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Good morning, welcome to

Business Today for Australian

Network, I'm Simon Palan. Business Today for Australian

Coming up on the program - on message, Julia Gillard

criticises the banks for hiking

official rise. Brand damage, rates above the Reserve's

how much of quantity - Qantas's

troubles hurt the airline Rolls-Royce. Mixed troubles hurt the airline and Optus rings up a good result Rolls-Royce. Mixed signals

but profits are down at its parent Singtel. First let's

look at the markets. In look at the markets. In about

30 minutes markets around the

region will begin to

For more on I'm joined by Cameron Peacock For more on the market action

from

from IG Markets. The Australian

share market will open soon.

What will we see today? unfortunately I don't think What will we see today? Look

we're going to build on those

gains of 0.6% we saw yesterday.

We are looking at a softer open

today with the market set to unwind about 18 points or 0.4% lower around about 4710 Lit be interesting to see

lower around about 4710 level. Lit be interesting to see a tug

of war today between the

material an energy names and

the financial sector. We did

have the material an energy

names as the best performing sect nor

That was despite the US dollar

strengthening and commodity

prices coming off. We did have

BHP and Rio Tinto slightly

firmer in London last night and

the stock will open 0.8% we had the BHPADR suggesting

higher. Expect points to be put

in today by the material energy names. What in today by the material and

regional markets energy names. What about

Probably looking at a slightly

softer open across Asia, in line with US leads. Sit line with US leads. Sit a Friday, we are heading into a

weekend and there's always a

little bit of extra cautious heading into a

particularly this weekend being

hosting a G20 meeting and at

this stage we are calling the Nike down about 30.2%. And

there are concerns that Ireland

may default on its debt. Do you

think that could affect markets around the region? think that could affect any

Look, not directly but

certainly indirectly and when I

say indirectly I mean, you

know, via the euro. Obviously

these European debt concerns

are having big implications in seeing the euro trading off and the currency

people switching from the euro

to the US dollar, which is having the effect having the effect of pushing

the US dollar higher and

dragging commodity prices

lower. Now we did see that last

night although we did have the night although we did have

strange occurrence where we did strange occurrence

see materials, resource names

actually trading higher and I suspect

suspect that was on the back of

those strong Chinese industrial production numbers we saw yesterday. But Wall Street battled overnight, happened there? It was battled overnight, what

relatively poor session on Wall relatively poor session

Street last night. We Street last night. We had the Dow Jones about 73 points or

the NASDAQ down 0.9%. The 0.6%. The snd AP down 0.4% and

market was dragged down by combination of factors. We had market was dragged down by a

a poor result from Cisco which

was down about 16%. It was down about 16%. It missed

its revenue target and gave some disappointing guidance.

We've also got the stronger US

dollar which dollar which for the best part

of year is weighed on equity and we've got this continuing debate and concern about the effectiveness of the Fed's new QE2 program which is really

weighing on sentiment at the

moment. And to commodities now, copper is at an copper is at an all-time high,

across all raw materials? At is that increase reflected

the moment copper's trading $4 a pound ner the all-time

highs which it achieve ed at the peak of the '07 bull

market. It's worth noting...

Australian a little bit from

where it closed at 4 pm

yesterday but still at healthy levels. Copper has

probably the best performing

base metal in recent months but

it does tend to front run and

economic recovery in the other

base met as. The other base

metals have done well in recent

months but probably not to the

same extent as copper. Some of

the base metals were down from

the 4 pm close yesterday due to the stronger US dollar overnight. Thanks overnight. Thanks for joining Business Today. And now let's

in currencies and commodities. take a look at what's happening

The Prime Minister has used the international stage of the

G20 summit in Seoul to deliver a reprimand to Australia's big banks. Julia Gillard made the

comments in a speech to

business leaders which included the ANZ's Mike Smith maintains that customers get

good value from the bank

services. While the G20 is talking international finance,

Julia Gillard is still talking,

at least in part, the domestic

variety. She used her speech to business leaders to launch another attack on Australia's

