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Lateline Business -

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(generated from captions) worth. Luke Dorner with two

goals on the nice, a very

precise strike and on it. 4-0

at half-time, then 5-0 at this brilliant work ending

up with Symond Orchard chore

scoring the sixth goal p a fine

bit of work characterising the Australian performance in this

tournament, and then the icing

on the cake provided by Glenn

Turner, one of the players of

the tournament. COMMENTATOR:

8-0 for

Australia. Unprecedented for

the Kookaburras, World Cup winners, Champions Trophy and Commonwealth Games winners in

the same year. That is a first. They've been

though, for India, but the

Kookaburras winning and the

Hockeyroos as well. Netball is

one of the Commonwealth Games

sports where the world's best

feature and there was a

amazing game tonight between

Australia and New Zealand with

New Zealand prevailing. Two

lots of extra time. What is it

with extra time in sport this

year, Wilko? Basically netball

stole the show tonight, quite

possibly stole the last couple

of days. It was a brilliant

game between the two nations.

Australia led by 4 at one point

and then trailed by 7 at one stage and they the final seconds to win it. It

was locked at 47-all.

Cox - oh, no, despair! It raged

from end to end. These two

nations just love to do battle

on the netball. Kragt Cox in

better range this time. That

Zealander s with van Dijk Iran was for 63-all, but the New

van

down to it, a key slip here,

trailing by one, there was

no-one to pass to, New Zealand

raged down the other end, and,

yes t ended up in the right yes t ended up in the

hands and the winning score. COMMENTATOR: The COMMENTATOR: The 23-year-old.

Can she deliver goal for New Zealand? She has. The Silver Zealand?

Ferns are gold medallists. It goes to New

they scored 36 times in extra

time and it could well be one

of the longest games of international netball ever. It was certainly was certainly one of the most

intense, one of the most brutal

and one of the most attractive.

Just fantastic sport. Pretty

amazing. The marathon is the

signature end to the track and

field competition. Kenya has

done well and a good result for Australia, too, in the men's? Yes, a terrific performance today in the

marathon in hot and sweltering

conditions. There was an women's race. The ultimate winner, Irene Cosgai, she

actually fell in the early

stages in heading for the

drinks station here. This is tumble you don't want to do

when you've got to combat the

42km and everything else, but

she won. A spew besh

performance and Lisa Weightman,

with thoughts of Kerryn McCann,

a brave bronze medal. Michael

Kelai, the first marathon

winner for Kenya in 20 years. A great win

great win for Michael silver medal for him. A terrific performance last night

in the diving. It was Matthew

Mitcham superb, but quite brilliant was Tom 16-year-old Englishman, he is brilliant was Tom Daley, the

right out of the box and this

was the perfect 10s on the way

to a remarkable victory. Superb

diving between the two best in

the world. Mooi sell Shelley,

only his second marathon

with that? Very happy with that. The final medal tally? It

has been Australia's all along.

74 gold, 54 silver, 34 74 gold, 54 silver, 34 bronze.

India did pip England. A 177 total for Australia, and really

the Games, I think, as far as

interest goes, there was a

crescendo there. It built to a

big finish and netball certainly the standout performance in terms of the

combat on the final night and

- rather, the Kookaburras. This

is your last night coming in

with us. Thank you so much for

coming in every night to bring

us up to date. Really good of

you. Pleasure. Good on you,

laeg. To the weather:

And that's all from us. If

you would like to look back at tonight's interview with Ahmed

Djoghlaf or review any of Lateline's transcript s, you

can follow us on the website or FaceBook and Twitter. I will

see you again tomorrow night

when my This Program is Captioned

Live. THEME MUSIC

Good evening and welcome to

Lateline Business, I'm Ticky

Fullerton. Tonight - the

Aussie currency on the cusp of

parity with the Greenback, but not without some damage. I think there's no not without some collateral

doubt when we look at current funding costs, rates are going

to increase. Banks are

recovering, but the halcyon days of the GFC took over, maybe days of cheap financing before

over. Credit looked very cheap

and it was very easy to get and

I think the risk return ratios

were out of kilter. I think that will be the case going they've

forward. And as Murray-Darling

reports burn in Griffith, the

banker's peak body refutes claims that banks are already foreclosing on irrigators. No

