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Live. Good morning, welcome Business Today for Australia Good morning, welcome to

Network, I'm raises interest rates despite difficult choice, the ECB

weak conditions in Greece and Rupert Murdoch closes 'News of

the World' as the news group 's shares take a dive. shares take a dive. And income

gap, the widening gulf between China's

China's elite and its poor.

shortly but first let's take Those stories coming up

shortly but first let's take a

quick look at the markets. local session will start soon, we'll have more on that in a moment:

For more on the market action

Bell Direct. Local trade will I'm joins by Christine ip from

start of the World' story impact News Corp shares and media of the World' story impact on

sector on the whole? It is

quite a scandalous story that's

come out of the media sector. The irony is this the type of story that the UK

tabloid would have thrived on.

It is the biggest tabloid

newspaper in Britain and the wind up of that 168-year-old newspaper isn't expected to have

have much of a financial impact on News Corp. have much of a material

Most of its profitability Most of its profitability does

but what we will be watching come from its cable networks

for is how sensitive for is how sensitive those

advertisers may be with the rest of the News Corp's conglomerate. Aside conglomerate. Aside from putting a spotlight on those

illegal reporting tackics one

of the possible positives that will come

will come out of that is it may

help News Corp's bid for BSkyB. Getting rid of the tabloid

newspaper is a big tick on

regulatory clearance. While

this is one of the biggest

headlines today we're not

looking at much of a financial

News Corp. Elsewhere in the impact on the media sector

region will that rate rise in China continue to flow through the market

the market today? Well we did see an immediate rise off the

back of the news. Chinese shares led the gains yesterday

and we will see some continued

attract IFness in those financials. The rate rise is

great news for bank margins but

while that monetary tightening is positive for China it does have

have a negative impact in the short term on the Australian share market. But most economists do agree that economists do agree that this should be the last we'll see for 2011. In we will should be the last rate rise

see that rein in inflation and

that will be positive for sustainable growth sustainable growth in

China. Let's move to the US now, what was behind the rally there? There was a positive optimism in there? There was a strong

markets last night and that was

mainly due to positive economic

data. With edid see a report

from payroll processer ADP. Now

private employers have added

157,000 jobs in the last month. estimate. Initial jobless That's

claims falling more than

expected. So some great news out of the US retailers as

retail sales well. Target showed that June

expectations. So overall a very strong performance on US markets and US stocks managing gains to 2-month highs. Let's

move over to Europe now. Stock

there's hit a one-month high, what was leading the what was leading the

charge? Well that was in charge? Well that was

reaction to news from the ECB

that they will suspend the

minimum credit ratings threshold on news did help lift the market and Portuguese banks, of

course, the funding concern is

going to ease a little too. And

that also did help investors

shrug off the ECB's decision to

lift interest rates last night.

There was some strong data out

of Europe too. Manufacturing output is up in

output is up in May and it's in fact recorded the biggest month

on month gain in a year. Strong

performances across Europe and the FTSE is up 51 points while

the CAC managed gains of 18 points. We'll leave it there, thanks for the

Christine Ip from Bell direct. Let's take a closer look at Let's take a closer look

what's happening with currencies and

European Central Bank European Central Bank has

raised interest rates for the

second time in 4 months in effort to keep inflation effort to keep inflation in

check and signal ed that more

increases are likely despite an

escalating debt crisis in

Greece. But the dilemma for

policy makers is how to manage

the euro zone's 2-speed

economy. Europe's central bank

today dismissed fears that raising rates is good Germany raising rates is good for Germany but grim for Greece. We consider that consider that maintaining stability for an stability for an entire

continent for 331 million fellow citizens is essential

for the prosperity of the

entire continent. What's more

Belgian than a waffle? Here the

interest rate decision makes

sense by helping to slow inflation in a vibrant sense by helping to slow

other countries like Europe but

also expand in Asia or in other

looking good at the moment In continents. So things are

ey things are looking ey things are looking good for the moment. Indeed Belgian growth this year is forecast to be close to 2.4%. Germany's

slightly higher, Finland around

3.7%. Contrast that with the 3.7%. Contrast that with the

strugglers. Ireland should grow

this year but Portugal's

economy will shrink, so too

Greece's by 3.5%. Up the road a

reminder of more affluent Greek

times. Higher rates will slow

an already an already struggling economy there. This couple always

planned to move back to Greece

one day. Not now, they told me.

me. It's miserable there. For

critics this is just the kind

of 2-speed euro zone they

always warned would be un sustainable. For years that were too low and that

encouraged an artificial boom there. Now they're getting

interest rates that are too

high. This is what we always said was the problem with the euro

euro that you couldn't jam divergent economies into divergent economies into a single currency. Many disagree with

with that. Here in Belgium, for

instance, hardly anybody questions remaining in the

euro, nevertheless there are

huge economic differences

across the euro zone which are

going to keep policy makers on

their toes for years to come.