banks. Our domestic debate, however, at the moment is

overshadowed by community

concern and anxiety about

mortgage rate increases and as

a result the Government is

in our banking moving to increase competition

Julia Gillard's written speech

was pretty strongly worded. She

accused the banks in it, for

example, of ripping off

consumers but when she came consumers but when she came to

deliver that speech she pulled her punches. We want to better

empower consumers to move away

from banks when they unhappy with their banking from banks when they are

they are being ripped off. Mike arrangements and believe that

Smith,

Smith, the CEO of the ANZ Bank,

and the man who arooufed that

above-the-odds rate rise

earlier in the week he was a

guest at that lunch and he defended actually feel that the customers in Australia get pretty good value for the services that they have. I

think what we haven't done very well is explain ourselves and been as transparent as we should have been. Later today

the G20 meeting will wrap up should have been. Later today

and the leaders will have to

see if they can actually agree on some of the reforms they've

been talking about, whether

they can call a ceasefire they can call a ceasefire on the so-called currency war, for example, that have been

straining relations between

Washington and bane jinge and then many of the leaders including Barack Obama including Barack Obama and Julia Gillard plane and head to Yokohama, Japan for the OPEC meeting. As

we just heard tensions we just heard tensions between the world's two economic

superpowers the US and China

don't appear to don't appear to have diminished

through a day talking through a day talking through

trade flows. Hu Jintao resisted American pressure to speed tup

reevaluation of the yuan. The

US President also failed to

secure a free trade agreement

with South Korea by his imposed

deadline of Thursday. It's a blow to Barack Obama who's

pledged to dunl US exports over

the next 5 years. The America and Britain have been spending and importing too much

and are now growing slowly. The

newer developing economies like

China are growing fast but

been importing and spending too

little. Agreeing the solution

at the G20 summit in at the G20 summit in Seoul

looks like proving rather

harder despite the slogan -

shared growth beyond crisis.

I think sit a vital meeting

that we are having. I'm not

saying that the G20 is in its

heroic phase as it was during the challenge those who say that

the 2008 crisis but I

the G20 is losing the G20 is losing its relevance. That was an

acknowledgment from acknowledgment from David Cameron that this summit will

not match the success of last year's in year's in London. I believe that the summit in Seoul will

produce positive outcomes. But not everyone agrees. not everyone agrees. China's

President Hu is under American

pressure to let his currency

rise stemming the flow of cheap Chinese goods. Hours after their chummy photo opportunity,

a Chinese official attacked a

certain country which he refused to not, he said, ask others to

take medicine because they are

sick. The result here may not

be heroic but better say supporters of this club that

world leaders meet and

and seek agreements than not

even try. An oil fire in the

engine is the preliminary

finding in the cause of last

week's Qantas A380 midair drama

over Indonesia. The European

aviation safety agency has made

the initial finding and recommended recommended the engines be subjected to repetitive

inspections. Qantas says it's not planning to fly until the airline is certain they are safe which could be at least a fortnight but possibly longer. Groundsed until further notice, the Qantas fleet of

flagship A380 s are still being

check after last week catastrophic failure of a Rolls-Royce Trent 900 engine. Qantas is working very closely with Rolls-Royce

engineers and airbus and

authorities in both Australia and overseas to ensure we can get the A380 back in the air,

we can get it back safely and we can do it as soon as possible. Europe's air authority has found the preliminary cause of the

incident. In an emergency air worthiness directive it says: The EASA says if not The EASA says if not detected

this condition could ultimately

result in uncontained engine

failure. And that's exactly

what happened with large parts

of the engine casing piercing

the wing and raining down on

the Indonesian island of ba

tham - Batam. Aviation

engineers say this is an engine de sign fault

easily fixed. Many say easily fixed. Many say the engine disintegration was not

worse and the oil fire wasn't closer to the fuel tank. While the Qantas the Qantas incident investigation is under way, the

European aviation safety European aviation safety agency is demanding repetitive Trent

900 inspections. Singapore Airlines has replaced 3 engines

on 3 of its A380s. The facts of

the matter as to what happened,

was the causes and so on, I

can't speak to that because the

investigations and so on are

still going on and it's more something that Rolls-Royce is

in a much better and more valid position to address. Rolls-Royce is yet to

make a public comment on its faulty engines. Well it's a week Qantas and Rolls-Royce

executives would rather forget. More

More importantly they probably wish everyone else would soon

forget it too. The engine

failure issues plaguing failure issues plaguing both

companies represents a public relations nightmare.

