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Good evening, welcome to Lateline, I'm Maxine McKew. With Kim Beazley battling damaging headlines
is the race on to replace him? One of our guests certainly thinks so and outlines what's ahead.

You know what the next phase is going to be. There's going to be a Labor Party internal research,
will leak, and it'll show Kim in the marginal seats not travelling well. Then there'll be a couple
of backbenchers who'll say the wrong thing. Then one of the Premiers will be half-hearted about
endorsement and Kim will have a very very unpleasant Christmas time.

Kim has done well this year. He's differentiated himself strongly from the Government on Iraq, on
Kyoto, on skills, on a range of issues. They've even turned interest rates against the Government
for the first time.

Graeme Morris and Michael Costello are our guests tonight. We'll hear from them shortly. But first
the headlines. Mission impossible - Henry Kissinger's pessimistic assessment of a US military
victory in Iraq. Changing channelling - the Seven Network gets cashed up for regional expansion.
And on Lateline Business, the Coles Myer board

Howard pays tribute at Long Tan

Howard pays tribute at Long Tan

Broadcast: 20/11/2006

Reporter: Jim Middleton

Prime Minister John Howard has paid tribute to Australian soldiers at the site of the largest
Australian battle in the Vietnam War, Long Tan.

Transcript

MAXINE McKEW: For the first time since the battle of Long Tan 40 years ago, an Australian Prime
Minister has visited the site to commemorate the war dead. With the approval of the Vietnamese
Government, John Howard has attended a wreath-laying ceremony at the Long Tan Memorial built within
the rubber plantation where 18 Australians and hundreds of Vietcong fighters died in 1966.
Political correspondent Jim Middleton reports.

JIM MIDDLETON: He's the first Prime Minister to lay a wreath at Long Tan and John Howard was
clearly moved by the moment. Most of the Vietnam Veterans on hand to witness the occasion welcomed
his presence.

GRAHAM KIRK: Graham Kirk, sir.

PRIME MINISTER JOHN HOWARD: Hello Graham.

SPEAKER: I don't believe in changing something that isn't broke.

JIM MIDDLETON: But this TPI pensioner had a different view.

PRIME MINISTER JOHN HOWARD: Hello Ken.

JIM MIDDLETON: Some of the vets did not get Vietnam out of their blood and now live in a nearby
Vung Tau where they've plunged into charity work. One of their young sons was there.

PRIME MINISTER JOHN HOWARD: I've had a lovely time in Vietnam. It's a very nice country.

JIM MIDDLETON: Today, the wind rustles the leaves in the rubber trees. Forty years ago it was all
shot and shell. Eighteen diggers died ambushed on an August afternoon. The Australians fought back
and vanquished a much larger force of Vietcong. Close to 250 Vietnamese bodies were counted.
Eight-hundred are believed to have died.

SPEAKER: It means a lot to us, it means a lot to Australia to have the Australian Prime Minister
pay homage I suppose to the fallen.

PRIME MINISTER JOHN HOWARD: It is very symbolic this place, and very important in the military
history of Australia.

JIM MIDDLETON: It's taken fully 40 years for the Vietnamese to feel comfortable enough to allow the
leader of a one-time enemy to visit a battlefield where they suffered defeat rather than savoured
victory. So it was fitting that Mr Howard paid homage to too Vietnamese war dead at an official
cemetery nearby. Up the road some veterans made Buddhist offerings as floral tributes from previous
pilgrims to Long Tan fade into the carpet of fallen leaves. Jim Middleton, Lateline.

Bush arrives in Indonesia

Bush arrives in Indonesia

Broadcast: 20/11/2006

Reporter: Maxine McKew

US President George W Bush has arrived in Indonesia amidst warnings of a possible Al-Qaeda attack.

Transcript

MAXINE McKEW: And President Bush has arrived in Indonesia for a six-hour visit amid a massive
security operation launched because of warnings of a possible Al-Qaeda attack. Mr Bush met
President Susilo Bambang Yudhoyono and other leaders to discuss efforts against terrorism and
poverty in the region, among other issues. Thousands of protesters took to the streets saying
George W. Bush is the most dangerous man on the planet and should be tried for crimes against
humanity. Indonesia is the world's most populous Muslim nation. Many there see the Iraq war as an
attack on Muslims.

