's got Maxine

McKew really rattling Howard

locally and the Labor Party is

forcing the Liberal Party to

spend lot of money and forcing

John Howard to spend lot of

time in Bennelong. That's

rattling him. He's got issues

in termers of the togetherness

of the Labor team. There's a

lot about Labor at this

election that feels like what

there was a-about the Liberal

Party ahead of the 1996

election. They want to stay on

message and win the election

and then they want to get a -

after that, they want to say,

"Now what kind of a Government

are we truly going to be? We

have the bones but we've got

the desire." That's the big

thing for the Labor Party. It

really does have the fuel a lot

of Liberals described to my

co-author and I when we were

doing the Howard biography that

Liberals had ahead of the 1996 election. They had been in

Opposition so long and wanted

to get into Government and

weren't going to break from

their on message approach.

That's what Kevin Rudd is

doing. Last week, when John

Howard looked strong t was

because he had prOfs measure,

not -- Peter Costello's measure, not Kevin Rudd's

measure. He knows Peter

Costello and knew he had him

cornered. He doesn't have that

level of confidence with Kevin

Rudd, I'm sure. It's a strange

situation where-W the polls at

the moment you've got to be

feeling confident, of course

you come from the Labor camp

but the newspaper veteran this

week had a go at analysing all

of the polls and argued Labor's vote was much softer than

people were giving it credit

for, quoting a observation by

voters that there is just as

much chance of them voting for

someone else as they would vote

for the Labor Party. Is it that

soft? It's to your advantage

to say it is, of course. But is it? I think people are going

to be making up their mind in

the course of the campaign and

we're going to see the full

barage of all the campaign

support, advertising and so

forth, to help firm up that support amongst Labor

supporters if it is soft in

certain places. I would expect

there is going to be some toing

and froing in the course of the

campaign. I think it will know

up can down as the cut and

thrust of the campaign takes

its force. I do think people

are going to have that view but

I think that's why Kevin Rudd

is going to continually

reinforce to point about him

being an economic conservative.

I think once he's got people

Luked in on that, that he's

going to keep interest rates

low, have surpluses and maintain the independence of

the Reserve Bank, people are

going to be more likely to lock

in on the other policies as

well. Do you agree? I do. I

think it is easy for Kevin Rudd

to paint himself as a fiscal

conservative because I believe

he is. He's in the Labor right

has a bureaucratic background

and had that approach with Goss

gos in Queensland when he was

his Chief of Staff. If he wins

the election, he will continue

to have that view and want to

stick to the view and elements of the Labor Party won't want

to have that view. They're

staying on message now. They'll

come outlet of the woodwork if

it they're in Government will

Kevin Rudd will be powerful as

Prime Minister because he'll be

the person who led them into

Government after a decade in

Opposition. Peter Van Onselen,

it's never been done before when the Prime Minister has

gone to the election presenting

himself not just as a leader

but as a team, voting for two

for the price of one. How do

you rate the success of that

and John Howard being able to

successfully sell that when

he's a solo opscprart a strong

one, ipthese sorts of

campaigns? I think everybody

knew it was going to happen

anyway. It's not so much it is

now an inevitability about

Peter Costello. I think the

reality is people have always

expected that. The concern for

the Government is John Howard's

authority as prooums has been

diminished now leers in a

co-equal relationship with

Peter Costello. How that plays

out is the difficulty for him.

When he's behind the scenes try

to plan the campaign for the

Federal director and deal with

the approach they're going to

take, all the time the Costello

camp are gonna be there

co-equally and if the

electorate gets a sense Howard is diminished as a result,

that's when it becomes a

problem. Peter Costello has

classified the situation about

when we'll go to the polls. If

an election is called in two to

three week time, is that a good

or bad thing for Kevin Rudd?

The momentum has been with him

so far but the Government seems

to be taking away. A bit more

time, does that diminish the

stand and presence of Kevin

Rudd in the public's eyes? Not

at all. I think part of the

problem for the Government is

if they get another bad

Newspoll between now and when

they call the election, some of

the perceived momentum could

fall away. I think it dozen

really matter from Labor's

point of view. They're ready to

go, whether they call the

election in two weeks or on

Sunday, they're right and ready

to move. I don't see much

difference whether it's in two

weeks or two days time. Peter

Van Onselen, when do you

imagine John Howard might ring

the bell? I think he'll wait

at least two weeks before he'll

call the election and I suspect

he'll call for a long campaign

like we had in 2004 because he

needs the time to try to come

back in the polls. There was a

lot of excitement amongst

Liberals at what they saw as

halfway decent poll numbers

this week but it's still

annihilation time. The rhetoric

the Labor Party were using was

successful when they were

saying, "We're two weeks past

where the campaign was in 2004,

why won't jured call the

election?" Suddenly, when a

better nup comes in, that

rhetoric drops away. It has to

otherwise they look desperate.