bank is using the guide to the

any of plan as a reason for changing

any of its interactions with customers. To the markets, and

For decades, dollar parity

seemed to be an unreachable

benchmark. Tonight, it's just

a hair's breadth away. Earlier

this evening in London trade the Australian dollar peaked at

US 99.94 cents. Commonwealth

Bank chief Ralph Norris says the damage being done to some of

of the industries is an

justifiably strong currency. unfortunate by-product of

He also issued the firmest possible warning that interest

rates will rise no matter what

the Reserve Bank does. Phillip Lasker

Lasker reports. It's been Lasker reports. It's been a

long time since

dollar went further than a Greenback. Prime Minister

Malcolm Fraser was in his final

term. He called the shots on the currency with the Reserve

Bank. Now it's the screen

jockeys who call the shots as

they reel off their reasons for the new economic reality. One,

the weakness of the US dollar,

second the strength of the

Chinese economy and the demand

for the commodities and third the resilience of the

Australian economy to the

global confidence we've just

been through. Financial markets

are convinced the US Federal

Reserve will embark on another round of quantitative easing

and it's happy to let dollar weaken. They're trying

to lift their economy out of

the doldrums and out of the

subdued recovery and I think

that's their main concern. In

Australia there's not too much

concern from policymakers or

bankers for those caught in the crossfire who might be

suffering due to the dollar's

extraordinary strength. They

are collateral damage, as the

floating currency does its intended job of preventing excesses in the economy. The

exchange rate acts as a buffer

in regard to economic

circumstances and I think it

plays its role very well in

that regard. But some say

exporters may be finding the

Australian dollar's recent run particularly painful. You're

already hearing exporters are

concerned about the level of

the currency and the speed of the move might have caught some

of that segment out and they

weren't prepared and perhaps

weren't hedged as much as they should be. The Commonwealth

Bank chief had his own tale of

woe for his business lunch

concern about funding costs.

He joined the chorus of bankers

warning of increased funding costs due to the financial

crisis and tighter regulations

which would put pressure on

capital. So are interest rate

hikes outside the Reserve Bank's moves inevitable? There's no doubt

that when we look at current

funding cost, rates are going

to increase and as I said in my address

address today, the additional

cost of liquidity and capital

is going to have an upward pressure on interest pressure on interest rates going forward. And environment in Australia that

will continue to underpin the local dollar. Not to mention what's happening

elsewhere. We're pricing in

some pretty optimistic outlook

on Asia, we're also convinced

that the Fed will move that the Fed will move to quantitative easing. We need

to see rebalancing of the

global economy away from an overreliance on the US

consumer. Part of that is a

weakening of the US dollar.

Unfortunately, though, most people are happy to see a

weaker US dollar, not against

them, though. That certainly

goes for Australia's industries who face their

biggest currency challenge for

decades. The rise and rise of

the dollar has been a boon for

companies specialising in

overseas travel, but at home the tourism industry is

the toughest condition in 30

years forcing some companies to

close for good. Here's Nicole Chettle. Sydney's Darling Harbour should be bustling with

tourists but the strong

dollar's seen many tighten the

purse strings. We're not spending as much as we possibly

would have. The dollar's steady

climb is good news for locals

heading overseas, but it's putting

US and Europe. We're now $3

billion in the red, that is $3

billion more is leaving the

country from travel as is

coming in and we haven't seen

that for 30 years. The backpacker market is among the

hardest hit, particularly in

the west where this man is

closing his closing his adventure tourism business after 15

years. There's been a serious

shortage of travellers up and

down the West Coast. There was

a lot more people out there

that are going to suffer with the strength of the Australian

dollar at the moment. The next big challenge could be interest rates. The rates. The tourism Export Council says many operators that survived the global

financial crisis are carrying

debt and some won't withstand

more rate hikes. But for some

business is booming as more Australians take advantage of

cheap flight and a favourable

exchange rates. The winners are

the Americas, USA, Canada, Asia

where we're seeing traffic in both those areas up 30%. One global online travel has seen a