Kissinger advises against Iraq war

Kissinger advises against Iraq war

Broadcast: 20/11/2006

Reporter: Tom Iggulden

Former US secretary of state Henry Kissinger has warned US President George W Bush that the Iraq
war cannot be won.

Transcript

MAXINE McKEW: He was the man who effectively threw in the towel in Vietnam and now former Secretary
of State Henry Kissinger says the Iraq war can't be won. Dr Kissinger has been advising President
Bush on the conduct of the war and is now pushing a plan to involve Syria and Iran in securing
Iraq's future. Tom Iggulden reports.

TOM IGGULDEN: At least 50 people died in Iraq on the weekend. The worst single incident was here at
Hillah, an impoverished Shi'ite city south of Baghdad. A mini-van pulled up offering temporary
work, then exploded, killing 22. The attack appears to be revenge for the arrest of 200 Sunnis as
the Shi'ite-led Government conducts a hunt for its kidnapped Deputy Health Minister. One of the men
advising George Bush about the war in Iraq now says it can't be won.

HENRY KISSINGER: I think we have to redefine the course, but I don't believe that the alternative
is between military victory, as it had been defined previously, or total withdrawal.

TOM IGGULDEN: Henry Kissinger developed the so-called 'peace with honour strategy' which allowed
America to withdraw from Vietnam 30 years ago. Two years later the Communist north took control of
that country. Dr Kissinger says complete withdrawal is not an option for the US in Iraq. He's added
his voice to the growing chorus of senior aides to President Bush calling for Syria and Iran to be
involved in the solution. Syria is signalling it's open to that idea. Foreign Minister Walid
Moallem visited Iraq on the weekend, the highest ranking Middle Eastern dignitary to do so since
2003.

INTERPRETER: We believe that a timetable for the withdrawal of foreign troops from Iraq will help
in reducing violence and preserving security.

TOM IGGULDEN: But many in Washington accuse Syria of allowing the flow of arms and terrorists into
Iraq, worsening the violence. There's also a growing lobby to increase American troop numbers in
Iraq, a lobby led by another Republican whose life was defined by Vietnam. Senator John McCain was
a prisoner of war and he's been a long-time supporter of former Vietnam-era General and former
Secretary of State Colin Powell's view that war should be fought using overwhelming force.

JOHN McCAIN: The lesson I learned from Vietnam is applicable today. If you're going to do what's
necessary to succeed, i.e. the Powell doctrine, then go ahead and do it. But if you're not willing
to, then don't.

TOM IGGULDEN: Many Democrats simply want the US to withdraw. One of them has moved a private bill
to reintroduce the draft. It's got no chance of succeeding, but Congressman Rangel, who also fought
in Vietnam, moved it to make a point.

CONGRESSMAN RANGEL: This President and this Administration would never have invaded Iraq,
especially on the flimsy evidence that was presented to the Congress, if indeed we had a draft and
members of Congress and the Administration thought that their kids from their communities would be
placed in harm's way.

TOM IGGULDEN: Some generals reportedly want another 40,000 troops to help secure Iraq. Tom
Iggulden, Lateline.

Costello and Bono discuss aid

Costello and Bono discuss aid

Broadcast: 20/11/2006

Reporter: Maxine McKew

Irish rock star Bono has met with Federal Treasurer Peter Costello today to discuss the level of
Australian foreign aid.

Transcript

MAXINE McKEW: After spending the weekend with the world's Finance Ministers at the G20 summit,
Peter Costello today spent an hour with Irish rock star Bono. The U2 front man and anti-poverty
campaigner met the Treasurer to try AND convince him to double Australia's $3 billion aid budget.

BONO: I'm pretty sure that Australia will go there, but you have to keep reminding the politicians
that this is important to you. I'm just a visiting rock star.

PETER COSTELLO: I think we're in total agreement that until you can show that all aid is being used
properly there's no point in engaging in more of it.

MAXINE McKEW: Bono said he focused on poverty issues and did not discuss the plight of Australian
Guantanamo Bay detainee, David Hicks.