Reputations are on the line and

mrkting executives are in

damage control. A short time

ago I spoke to advertising and

branding expert about the impact on the companies' reputations. Thanks for joining for joining us.

Pleasure. Let's look at Qantas first l.

first l. Qantas would spend huge amounts of huge amounts of money protect and building its imdge how damaging have these engine

failures been? It's difficult to quantitify obviously but in

truth how a company truth how a company behaves after some sort of trauma after some sort of trauma is more important, I think, than

the fact that they've the fact that they've had a

trauma. It would be fair to say that most people that most people would acknowledge that this is

accident, certainly not

of all, Qantas have of all, Qantas have reacted

very well to it in that they've

been very open about what is going on with their engines and I think that's the sort

thing that's more damaging. How you behave post an event like

this is more critical than this is more critical than the event occurring itself and to date, I think Qantas date, I think Qantas have behaved very

behaved very well and they've been very

been very open with the public

and that's, I think, the two factors that are most critical

to perception of the brand. And

we just heard in that last

story that Rolls-Royce is what do you think is driving story that Rolls-Royce is yet to that to make any public

that strategy? I think - I

would say that Rolls-Royce are

probably bound contractual ually not to make ually not to make any statements, you know n way perhaps that if way perhaps that if Holden

source an engine out of Korea I

don't think it would be in the interests of Holden, the brand, for the Korean engine

manufacturer to make a comment

about their engine or the

airline's performance. So my suspicion would be that

Rolls-Royce are bound by some sort of contract they're not really allowed to sort of contract that says

comment on what's going on. But

even Qantas, I mean they're in a tricky position, they can

either engage with the media

and explain the problems and try to try to rectify it as best they can, or they could also be

tempted just to go quiet and

not offer comment to the media

and potentially suppress

stories. Do you think it's best

to be open and to engage?

Yeah, I mean we live now more

than ever in an era where consumers, customers expect to be

be able to talk to the company

talks back to them. Gone are

the bad old days of where the

company goes silent and nobody

says a word. So I

says a word. So I think Qantas have done exactly the right

thing and been very open about

it. Going quiet creates

suspicion and therefore, you

know, understandably they know

what they're doing, they have

just kept it as open as

possible. OK. How long does

this sort of damage last? I mean isn't it often the case that many consumers that many consumers forget things very quickly? Well, consumers do forget things

quickly and when we refer to

damage we just need to be a little bit careful there

because at this stage while it's been inconvenient for people I don't think there's

been any real damage done to

the brand. Had they behaved

differently, had the planes been

been put back in the air been put back in the air before

the problem was resolved, that

certainly would be damaging but to date the planes are growned

and while it may be

inconvenient I think most Australians, most people flying

with Qantas would appreciate kind of airline that are

prepared to lose money to prepared to lose money to sort out their problems rather than

put passenger safety at

risk. OK, but even if there were some perceptions that passenger safety was at risk because of these engine

failures, I mean consumers are

pretty aware that planes often

have technical difficulties or

even crash but still they keep

flying, do you think flying, do you think these engine failure incidents engine failure incidents have

any capacity in stopping people

flying with Qantas? No, not

while we are entirely aware of

the situation that they're So in other words, I think most people would realise people would realise that

you're probably not going to

get on a Qantas A380 in the

next week or so according to

news reports, but that certainly wouldn't stop them from

from flying Qantas. It still

has one of the best track

records in the world and that's

because they're prepared to

ground their aircraft, sort

their problems out and then get

back in the game. OK, let's

look at Rolls-Royce now because it operates in a slightly

different way. It operates different way. It operates in several different business

segments. Could the reputation issues their engines actually translate into the minds of

people say thinking about buying a Rolls-Royce car?