massive lift in bookings from

Australia since the dollar hit

US 98 cents. We've seen

upwards of 200% year for people planning to

travel to Paris, to Rome, to Barcelona , to the Czech Republic over Republic over the Christmas periods. Fierce competition has brought down the brought down the price of domestic flights, too and

there's been steady demand for

trips to Sydney, Melbourne and

the Gold Coast, but that's cold

comfort for Perth-based Easy

Rider closing its doors for the

last time this weekend. Back

to the world of banking and shaking off the financial

crisis with a record profit,

Bank of Queensland produced annual results today. income rose 27% to $179.6 million, delivered with above

market growth in both lending

and deposits. It's been a busy

year for BOQ bedding down two

acquisitions a securitisation

issue and plenty of new products in the offing. I

spoke to managing director

David Liddy a short time ago. Welcome to Lateline Business. Thanks, nice to be with you. You've just missed

and $200 million profit mark,

I'm interested in your net

interest margins and what

impact the financial crisis has had? A

full year we increased our net

interest margin by 4 basis

points but in the last 6 months

we declined 10 basis points. A large impact has been the cost of funding which is

significantly higher than it

was pre-GFC across all product

ranges and coupled with cost of wholesale funding has been very

competitive and high cost of

retail depofts, that's come off

a little bit. Presumably having that extra about $1.6 billion through a securitisation issue which has

helped us retain a strong

liquidity holding but it's about 17% which is

significantly above where we'd

normally be. Do you see an out

of cycle interest rate rise as crucial, what would happen if

it didn't go ahead? I wouldn't

say it's absolutely crucial,

but I think it's inevitable

that it will occur. The cost

of funding bank's balance

sheets has got no link to the

cash rate that the Reserve Bank

sets and all banks'

than they were. Regional banks

is significantly higher than a

major banks it's a double impost to us. You have

ambitions to get a return on

equity of 15%, what are the

challenges ahead? Definitely.

We've undertaken acquisitions,

we've improved our capital so a

couple of things that we've got

control on are very important.

Cost to income ratio for our

bank, we're a 20th the size of

the majors but we're in

relative terms the size of

cost-income ratoes. issue is definitely going to be

net interest margin and that is

a head wind but we think with

the mix of businesses we've now

got we've gone into an

insurance business, recent acquisition in St Andrew's,

we've bought a vendor finance business, ambitions to move more aggressively into the

motor vehicle business, so we're diversifying revenue,

improving margins and reducing

capital intensity. I hope

that'll flow through into the

next year. Are you also

assuming life will return in a

few years time to

like in that incredible decade

before the financial crisis?

Because the cost of borrowing

was very cheap. Do you believe

that will return? No, I don't.

That's a personal opinion, but

I think the cost of credit I think the cost of credit has

changed I think forever.

Australian banking system came

through this crisis exceptionally well and you've

got to take your hat off to the

management of certainly the

major banks and all the banks

and our regulators and the

Australian Government for the

role they played. Credit role they played. Credit was very cheap and it was easy to get and I think the

risk return ratios were out of

kilter. I think they've

returned and I think that will be the case going forward. You

can still manage your ambitions given we've had this change

forever, in your view? It's

certainly made BOQ a stronger

company. We had to remodel our

business and rethink our business and rethink our

funding and where we received

or got our funding from, we've

come through with a stronger

capital base, much stronger

liquidity base and restructured business in terms

of operational efficiency. Out of every

of every bad patch there's some

good and I think that's what we've achieved going

forward. You are different from

some of the other smaller banks. You've banks. You've got different strategies, using third party

brokers being one and now

moving from housing lending to look at

look at equipment finance

leasing and even car financing.

Presumably this is also going

to increase your risk, isn't it? It's manageable risk,

though. They're businesses we

understand. The home loan market is still around about

70% of our overall assets under

management and that will always be

done with the bank, or BOQ

group into three core segments.

One is the core bank which is

our branch consumer-based lending, the

national finance will cover

equipment and debtor finance and the recently acquired

vendor finance and the motor

vehicle finance business and on

top of that we've recently

acquired an insurance business. They're the three core element of our business going forward.

They all carry different risks.