Beazley asserts leadership

Beazley asserts leadership

Broadcast: 20/11/2006

Reporter: Greg Jennett

Kim Beazley has told critics he is the only person to take Labor to the next election, an indirect
shot at Kevin Rudd who is touted by some as a leadership contender.

Transcript

MAXINE McKEW: Kim Beazley has moved to assert his authority, telling his critics he's the only
person with the experience that voters will be looking for at the next election. It's an indirect
shot at Kevin Rudd who's been touted by a small group within Caucus as an alternative leader. But
Mr Beazley's stated intention to take Labor to the next election has not silenced one backbencher.
Retiring Tasmanian Harry Quick says Mr Beazley has to go and the sooner the better. From Canberra,
Greg Jennett reports.

GREG JENNETT: Harry Quick never wanted Kim Beazley as his leader and two years on he says many
others have come around to his view.

HARRY QUICK: Everyone I speak to are saying, "You've got to get rid of Kim Beazley. We are not
going to vote for Labor".

GREG JENNETT: The outspoken Tasmanian who retires at the next election wants Kevin Rudd and Julia
Gillard to replace the Beazley-McLann leadership team and he wants Caucus to consider the
leadership question when it meets next Tuesday.

HARRY QUICK: It's like a sore. It will fester and fester and fester and like poor old Simon and
Mark, it'll just burst. And the sooner it happens, the better.

KIM BEAZLEY: I'm about leading the Labor Party to the next election, and I will be.

GREG JENNETT: Kim Beazley's gaffe on Friday confusing grieving comedian Rove McManus with White
House adviser Karl Rove has aroused renewed frustrations within Caucus and not only with Harry
Quick.

HARRY QUICK: Politically I think it was very damaging.

GREG JENNETT: In his first media appearance since then Mr Beazley has sought to make amends.

KIM BEAZLEY: I made a slip-up on Friday, as you're all very well aware. I'm very sorry for that.

GREG JENNETT: Taking on the small band of sniping MPs behind the push for Kevin Rudd and appealing
to lingering fears from the Latham experiment, Kim Beazley asserts his record in office as his main
claim to the leadership.

KIM BEAZLEY: The Australian people will be looking for experience in leadership. They always do.
When an election campaign comes around, I'm the best bloke for that.

GREG JENNETT: And to emphasise the point.

KIM BEAZLEY: I'm going to make Kevin Rudd a very fine foreign minister for this country and Julia
Gillard an excellent health minister.

GREG JENNETT: Kevin Rudd is out of the country on a visit to China. Talk about the Labor leadership
is rife, but no-one's counting the numbers for Kevin Rudd and there's been no shift in the
factional groupings that underpin Mr Beazley, which is not to say some don't plan to give him a
wake-up call when Parliament returns next week. Greg Jennett, Lateline. Search Lateline

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Experts discuss Federal leadership

Experts discuss Federal leadership

Broadcast: 20/11/2006

Reporter: Maxine McKew

Maxine McKew discusses Federal leadership speculation with political experts.

Transcript

MAXINE McKEW: Well, as we approach the next Federal poll due around October next year, or perhaps
sooner, just how well placed are the Government and Opposition and their respective leaders? Kim
Beazley struggled through the past week with the Rove gaffe and a bad news poll, but looking ahead,
John Howard and his team are bracing for the Cole Report into the AWB scandal. For a view from both
camps tonight I'm joined by Graeme Morris, at one-time chief of staff to the Prime Minister, now a
senior executive with Pricewaterhouse Coopers, and Michael Costello, a former Chief of Staff to
Opposition Leader Kim Beazley and a regular columnist for The Australian newspaper. Good evening
both of you, good to have you on the program. Michael Costello first to you, with regard to Kim
Beazley's leadership, which seems to be visibly an issue in the press at the moment, when you
consider some of the headlines and the hostile or indifferent commentary, is the tail end of this
year starting to feel to you like a bit of a rerun of the tail end of 2003 when Simon Crean ended
up giving way to Mark Latham?