I thing with that falling away,

John Howard in a position to

wait and hopefully for him,

claw back. If thought, I agree

another bad Newspoll would

spell disaster for the

Government before they call an

election which they want to be considered to be in the game

for. If Peter is scbroith

there is an uneasy relationship

between the Treasurer and Prime

Minister, the longer the uneasy relationship continues before

they get into to an election

campaign where the normal

disciplines kick in, the harder

it's going to be for them. They

can't afford to have any sign

of disunity. We know there are

people in the Costello camp who

are prepared to do things which

destabilise. I think they would

be thinking, "We got to hold

this leaky boat together. We

can't be going on for too long

making out we're one, big happy

family when everybody knows

we're not and if someone starts

making that point in ternally

we've got real problems." John

Howard relishes a fight like

this. What do you think we can

see from the man during the

campaign? It's interesting. I

don't think John Howard is as

good a campaigner as he's made

out to be. He is a good

politician who goes into

campaigns with well-laid plans.

Leze not that good at a debate.

Really fwoun 4 was the first

time I'd say he won the

campaign. In what I would

expect to see from him is

steady as he goes. Leers going

to have to talk about the

future and doing that side by

side with Peter Costello.

Expect him not to make the kind

of slip-up he was doing on AM

when he was given the it chance

to talk about the future and

didn't have anything to say. I

expect he'll do more of that

and have Peter Costello next to

him when he does it. How does

Kevin Rudd respond? He makes

the point this is a Government

that's 11 years old, it's

stale, that the Prime Minister

has lost touch and Peter

Costello's never been in touch.

I think they're the problems

they're going to have doing

that sort of joint shuffle

between Costello and Howard.

The other thing we're going to

see in this campaign is an

extremely negative advertising

campaign from the Government.

I've got no doubt about that. Because they're such an old

Government, because they've got

these problems about being

stale, because Peter Costello

really isn't doing anything

that's different from John

Howard, the only way they can

get it at the Opposition is to

go low and we've seen that in

the last week and we'll see it

again. Peter Van Onselen, do

you agree with that? I don't

actually. I think that the

Labor Party is very

successfully made the point

that they expect a negative

campaign and the Liberals will

realise that voters will be

cynical about that. I think

they're gonna do what long-term

Governments often have to do.

They can't keep being negative,

they have to start being

positive about what they've

done. I'm not sure it will work

but Paul Keating did it in

1996, not successfully. John

Howard will have to go positive

because Labor has successfully

pointed out they'll go

positive. Thank you for joining

us tonight.

A dominant figure in Northern

Territory politics and the first Federal Government

Minister from the Top End has

died. Bob Collins was awarded

an order of Australia for his

work promoting the Territory's economic development and

Indigenous affairs on the

national stage. But his final

years were over shaddode by

controversy. At the time of his

death he was facing child sex

charges in the dispharn ACT.

From Darwin, Rick Hind reports. Emergency services were called

to Bob Collins' house about

8:00 this morning. Police say

his death was not suspicious.

His passing is a shock to all

and we feel for Rose and the

children today. Bob Collins

first came to prominence as Territory Opposition Leader when he supported Lindy

Chamberlain against a tide of

public opinion. What about

question has been the grossest

miscarriage of justice. He

moved to the Senate in 1987,

serving in the Hawk ministry

and Keating Cabinet but

remained a fierce advocate for Northern Territory

self-Government. I would much

prefer that the Northern

Territory be govern by the

worst of all possible

administrations in the Northern Territory, which is precisely

what we have, than the best

possible of all administrations

in Canberra. Colleagues

remember him as a tough

factional warrior and straight

talking campaigner. Shane

Stone was right when he said he

would not play the race card in

this election. Leers playing

the whole deck instead and

dealing off the bottom of it.