We're bankers, we're in the business

pricing accordingly. I gather

you've got a new product a bit

like the UK premium bond? We've

got a new save to win product

that's going to be lauchg in

November and it's a

lottery-style product. It's

obviously a regulated product

but for every $250 minimum

balance, you get 250 entries in

a monthly draw. Initially that

monthly draw will be for

$30,000 and $20,000 for the

first ticket out, so I'm sure it will appeal to a lot of our existing customers and I

believe it will appeal to other

customers and as you said, the

product's used in the UK, a

similar product is also in place in New Zealand. It's

been very successful. Don't put

it on the horses, put it on

you. David Liddy, thank you

very much for talking to Lateline Business. Thanks

Ticky, nice to talk to you.

The world's second largest

iron ore producer Rio Tinto

continues to run its operations

at record capacity. In its third review, Rio says iron ore,

coking coal and alumina production reached record

levels. Rio Tinto shares hit a

record high on the news jumping

more than $3.40 to close $82.08. Iron ore output more than $3.40 to close at

accounted for more than a

quarter of sales and came in at

47.6 million tonnes up 1% year

on year. Copper and gold

production were down while

bauxite increased 17%. BHP

Billiton also did well,

climbing 2%. Gold miner

Newcrest Mining up more than record. The Commonwealth was after gold prices hit a new

nearly the best of the banks lifting

slipped more than 1%. nearly 2.5% and Harvey Norman

In New York, oil is

approaching US 84 a barrel.

Gold continued to rise and has

hit another record high and

copper is up $90 a tonne. The has poured cold water on

reports banks are planning to foreclose on foreclose on farmers as a

result of the release of the Guide to the Murray Darling

Basin Plan. An independent banking

banking report has warned farms

are at risk and at least eight

irrigation towns may not

survive if the water cuts go

ahead. Many local businesses

are worried, with debts at

record highs due to a decade of

drought. Emily Stewart

reports. Water is the lifeblood of many bush

communities, and less water for farming in the Murray-Darling

local economies and Basin will flow through to

businesses. It's going to

hinder our planning going

forward, it's going to hinder our investment decisions in the

basin, it's going to hinder our

our balance sheet in terms of true assessment in relation to

property values. It's probably

going to hinder our capacity to

raise funds. It might raise

banks . We don't know. The the cost of funds from the

Murray-Darling Basin

Authority's guide released last

week recommends that the

Federal Government buys back up

to 4,000 gigalitres of water

from farmers to be used for

environmental flows. A report by consultant looking at lenders

found because of the guide

banks are already preparing to

foreclose on loans. And that

investors consider the basin

plan will increase political

and regulatory risk for the

investment in Australian agriculture.

agriculture. But the Australian Bankers' Association

says this is untrue. We have

spoken to all of the major and regional banks today and put

out a public statement that

said no bank is using the guide

to the plan as a reason for

changing any of its

interactions with

customers. The report goes on

to say at least

including Mildura Griffith and

St George may not be viable

without sufficient water for irrigation. If eight towns close, you can be guaranteed

elders won't be having branchs

in those towns or places like

that. Some of the towns we're

talking about, these are major

hubs for agribusiness for us

and the whole of the Australian

bush. The authority says around

800 jobs could be lost, but community representatives across the basin say it's much

higher. The figures quoted for job losses in report are way understated. In

fact, it's ridiculously

understated. In the small

valley where I live the Border

Rivers we can Rivers we can easily calculate

a loss of 600 in that particular Vally. Extrapolate

that over the basin, you're

talking potentially tens of thousands of jobs. Irregularitiated

agriculture production in

agriculture production in the

basin is worth around $5.5

billion to Australia's economy.

Agribusiness Elders has 88 stores operating across Basin and the CEO says he's

concerned about the effects of

Australia suddenly starts water cuts on production. If

ramping down its food

production that will have a huge impact on the Australian

economy and a huge impact on

how we feed this how we feed this planet. The

banking report also indicates

lenders could be the winners

out of the buybacks. It found

banks will have a first right under security arrangements

with businesses and farmers to

any amount of compensation

received. Not necessarily the

case. It's going to have to be

dealt with on a case by case basis. The general that in the long-term big

business will be able to

leverage off opportunities for

rationalisation. Those that

opportunities as a result of a remain in farming will see some

particularly food scarcity of production,

production. But for most, less

water will mean a smaller

profit and possibly even foreclosure. Thousands of

people have expressed their

concerns at meetings being held across the basin and the

Federal Government will now set

up a 6-month parliamentary

inquiry into the human impact of the water of the water cuts headed up by

Independent MP, Tony Windsor.