MICHAEL COSTELLO: Not at all. I think the thing to say about the latest news poll, which generated
so much excitement, was that it was a dull result in the sense that it was pretty much business as
usual. Labor competitive, but close. What happened was for two polls before that Labor had been at
52 per cent. Labor dropped to 50-50. Now, you would have thought Labor had dropped to about 41 per
cent given the coverage of it.

MAXINE McKEW: Why is Labor dropping at all when interest rates are going in the other direction,
they're going up?

MICHAEL COSTELLO: Well, Maxine, there is a little footnote on all the news polls which I think
would be well-advised for people to take note of, as they do in America whenever they report a
poll. It says there's a margin of error in this poll plus or minus 3 per cent. So when polls move
once, a one-off within that band, you really can't draw a conclusion from it. You'll often see
people remark how polls bounce around. That's the reason they bounce around when there's not much
change. That's what happens happening at the moment. If you saw a series of polls where Labor
dropped to 48 or 47 per cent, as you were seeing in 2003 for a long period, then you would have a
similar situation to 2003. But you have nothing like that at the moment. Labor has been competitive
all year. According to the latest news poll, it still is.

MAXINE McKEW: So why are we seeing leadership speculation again?

MICHAEL COSTELLO: Well, everyone has their opinion. I have an opinion which I form on the basis of
the best judgment I can make at the time. Often I don't agree with Kim Beazley, as I don't over the
Iraq war, but then I don't agree with a lot of the Australian people.

MAXINE McKEW: But surely the point is, Michael Costello, if Kim Beazley had established an
unquestioned authority as the alternative Prime Minister there wouldn't be any speculation, I mean
informed or otherwise.

MICHAEL COSTELLO: Well, what you're seeing is one newspaper gave this a hell of a rev-along and the
thing that I find most interesting is the people who have the lowest opinion of Kim Beazley are
those who by and large seem to have the highest opinion of the Government. Now, Kim has done well
this year. He's differentiated himself strongly from the Government on Iraq, on Kyoto, on skills,
on a whole range of issues. They've even turned interest rates against the Government for the first
time by finding new ways of talking about it. You cannot stop the press when it gets on a roll for
a while keeping this talk going. I mean, if you look at it all sorts of people are supposed to be
speaking out against Kim. All those people have come out and flatly denied it. Of course when you
really want to get someone on record you refer to dear old Harry Quick who's always good for a
quote. He's the man who said we couldn't support Kim, we had to put in Mark Latham. So I guess
there's his judgment. But I just think this is the most remarkable week for an extraordinary
beat-up. Kim makes a slip-up over a name; very unfortunate. It was only a few weeks ago that Prime
Minister John Howard, known to be one of the most focused politicians in Australia, couldn't
remember the name of the electorate he was in standing beside the long-standing member, the
electorate of Makin. These things happen in politics, they happen every day, but for some reason
when it happens to Kim Beazley it's splash, shock, horror.

MAXINE McKEW: Graeme Morris, is that what we're seeing, splash, shock, horror, but there's nothing
in it?

GRAEME MORRIS: Michael is right on the polls, they will go up and down. But I think the reaction to
one bad poll is indicative of Kim's problem, and that is, he seems to be sort of propped up by some
hot air and when anything goes wrong there's nothing underneath. So at a time when interest rates
were on the front pages, when Kyoto was on the front pages, when industrial relations was on the
front pages, he actually went backwards. And I think that frightened his troops, that in these
times of our issues on the front pages, his troops were saying, "How can we slipped a bit?" Then
they started to say, "Well, is Kim really doing the job?" Are all the things Michael pointed to
happening despite Kim? And I think they're going through a period at the moment - you know what the
next phase is going to be, there's going to be a Labor Party internal research will leak and it'll
show Kim in the marginal seats not travelling well. Then there'll be a couple of backbenchers
who'll say the wrong thing. Then one of the Premiers will be half-hearted about endorsement and Kim
will have a very, very unpleasant Christmas time.

MAXINE McKEW: So you think we're already in the first phase of something that's quite inevitable.

GRAEME MORRIS: No, not quite. I think the difference between this one and Simon Crean is that Simon
Crean jumped at shadows and quit off his own bat when there was no challenge. Kim Beazley you would
have to blast out, and that means either Kevin Rudd or Julia Gillard will have to grow a backbone
and challenge Kim and have a go at it. And I suspect at the last hurdle they will baulk and Kim
will probably be there. But there's going to be some rocky roads between here and the election
time.