Look, I don't think so. Roms Royce have, as most people would know, a phenomenal reputation in the area of

engineering but particularly so

in the airline business and I think it would be fair to say

this is a new engine this is a new engine and they're having they're having teething problems with the engine. It's

unfortunate but I don't think it would personally in another aircraft it would stop that's personally in another aircraft it would stop me flying that's been flying for, you know, 20 years with a Rolls-Royce engine perfectly

safely. And just very briefly, do you expect Rolls-Royce

come out and say something

soon? No, I done. I don't

believe it's in their believe it's in their interests

or the airline's interest. I

think they should leave - they

are a supplier to the airlines

and I think it would be wrong

for them to comment when the

airlines appear to be doing a

pretty good job on being honest

about it and what to be that Rolls-Royce are

doing a pretty good job of

trying to sort it out. Because

I mean it can't be inexpensive

changing A380 engines nonstop.

So I think this is going to be painful at some level but I

done think Rolls-Royce should

say anything and I don't think

they need to while the airlines are prepared to cover it. OK, are prepared to cover it. OK, Rob Belgiovane, interesting times, thanks for times, thanks for joining Business Today. Thank you.

China's inflation has hit a 2-year high testing Beijing's

ability to contain risks from

its massive stimulus program. October inflation climbed to

4.4%, up 0.8% on last month driven largely by food driven largely by food prices.

While US leaders are in China for G20 meetings Beijing officials have criticised US's

quantitative easing program place further pressures place further pressures on countries like China. Some countries have launched a new

round of loose currency policy which pushes up raw materials and agricultural

goods and increases the

liquidity of the market. The

new situation will influence China's domestic economic

development and goods prices. Chinese officials have indicated that further indicated that further interest rate rises are likely. rate rises are likely. While leaders of the world's top 20 economies have been bogged down by by deep divisions over

currencies, monetary policy and global trade imbalance,

ministers at the 21-member APEC an agreement ministers at the 21-member APEC

forum have been an agreement for an ambitious

region wide free trade region wide free trade zone. Foreign and trade ministers

from the region have wrapped up

meetings in Tokyo, vowing to avoid imposing new avoid imposing new barriers to trade and investment until

2013. They've also committed to pushing ahead with the aim of bringing these talks to bringing these talks to a

successful conclusion. A little

known trade pact promoted by US President Barack Obama has

emerged as a key emerged as a key vehicle

towards the creation of a towards the creation of a free trade treaty trade treaty encompassing more than half the world's economic output. We see this initiative as

as a critical component of

building this strong building this strong growth strategy for the future and

welcome this expression of interest. Currently the includes only 4 small economies - Brunei, Chile, New Zealand

and Singapore but the and Singapore but the US, Australia, Malaysia, Vietnam

and Peru are in talks to join.

While Tokyo says it While Tokyo says it favours

moving toward freer trade

there's likely to be an outcry

from farmers in South Korea and

Japan who benefit

Japan who benefit from protective

a difference in emphasis

emerged from some members emerged from some members like Japan who were happy to forge

ahead using existing bilateral trade trade agreements.

TRANSLATION: In this

ministerial meeting we had no discussion

discussion of whether to change APEC into a binding decision-making body. APEC

leaders are expected to convene after the G20 economic summit

this weekend. South-East Asia's

biggest phone company biggest phone company Singapore Communications Communications has posted a 6.8% drop in roft for the second quarter, mainly due to lower contributions from its associates unit Optus has lifted half net profit by 19% on the net profit by 19% on the back

of a strong performance by its

mobile phone division. The battle ground in the Australian tele communications sector is

in the mobile space and at the moment Optus is doing well.

It's a point not lost on shareholders like Arnhem

Investment Management. Delivering 10%

revenue growth on the mobile side which is very strong and

keeping the margin at the same

level which is always the

trick. Optus's half year net profit was up 19% to $345

million with the bottom line also helped by tight control of costs which rose only costs which rose only 2%. We added 189,000 new mobile

customers in the quaut e, 143

thurks of these were post paid

customers an our numbers bring

our Optus mobile for the half

year to 380,000. The strength

of Australian dollar boosted Optus's contribution to the bottom line of company Singapore bottom line of its company Singapore Tele

communications which now earns

more than 70% of is revenue

outside sing pore. But

Singtel's half year earnings

were down despite a 10% increase in increase in revenue. It marks an extension of what the

company's been experiencing for

the last 5 years. Where

revenues have gone very well, experiencing uninterrupted

growth, but profitability has

been somewhat mixed due to the increasingly commodity increasingly commodity like nature of the services that