The coal industry is seeing a

bit of corporate jostling with

a $193 million bid by New Hope

Corporation rebuffed by its target Queensland coal

explorer, Northern Energy.

Macarthur Coal New Hope After an unsuccessful tilt at

arguing Corporation is digging in

arguing its offer price of

$1.50 a share is a 43% premium

to yesterday's closing price of

$1.05. Shares in the target

explorer closed at $1.58. To put the case for Northern

Energy I spoke to Lateline Business. Good Chris Rawlings. Welcome to

evening. I know you see New

Hope as a low ball offer, but

the board has left things open, it's really a question of

price? The issue price? The issue for us is we

see great underlying value in

the assets within the company, we've worked for over six years

now to develop up the resources we have and the value in the

assets is certainly much

greater than the price on the

table from New Hope at the moment. You'll need to actually

fund the expansions you're

talking about, though, that will provide that value, do you

think you'll be able to get that funding from the market,

or is a combined entity with

New Hope Corporation a better

way of going about it? Our

corporate development plan was initially to start small at the

coking coal mine, to earn cash

flow from that progressively to either expand that mine or

deposit in the Surat Basin, together with a partner at the

once the infrastructure issues

have been outcome, the Wigan terminal, and the connector to

the Queensland Rail network, we

then saw there would be

significant cash flow and the

market has said to that we would support you in

doing that. We have shareholders there ready to stand with the company and

support us in our capital development program. New Hope

Corporation have said the offer

is friendly for is friendly for now, but they

seem pretty keen and could convert

convert that into a hostile

offer if necessary. Robert

Milner says he's got $2 billion in his war chest, what will

your reaction be if he presses

a little further? It's not for

me to say. We will consider

whatever offer is put to us and

it's up to the shareholders to decide whether that's something that suits their expectations

or whether it doesn't. very nice position for any

company to be to have that much cash in the tin but at the end of the day our shareholders

have the assets, the resources,

they own this company have been telling us it should

not be given away for anything

less than its value. Do you

have other suitors, or will others come out of the woodwork? Many people have had

point of view of investigating a look at our operations from a

joint venturing. Other suitors may shine a light on the company now New Hope

Corporation has done that. It

wouldn't surprise me to see

others step up to the

plate. Can you see this playing out over a long period, or

resolving itself by year

end? These takeovers have a

life of their own and I think

if I was presumptive enough to

stand back and say when this would

would be finished people would

laugh. The reality is this

will take its course, we will

fulfil the role and I assume New Hope Corporation will do

the same thing. You've been in

the coal business for nearly 20

years now, what do you say in

the sector, is there going to

be a lot more rationalisation, and how do you forward, particularly in performance of the sector going

Queensland? Australia is very

lucky to be endowed with great deposits. We have the premium coking coal deposits in the world,

world, very good thermal coal deposits and we

the door step of Asia who has

increasing demand of coal, even

question and for others again That's a

to decide. I'm deciding in my

own mind whether I invest in

QR. They've got a very

extensive risk section in their prospectus. People should

that very carefully. I think

they're fundamentally a good

business, but the challenges

that are before them is to

develop their infrastructure

growth in advance of the need

for companies to deliver the

coal. I think there's a lot of

thinking going on in many

offices around the world as to whether it's a good whether it's a good investment or not. At the right price it will be a great appropriate? Again, not you think the range is

something for me to comment on.

I'm a private investor in that

it as a cheaper price. and I would always like to get

Whatever comes out, I'd always like it for less. Dr Chris Rawlings, I thank you very much for joining Lateline Business

tonight. A pleasure, thank you.

Now a look at tomorrow's

business diary. Among the

companies holding annual general meetings are Maxi

Trains in Melbourne, and

sunland Group in

paradise Queensland. US retail

sales figures for August are

out and there'll be a close

watch on a speech by Fed

chairman Ben ber neckachy. I'm Ticky Fullerton, watching, goodnight. Closed Captions by CSI

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