MAXINE McKEW: Michael Costello, what of that?

MICHAEL COSTELLO: Well, all I can say - - -

MAXINE McKEW: Fanciful or not?

MICHAEL COSTELLO: Anything happens in politics. All I can say is this: in January a couple of years
ago when Kevin was asked why he didn't challenge he said, "It's because I don't have the numbers."
And I think that was right. The party chose Kim and they chose him for this reason. In our history
as a country the only person really who's become Prime Minister, been elected successfully when
they haven't had a long stint in federal politics is Bob Hawke who'd been a major national figure
really for 20 years anyway. It is a fact. The history seems to show that people want in those top
jobs people who've been round for a long while, they're familiar with and who've got experience. I
think that's why Kim got the leadership back. I think that's why Labor's doing okay. It's not
guaranteed of winning, although I think it's very strongly competitive at the moment.

MAXINE McKEW: You've just said two things there. You've said Labor's doing okay and then you've
also said it's competitive. Now, which one is it? I would have thought you should be way ahead at
this stage.

MICHAEL COSTELLO: I saw them as the same.

MAXINE McKEW: You see them as the same thing. Let me put this to you: you've got a 10-year-old
Government that is not travelling on a range of issues, interest rates going up, the Iraq war, the
looming AWB scandal. I mean, whether the news poll is fifty-fifty on the two party party or 52/50,
shouldn't you be now in a position where you have a commanding lead over a government that is
looking indifferent on a lot of issues?

MICHAEL COSTELLO: Well, I have to tell you I don't think the Iraq war has a particularly adverse
effect in Australian politics because fortunately Australians aren't suffering casualties. It's a
huge issue in America. I might remind you that contrary to what you may have seen reported in the
press, the Iraq war was the fourth biggest issue according to the exit polls in the US election.
Indeed Lieberman, who'd been knocked off as a Democrat candidate because of his pro-war views by an
anti-war, got up as an independent. So I think there's a lot of - but let me add - - -

MAXINE McKEW: I don't want to traverse American politics too much tonight, but go on.

MICHAEL COSTELLO: But let me add I think It's also worth saying some very adverse things happened
for Labor in that week and I think they explain a bit and they were the scandal and sleaze. The
reason I refer to American politics is the exit poll showed there the biggest issue in people's
minds was scandal sleaze and corruption in the Republican Party, not the Iraq war. I think that
really did hurt Labor and is hurting Labor.

MAXINE McKEW: Graeme Morris, what was the flow-over effect, do you think, for Federal Labor from
those State scandals?

GRAEME MORRIS: I think they hurt, there's no doubt about that. The word "Labor" did not smell
terribly well in New South Wales, Queensland or Western Australia in the last couple of weeks. It's
been dreadful for the Labor Party. But I think that's the point, is that Kim does not yet have the
presence or the strength to overcome any sort of blip. When you listen to all the people you can
sort of sense the come about me. There will be a group of people who will say, "Could we do any
worse if we change? Is there anything wrong with changing?" I think people will seriously have a
look a at the Kevin Rudd and Julia Gillard duet and there will be some encouragement for them to
have a go. As to whether or not they will, who knows?

MAXINE McKEW: But when you look at the calendar for next year Labor has a national conference
coming up, there's a state election in New South Wales. That's looking pretty crowded. You can
still see the possibility of a leadership?

GRAEME MORRIS: I genuinely think if you look at the last 20 years, a budget is very important and
if an Opposition in an election year cannot make a dent on a budget, people start looking at the
leadership. It's happened time and time again.

MAXINE McKEW: If all that is the way it plays out in 2007, what would you be doing if you're the
Prime Minister, having an election straight after the budget and perhaps before the APEC meeting
which is due in Sydney, what, in next September?