it's selling. Tim morz says

Singtel in its home market is experiencing many of the

problems Telstra is facing in

aren't as high as they were in yesteryear and the

yesteryear and the major players have a fight on players have a fight on their hands retaining hands retaining market

share. That fight comes at a

cost which is eating cost which is eating into profit margins. They are subsidising handsets just as is being done here in Australia and secondly and secondly they're paying a

lot for content for their IPTV

platform. Singtel may also

become a victim of Telstra's new campaign to win back market

share in Australia which some

believe will make it harder believe will make it harder for Optus to maintain its upward profit aggressive stance on aggressive stance on protecting

its eroding market share is bad

for the entire sector and for

that reason we're underweight,

the telco sector and have a

fairly pessimistic view on the

near term growth prospects for

most companies involved. The

threat of high interest rates

is still very much alive despite a surprising rise despite a surprising rise in unemployment. Australia's

unemployment rate jumped to

5.4% in October, that's a

6-month high, but the increase came courtesy of a record

number of Australians flooding

back into the back into the jobs market. You might have back into the jobs might have thought the surprising jump in unemployment would raise question about the wisdom of the Reserve Bank's

latest interest rate hike. On the contrary. Overall, I think

these numbers are consistent with an economy that's still

moving along at a pretty solid pace. Although unemployment

jumped from 5.1 to a 6-month

high of 5.4% there was a solid

pick up in employment and at

65.9%, the participation rate

has never been higher. In other

words, a record number of Australians or looking for work. Usually,

you know, a strong labour

market encourages new entrants

in and that's why we're seeing a rise in participation and participation actually hitting record levels. But the story

behind the record high participation rate is universally positive. There are

a large number of people that

are going to work because they have to, people are having have to, people are having to

add more paid work to add more paid work to the

labour market just to make the bills pay

bills pay and that's really not

a good thing. I think we need to start asking ourselves about the share and the the share and the distribution of income in the country, not just how many people are working. But the rise working. But the rise in the number of willing to work will help keep

a lid on the wage inflation the Reserve Bank watches so closely. That's an closely. That's an encouraging sign but I don't think the Reserve Bank is going

on that to help contain inflation over the medium term.

We know this term of trade shock, the accompanying

investment boom that's pending

as well as the construction

activity is going to place

additional pressure on the

labour market and I'm not sure if the supply is going to be enough. That tells me that whilst whilst the Reserve Bank is

probably likely to pause in interest rate hikes as we interest rate hikes as we go December, we should expect more interest

into 2011. Probably in February

next year. And most economists

say that the Government's

midyear economic forecast of a

jobless rate of 4.75% by the

middle of next year is still

credible. Going forward I think participation will stay high

but by the same token the

strength in the economy will generate enough jobs to absorb

those extra workers and so as a

result by the beginning of next

year, at least for the first

few months of next year, we see

the unemployment rate falling below the 5% what some would call full

employment. The very personal

belongings of Bernie Madoff are

up for auction up for auction this week. The prize items are a 10 carrot golden ring

golden ring that belonged to

his wife, other his wife, other custom

jewellery and a grand piano.

Buyers will be able to sleep, walk and drez like the

Madoff's. It's the second government-run auction government-run auction of belonction of belonction of Madoff who is

serving 150 years in prison for his Ponzi headlines around the region. The Hong Kong Standard reports

mainland inflation is rising

living costs in Hong Kong. finance fms says the US is

following a policy of currency weakening. And the Wall

weakening. And the Wall Street journt says a deal between the

US and Korea has failed. I'm I'llon Palan, thanks for

joining me, have a great day. Closed Captions by CSI

This morning - Australian uranium will soon be sold to

Russia. Julia Gillard seals the

deal with Dmitry Medvedev. This Program Is Captioned Live. Australia's Defence Force faces a critical doctor shortage with

shortage with claims it could affect military operations. affect military operations. An Australian man convicted Australian man convicted of

murder in Bulgaria hopes new evidence will exonerate him.

And Julian Lennon comes to

terms with a fraught relationship with his with a little help from some

Beatles memorabilia.

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