Europe are impacting currency

markets, I spoke earlier to John John Noonan. Welcome back to the program. Good morning. Now the euro curbed recent losses in the wake of this

announcement by the ECB, what's

your view on that? Well the ECB

assured the markets that they

would provide liquidity, that

they would relax the collateral rules to provide important step. They also

signalled that they will be

raising rates. You've got the

ECB playing sort of 2 games now

because

because the kimpbs differences

throughout Europe is so great

so they're

amounts of liquidity for the

peripheral, breaking all the

rules that they have to while at the same time they've

signalled they raise rates

because core Europe is still moving

moving strongly. Managing

moving strongly. Managing a

2-speed economy is a difficult

thing to do, how successful do

you think they will be? Don't

think it's

think it's manageable over the long term. You can't have a one

size fits all economic monetary policy when you have different

fiscal policies coming out of all all these countries. Now they're moving towards fiscal

union by forcing Greece to sell

all of its assets, you're

moving towards a sort of fiscal

union but it's not going to

happen fast enough to make the

ECB any easier. On that euro it

ECB any easier. On that euro it suffered substantially in the

wake of the turmoil in Greece

and Portugal, Portugal, you spotlight so what's the future

for the euro? Well, the biggest

fear is contagion. I think the

markets have priced in the fact

that Greece eventually will

probably have to have probably have to have some form

of default. They've priced in

the bad news about Greece and

their view was the euro could

be quite stable as long as it's confined to

confined to Greece but now

we're talking contagion.

Portugal's been downgraded as

you mentioned, you mentioned, Ireland is probably next. The biggest fear

is Spain. If the markets there's a buyer's strike in the

bond market towards Spain and

you start seeing Spanish yields pick um and they have started to since the Portugal down

grades then you have

problem. You mentioned Greece, some form

some form of a default, what

would that look like? I think

initially what you will see is

a rescheduling of the debt

which is really a technically a

default. The ratings agencies

have come out, all of them, and said that they will view rescheduling of the being a technical default. The

ECB is still against that but that looks inevitable. The French banks have put together

for a proposal for voluntary

rescheduling of Greek debt. I still think in all likelihood investors will have to take a

hair cut will you not only hair cut will you not only see a rescheduling of the debt a rescheduling of the debt but

you will see the face value of

the debt reduced because it's

un sustainable. Greece cannot raise enough revenue to pay off

the debts that have outstanding

going out to 2015 and

a time when Greece returns to the drachma and would they the drachma and would they be

better off doing so? That would

be the last resort. That would

be a disaster for the euro zone. This is what you

would probably have to see an

election cycle take place in Spain when these austerity

programs that are going through we're already seeing the

Spanish take to St Streets.

There will be tremendous

resistance to it and even if

it's not in the interest be

interests of the country you election cycle where they will insist on that because losing their sovereignty, which they will have

will have to do, is not palatable for the Spanish population. Just looking at the

euro zone on the whole do euro zone on the whole do you

see that it's concerning that

the EU seems to be slowly toward this deep

economic fracturing that would

be very hard to recover

from? Absolutely. I see

peripheral staying extremely weak because the austerity programs are

going to be that much more

severe. The German taxpayer and the EU the EU is not going to be

allowing these bailouts to

continue and Moody's warn that

Portugal will probably need a

second bailout unless they start giving up their

sovereignty and the austerity

programs will not allow growth

in peripheral Europe. This will

in peripheral Europe. This will start feeding towards the core.

We're seeing it already, the

manufacturing data out manufacturing data out of core Europe is starting to deteriorate slightly and, deteriorate slightly and, you know, leading core Europe, Germany in particular, benefitted

tremendously from these growing economies in pe riffial Europe. As they began to shrank rink the European economy the European economy will suffer. I think the ECB will

not be that aggressive raising rates going forward because of

that. The other big

international news is the US debt level negotiations.

They're going to have to come

to some sort of consensus

eventually so what impact would

that have? Well, there's a emerging coming from the conservative right that a

short-term default would not be

such a bad thing because - Really? Well, I don't agree

with this view, but with this view, but this is what scares me because they well it will signal to the

world that longer term world that longer term we're taking care of our debt issues.

The markets are going to say

wrong on all counts. If the US

faces any kind of default, whether it's to foreign

creditors or even to the people who know mow lawn the reputation of the US lust be extremely lust be extremely damaged,

there will be market turmoil,

yields will go through the roof and markets aren't and markets aren't pricing in that eventuality because can't believe it will happen.