GRAEME MORRIS: Yes. Look, there's no doubt the election is due in October/November. That would be
the Orthodox. The Prime Minister has been fairly Orthodox. There's a slight difference this time as
people have pointed out this week; that is around September is APEC. Now, you could I suppose - and
it's unfair to speculate now because the Prime Minister wouldn't know - but you could say if Labor
was in a complete mess after the budget is to go a fraction early or you could say you can't really
have APEC on the eve of an election so you could go in about September or August, August or
September, and that gets APEC out of the way. Or you could do the Orthodox and go in October or
November. But a slightly early option because of APEC is not unreal.

MAXINE McKEW: Michael Costello, if we do see something like a post-budget, say a winter election,
what difficulties do you see for Labor, given they could have this sort of knockdown fight over
uranium come their national conference next year?

MICHAEL COSTELLO: Let me just say on this point about " there may be a feeling we couldn't do much
worse if we changed from Kim", there was that feeling too at the end of 2003 and Labor did do a lot
worse. I think people will have that very much in mind. Knockdown drag-out of uranium, well, the
party should have a good argument about it. It has had before and I don't think a vigorous policy
debate is a problem. What really matters is if the party goes into next year and the whole of next
year and is taken up with will there or won't there be a leadership challenge, you can forget Labor
winning, and understandably, simply because people won't vote for a disunited party. That's why I
think one way or another if there's anything to be done it will happen this year. I think that's
extraordinarily unlikely simply because there is no mood to change.

MAXINE McKEW: Can I move to another issue. Graeme Morris in a week's time Commissioner Cole's
findings are going to be made public. The headlines are going to look very different then. They'll
be bad headlines for the Government. So how do you gauge the potential impact?

GRAEME MORRIS: I should declare an interest in that we're doing some work for the Wheat Board.

MAXINE McKEW: Having good disclosure like that, okay. This question still stands.

GRAEME MORRIS: Look, it will be interesting to see if the Commissioner places any blames at a
ministerial level or he simply says that the Ministers didn't know, the Board didn't know and that
it was the officials at the time who got all this wrong. I don't think we know yet. In fact, I know
nobody knows. There is certainly going to be some legal action and that will taint some of the
actions of the past and that will I think naturally flow on a bit to the Government. But I think
there's a bit of a sense out there that people have done the Wheat Board. They've watched it all
over the front pages and have decided it really doesn't affect them much so it's a big media issue.
I think where it could be politically awkward is if there is disunity between the National Party
and the coalition in Government over what happens to the single desk, the way we sell wheat in this
country, and there are very different opinions there.

MAXINE McKEW: Michael Costello, what do you think?

MICHAEL COSTELLO: I think the Government's made sure there can't be any adverse comments on them by
the terms of reference, but the United States Congress with a Democratic majority won't feel
similarly inhibited and they are certainly going to begin inquiries into this in a much more
broad-ranging way next year. What I will be interested to see is if an observation made by Counsel
Assisting quite early on in this Cole Inquiry, how far that will be followed up. And the question
he put was, what happened in 1996 so that the attitude in the departmental official centre changed
so dramatically between a very tough line up until then and a different sort of line afterwards?
I'll be interested to see the answer to that question.

MAXINE McKEW: Graeme, Labor is obviously going to want to take the moral high ground when
Commissioner Cole's findings come out. But again to what extent is that going to be undercut by the
fact that you've got scandals in three Labor States. You've also got Kim Beazley's long-standing
indulgence of the former WA Premier Brian Burke; hardly a good look either.

GRAEME MORRIS: Again, I saw a report of Kim being at some dinner organised by Brian Burke as though
this was a terrible breach of Geoff Gallop's rules. Brian Burke wasn't at that dinner and Geoff
Gallop was. That small last detail nobody bothered to report. Of course Kim ran into Brian Burke
over in Western Australia. It's hard to avoid him, he's a big presence. But Kim's made clear that
he sees it as his duty as the leader of the Labor Party now to cut contact with him, to pursue the
interests of the party and I think he'll do that.

MAXINE McKEW: Just a final question, we've got a Victorian State poll coming up this weekend.
Michael Costello to you first, do you see any change likely or what are you betting on, status quo
result?

MICHAEL COSTELLO: The conventional wisdom is that Labor will lose a few seats. It looks as though
the Greens are going to control the Upper House, which is an important new development, and, of
course, the Greens have done a deal with the Liberals against all their principles.