He was a ruthless politician,

very clever, very greats

orator. He knew how to play the

game and played it right. High

mentored Clare Martin to a

shock win in 2001. His final

years will be remembered for

controversy. Police were

investigating allegations of

child sex offences dating back

30 years. Bob Collins crashed

hiss pelvis when he -- broke

his pelvis when he crashed his

car. Last year, Mr Collins was

charged in the ACT for alleged

sexual intercourse with a

12-year-old boy in Canberra in

1989. From hospital, Mr Collins

released a statement, denying

the charges. A committal

hearing was due to start on

Monday. Sadly, my mind goes to

the fact that justice has been

delayed and in this case denied

the victims. There are victims

in this court case who believe

they won't have any justice

done to them. There won't be a

win-win situation. The part

sea considering a State service

but understands the family may

want a private service. Bond's

attempts to sue over a

newspaper journal have been

thrown out of court. He

attempted to sue Paul Barry

over an article about Lesotho

Diamond Company. Alan Bond said

it contained false statements

and the journalist was liable

under the Trade Practices Act.

Justice Robert French today

dismissed the case, saying the

argument was untenable and had

no reasonable prospect of

success. He feels it's been

mis leading and deceptive, then

he should sue for defamation

but I don't think he will

because in WA he doesn't have

much of a reputation. Mr

Bond's legal team is Ier

whether to appeal. The head of

the United States Federal

Reserve has warn offend more

trouble to come from the

subprime mortgage market. Shane

Byrne said defaults on high

risk housing loans have put

pressure on financial markets

and said many borrowers are

still in distress. He said the

Federal Reserve would take

steps to crack down on bad

lending practices. We are plan

to use our rule-making

authority to oppose additional consumer protections later this

year. There is no question

that there is unsettling times

in the housing market and

credits associated with the

housing market. While President

Bush conceded there was

troubling, he said overall the

US economy is in good shape.

The Federal Reserve slapped

interest rates two daze ago in

a bid to stave off a wide

economic turndown. Ben Bernanke

has had a big week. With his

analysis, I'm join by Economics Correspondent Stephen Long.

Investors were cheering but not

everyone thought the Fed did

the right thing. Indeed not.

One critic said the cut was

socialism for Wall Street. Nice

phrase. It is. He said it was Lenin who said to destroys

cappal team-mate you had to

debauch the currency and the

Fed was going down that path.

Dr Marc Faber said the Fed

should be putting rates up

rather than cutting them. At

the heart of the problems in

the US is excessive credit

driving irrational behaviour in

the credit markets and what are

they doing some they're

loosening money, making money

cheaper, making more credit so

you've got that criticism

coming through quite strongly

of the Fed decision. Was it

just those local crit.Icise or

did they come from overseas

too? Around the globe. If went

to some of the key websites

with key financial and economic

commentators, there was an

argument this involved moral

has scpred was as much a

bail-out for bankers and hedge

funds as it was to do with

anything real happening in the

economy is. That the case?

Look, I'm not sure that I

agree, Virginia. I'm

uncomfortably straddling the

fence on this one because I

think they had an economic case

for cutting rates if you thing

job of a Reserve Bank and

Central Bank is to avoid a

recession because there is a real risk of recession in the

United States, but those issues

are there. It's as if the world

has been addicted to debt and

you've got a situation now

where basically the withdrawal

has been painful and cold

turkey could kill the patient,

but sticking the needle in the

arm again, well, that might

keep it running along but it

doesn't cure the addiction so I

can see both sides. There's a

strong economic argument, they

had to cut to avoid a recession

but the underlying problem

won't go away. With oil prices

soaring, is inflation still a

threat? The big fear a remote

fear, but the thing that really

worries me is that there is a

possible threat of stagflation.

Tonight, west Texas

intermediate crude has hit a

new record high. We've got

wheat prices and key food

commodities at record highs.

We've got the US dollar at its

lowest point ever against the

Euro, low points many

currencies which will make

imports more expensive to the

US so there is a remote, but

real threat of stagflation, I

think. Has the cut worked to

unlock credit markets if that's

the intention? The squeeze has

ease adlittle. Some of the risk

Premier in the rates banks lend

to other banks has eased.

What's underpinning the problem

was fear about toxic debt. Now,

if more US mortgages are gonna

go under, and we know they are,

well, that fear won't

necessarily go away so I think

it's a wait and see on that. I

think that the fat lady hasn't

sung yet on the credit

crunch. I look forward to the

aria. Thanks, Stephen Long.

You're welcome. Now to the

weather:

That's all from us. If you'd

like to look back at tonight's

forum or review any of Lateline's forums or

transcripts, you can go to our

website at abc.net.au/Lateline.

Tony Jones is back on Monday

and I'll see you next Friday.

Goodnight.

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