The fear is if the political side of things, if the

Republicans dig their he'lls in

and the Democrats do the same,

any kind of government default

in the United States would be an absolute disaster. Alright,

well hopefully that won't

happen. Let's move on to the

Australian dollar. Now it

overnight, it's now sitting in

the high 107s, is that

the high 107s, is that largely due to those employment

figures? That slerning

a nice bump. We moved up a

sense of those numbers came

out. I think there were some

fears the Australian economy

was starting to deteriorate a

bit after the are RBA statement

said they might have to revise

down the growth figures. The employment numbers show the

economy is still running pretty

strong even if it is 2 tiered. But also helping the Australian dollar

a bit the numbers out of the

States last night, the ADP job numbers were strong. Fears of US economy sliding have been alayed alayed a little bit after recent data has been picking

up. So I think in that

environment - Parity until at

least the end ot year? I think

we will go back and test we will go back and test the

110 level. We're getting into the northern summer the northern summer and the

northern summer time carriage rate where

rate where you borrow very cheap interest rate currencies like the you put it into currencies like

the Australian dollar very

popular. So the Australian

dollar should stay quite

supported in the short term unless wee see a deterioration

in the China outlook but even

with the interest rate hikes in China there's still a China there's still a bullish outlook for the

outlook for the developing world. We'll have to leave it there, thanks for there, thanks for joining the program. Thanks, Whitney. One

of the flagship brands of Murdoch media empire, Britain's

'News of the World', is to

close after days of increasingly damaging allegations against the allegations against the paper. The 168-year-old tabloid accused of hacking into accused of hacking into the mobile phones of crime victims, celebrities celebrities and politicians. Of all the options this was

perhaps the least expected

after 168 years of production

the last copy of the last 'News

of the World' will roll off the presses this mistakes said James Murdoch,

not just the hacking but out of court settlements authorised by

him. So the act of atonement him. So the act of atonement - kill the paper. I feel regret,

clearly the practices of certain individuals did not

live up to the standards live up to the standards and

quality of journalism that we

believe in and that I believe in and that this company

believes in. But for all the

contrition, senior executives, including former 'News of the

World' editor Rebekah

keep their jobs. I am satisfied

that Rebekah, her leadership of

this business and her standard

of ethics and her standard conduct throughout her career

are very good. And it's are very good. And it's widely assumed event schully the

company will simply produce a

Sunday tabloid under the Sun banner. It's a typical management stunt of Mr Murdoch.

He gets rid of problems and in this case nobody in the senior management clearly involved in these matter, Rebekah clear example, none of those go but the poor old workers at the 'News of the World' 'News of the World' are going. What I'm interested in

is not closing down newspapers, I'm interested in those were responsible being were responsible being brought

to justice and those who had responsibility for the running

of that newspaper taking their

Have been in this negotiation with Government and the independent

Independents and the

Government trying to get the

brodest ponl way climate change and I think our support

support base and Australians

will be, who really want action

on climate change, they will

see they're now getting it. Do

you believe there have been an experience before with the

Resources Minister Martin

Ferguson? I certainly think,

I'm not going to name any ministers who have been

involved in interference but

just the example during the election campaign of money

being taken out of a solar

program to finance cash for clunkers, then money being

taken out or proposed to be

taken out of solar flagships to

fund the flood levy. We have

had cabinet decisions to end

the rebates on solar at various

times earlier than had been

anticipated so there has been many, many examples of political interference political interference either

at cabinet or ministerial level

to switch money around, to change

change the rules. Just as

people get geared up to participate in a program, just

as businesses expand and take

on more people then the rules change. So we've ended up with

boom and bust cycles. That has to stop and I've argued that

until time blue in the face until time blue in the face and

I'm really pleased that we have

now a renewable energy agency,

sa statutory authority length from Government

we're going to see now real

support, consistent, secure

support for research and development

development and demonstration and commercialisation

projects. Do you support the Labor backbencher's revolt against the resumption of live

export? The Greens have made their position clear that we certainly the live export trade should be

resuming in the way that the

Minister has suggested and I certainly think it's certainly think it's healthy in any political party for people

to debate that. Julia Gillard,

should she have consulted her colleagues or Joe Ludwig consulted their

colleagues? That's a matter for

the Labor Party and how they run their internal decision

making. The Greens have a very

strong view about what should

have occurred and Labor will

deal with its own members in

the way it chooses. When

exactly are Greens MPs, the reports yesterday that Greens MPs will Saturday, when are they being

briefed on the carbon tax

package? I've been part of the gosh r negotiations as has my

colleagues ad-ABandt and Bob Brown. We have been constantly working with our colleagues

throughout the package just in

the same way that the

Government has been talking to

its cleeck cabinet. It will be on Sunday, the Government has not briefed the Greens part room on this

and all the details will be made available to Sunday. The price impacts Sunday. The price impacts on families are about $10 we're led to believe, do you think families who are struggling

with cost of living pressures

are able to absorb that? The

great difference between what

the Government and tp Greens tand Independents are delivering as delivering as a package for consideration for parliament

and that being proposed and that being proposed by Tony

Abbott is that we are

absolutely focused on making sure that particularly the most

vulnerable in Australia, the

low and middle income low and middle income earners, are supported to meet the cost of living

impacts that will be passed on

by the big polluters who will

face this carbon price. Nah -

that is the

out there making sure that that

is going to happen. Do you think 150,000 threshold for

families is rich, that level of income? The whole package and

how it will be dealt with, particularly in assistance, will

will be, of course, out there

on Sunday and I'm not commenting

commenting on it further. $23 a

tonne is too low, what would

you have the Greens had been working on this package we would have

assumed that having signed up for Australia to restrain global warming to less than global warming to less than 2