MAXINE McKEW: In some seats, yes.

MICHAEL COSTELLO: To win a couple of seats, which has absolutely outraged the Nationals. So it will
be a fascinating contest between them.

MAXINE McKEW: Graeme Morris, Victoria first?

GRAEME MORRIS: The Liberal Party has six days to show that the Bracks Government should go. They
haven't achieved that in three years and are unlikely to do it in six days, but I think Ted
Baillieu will probably get the coalition to a position where they are in a winning position next
time. This one was a bit hard in one hit, particularly against the Bracks Government.

MAXINE McKEW: This confirms the point that you've been making for some time, isn't it, that
Oppositions try and win it all during the campaign?

GRAEME MORRIS: And it's bloody pathetic. The politicians say, "We haven't been able to make a dent
on a state Labor Government for three years. Can you the campaigners do it in three weeks?" It's
stupid.

MAXINE McKEW: We saw it in Queensland, it's going to happen again in Victoria. Now, what about the
New South Wales poll next year? Do you want to try and predict that one, given what we've seen in
the last fortnight? Which way is this going?

GRAEME MORRIS: There's no doubt there's going to be a huge swing against the Labor Government, but
it requires a 10 per cent swing for this Government in New South Wales to fall. That would mean
that Morris Iemma would be Australia's biggest political loser and Peter Debnam would be
Australia's biggest political winner. There has never been in this country a swing of that size.

MAXINE McKEW: You're saying it's not going to happen?

GRAEME MORRIS: It's most unlikely in one hit, but certainly the size of the swing, if it was held
any time in the next month or so, it would be huge, but probably not enough for the Government to
lose, despite the taint. But no, I think the party's very lucky they've got Morris Iemma here.

MAXINE McKEW: With all that Debnam has got running his way, he seems last week to have snatched
defeat from the jaws of victory. Is his inexperience showing?

GRAEME MORRIS: It was either badly advised or it was a poor call, bad judgment, because something
which was running so well of a sudden turned on him and bit him, and the entire media shifted from
what's Morris Iemma going to do about this drama to "Debnam, what a goose you are". That was not
clever politics.

MAXINE McKEW: Michael Costello, just a final quick comment from you on the New South Wales, the
likely result there next year. How do you see this going?

MICHAEL COSTELLO: I think Morris Iemma will pull them through and I think they've got a very tough
and high-quality campaign machine there with Mark Arbib because I do think that Graeme is being too
modest there. Campaigns matter an enormous amount. Very large numbers of people don't make up their
minds about how they're going to vote until election campaigns. They may have inclinations, but
they don't. An extraordinarily large number don't make up their mind until the last week in the
last few days. So campaigns matter a hell of a lot. It certainly did in the last federal election
campaign, I think the last week made a big difference.

MAXINE McKEW: Gentlemen for your thoughts tonight, thank you very much indeed.

Seven embarks on joint venture

Seven embarks on joint venture

Broadcast: 20/11/2006

Reporter: Helen Brown

The Seven Network is poised to buy more media assets after forming a new $4 billion joint venture
with a private equity firm.

Transcript

MAXINE McKEW: The Seven network will be part-owned by an American private equity group in the
latest deal among the nation's media giants. It's an arrangement that will create a new company and
give Kerry Stokes billions of dollars to play with. Speculation is already mounting about his
interest in the Fairfax media. However, not everyone is convinced that other media companies are
necessarily the targets of the new Seven venture. Helen Brown reports.

HELEN BROWN: Kerry Stokes is the latest media mogul to make changes to the landscape. His Channel
Seven network is creating a $4 billion group with the American private equity firm Kohlberg Kravis
Roberts to be called the Seven Media Group. That will see them both share ownership of Seven's
television, magazine and online assets.

KERRY STOKES: This is the most excited I've ever been about our network.

ALAN KOHLER: It's the best game in town. They're able to get all this cash while retaining half of
the business.

HELEN BROWN: The deal is similar to the one made last month between the Packer family's PBL company
and a different private equity group where ownership is shared and funds are freed up for
potentially other users. Today's agreement gives Kerry Stokes $3.2 billion to invest. And in a
statement to the Stock Exchange, Mr Stokes said, "The agreement delivers to Seven, its people and
shareholders a venture with strategic and financial flexibility to take advantage of the dynamics
of the Australian and New Zealand media."

Mr Stokes recently added to his shareholding in West Australian newspapers and is now being
questioned about his interest in newspaper publishers Fairfax.

KERRY STOKES: We've made no decision on buying anything.

JOURNALIST: Would you like to?

KERRY STOKES: I haven't considered Fairfax.

ALAN KOHLER: The trouble is this new vehicle which is half-owned by KKR and half-owned by Seven
that owns these things has so much debt. It's already got $2.5 billion debt. They'd have to raise
more money from somewhere, presumably from Stokes and Seven and from KKR. They won't be able to
borrow much more. So I think they might talk as much as they like, but I would say the big
takeovers are off the agenda unless they can raise more cash.

HELEN BROWN: Private equity firms essentially buy an entire company instead of just investing in
shares and then cut costs and resell it, sometimes to the very

people it was bought from. Mr Stokes says there'll be no changes to Seven's

staff.

KERRY STOKES: We've made our cuts. They're excited we don't have to make cuts.

ALAN KOHLER: Private equity in general are harsher and tougher on costs and so on. But David Leckie
and Kerry Stokes have already been pretty tough on costs at Seven. So I don't think there's going
to be any change there. Anyway, they still own 50 per cent of it and David Leckie remains managing
director. So really in terms of the management and the way it's run, it will make no difference at
all.

HELEN BROWN: The trend of private firms buying media interests isn't confined to Australia. Last
week KKR was among losing bidders for US radio giant Clear Channel, a deal described as the fourth
largest of its type ever. Helen Brown, Lateline.

Telstra shares open strongly

Telstra shares open strongly

Broadcast: 20/11/2006

Reporter: Phillip Laska

The Federal Government is confident T3 small investors will hold on to their shares after a strong
debut on the stock exchange.

Transcript

MAXINE McKEW: Well, it's been a strong opening day for Telstra 3 shares on the Australian Stock
Exchange. The Federal Government is confident that the rising price will persuade small investors
to hang onto their investments. But existing Telstra investors saw their T1 and T2 shares drop in
value. Phillip Laska reports.

PHILLIP LASKA: T3 was one bright spot in a sea of red as the sellers hit almost everything.
Turnover in Telstra shares was nearly 20 times average levels.

SPEAKER: I think the deal's gone very well. I think Telstra's got 80 to 100,000 new shareholders.

PHILLIP LASKA: They will be happy to see their T3 part-paid shares or instalments up 18 cents or 9
per cent on the issue price, but the existing T1 and T2 shares fell 12 cents or 3 per cent. Hordes
of investors sold those fully-paid shares and bought the cheaper instalments, taking advantage of
the same dividend.

RUSSELL KARLSON: Their pricing seemed to be about right and we've seen retail investors probably
looked after a little more this time.

PHILLIP LASKA: Analysts expect less volatile trading after the jockeying is over but not all
Telstra shareholders emerged winners. It's early days yet but at the end of day 1 the biggest
losers are those Telstra shareholders that chose not to participate in T3. Finance Minister Senator
Nick Minchin, who was on hand to witness the end of the day's trading, saw no losers.

NICK MINCHIN: All Telstra investors and the company itself will be much better off without the
Government there as the majority shareholder.

PHILLIP LASKA: Now some are wondering whether the opportunistic private equity groups might seek a
stake in Telstra from the Government's unsold shareholding locked up in the Future Fund.

SPEAKER: To make it interesting for private equity you need to own a pretty chunky stake. Most of
the bit private equity players are foreign and they can only buy up to 5 per cent anyway. I'm not
at all sure that in the sort of size we're talking about that that any private equity player would
be interested.

PHILLIP LASKA: Future Fund chief David Murray won't mind. T3's success means he's been left with a
smaller than expected share holding and won't be such a desperate seller. Phillip Laska, Lateline.

share hoilding and won't be such a desperate seller. Now to the weather. That's all for Lateline
tonight. You can find tonight's debate with Michael Costello and Graeme Morris on our website
shortly. Now Tony Jones will be back with you