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Lateline Business -

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(generated from captions) Commissioner Tony Negus

described the newspaper's

behaviour as reprehensible. The

news that the 'Australian'

newspaper had wind of a

counter-terrorism investigation

was described as gut wrenching

and devastating by AFP boss

Tony Negus. Simon Artz is

accused of leaking the

sensitive information to

reporter Cameron Stewart.

Giving evidence against him

Commissioner Negus told the court the tip off jeopardised

thousands of hours of

investigations. He said he

implored the newspaper's editor

Paul whit Whittaker to

consider not publishing the

leaked information warning

lives would be at risk. In what

he termed a very direct

conversation he explained the

terror cell was planning an

attack on a military base and if it learnt of investigations

the cell might panic, change

its tack and fire on a shopping

centre. He said Mr Whittaker

replied:

While he said it was too

strong to say he was

blackmailed, the Commissioner

told the court he begrudgingly

detailed the planned operation

to take place forming the basis

of an exclusive story. The

court heard the deal was struck

under the proviso the

'Australian' held off any

publication until arrests were

made. But editions of the paper

hit the streets on 4 August 3

hours before police executed

search warrants. Mr Negus said

while the paper and the AFP had

a strained relationship he said

the 'Australian's tactics were

reprehensible. The hearing

continues. Before we go we have

a very special treat for you

tomorrow night, an extended

interview with Stephen Fry,

author, screen writer, actor,

director, and TV show host,

he's also a global conservationist but his efforts

to become the next generation's

David Attenborough have not

been without a certain amount

of pain. There are things that

crawl and screep and scream.

The noise of a jungle at night

is something absolutely

(Screams) Something comes in

your ear and you think what the

heck is that. And you hear the

words of an animals that says

"Only on Tuesday's" and then

the (Growls) And all these things happening around you and

the little things are biting

you. And the oil lamp is

flickering. If you have the

lamp on it's going to attract

the animals and if it's off I

can't see anything. There's not

enough alcohol or sleeping

pills to take this horror away.

You just tremble into the night

thinking I'm going to wake up

covered in snakes an it's so

awful. And when you do wake up it's the most beautiful thing

you can do is to wake up to the

jungle because suddenly it's

light and there's a sort of

little pure drops falling off

the flowers and then little

monkeys are swinging along the

trees, everything's colourful

and bright and it looks so

benign and beautiful and so

utterly unterrifying anymore.

And it's just the most

transformative thing. A

wonderful Stephen Fry on

wildlife, death, the universe

and everything. That's tomorrow

night. A quick look at the weather.

That's all from us. If you'd

like to look back at tonight's

interview with Geoffrey

Robertson or review any stories

you can, follow our website and

you can follow us on Twitter

and Facebook. Don't forget our

interview tomorrow with Stephen

Fry and let's hope his 3

million Twitter followers hear

about it too. See you

then. Closed Captions by CSI

This Program is Captioned

Live.

Good evening, welcome to

Lateline Business, I'm Ticky Fullerton. Tonight - trouble on

the water front with strikes at

3 ports and negotiations

deadlocked at two more. I think

you have to come to a situation

where resolution may require

very strong action on the part

of the employers. Virgin looks

to cash in on Qantas'

industrial unrest. We're an

Australian company, we employ

Australian people and we will

be, in fact we are, we proved

we can, that we are one of two

very strong airlines in this country. And we're live to

London to discuss the cheery

prospect of a global crash next

year. Charles Dumas'

predictions involve a halving

of Chinese growth rates,

depression for Europe and an

America that rises from the

ashes. To the markets where the consolation is it could

have been worse. The All Ords

halved its losses through the course of the afternoon.

Tension between the unions

and the stevedoring companies

seems to be mounting sparking

fears of another prolonged

industrial campaign on the

water front. Already there's

been an escalation of rolling

stoppages and work bans, now

talk of lockouts. The water

front dispute of the late '90s

crippled Australia's import and

export markets. But once

resolved led to water front

reform and increased

productivity. 14 years later

some fear the climate at the

water front is deteriorating

again with rolling stoppages

and work bans escalating. We

saw what happened in '98, we

certainly don't want to go back

there and I don't think anyone

does and I don't think the

unions do and neither do the

employers. But it just can't go

on and I think you have to come

may require very strong action to a situation where resolution

on the part of the

employers. Are you talking

about action like Qantas has

taken? Lockouts, yes. Talk of

heavy handed tactics don't seem

to worry the Maritime Union

which is trying to negotiate

new workplace agreements. The

Patrick dispute in '98 was a

brain tumour. This is a passing

headache. It's a few hours, a

few days, it's a limited

inaction and scope, it's

designed to get the company to

make a concrete offer which is

going to relieve the economic

pressure on our members. The

union claims a deal with

Patricks has been reached after

a 12-month slog but says early

negotiations with DP World have

already broken down. Last

weekend's stevedores in

Fremantle walked off the job.

Toold there was strike action

in Melbourne with Sydney and

Brisbane to follow next

weekend. It seem assoftening up

exercise. We'll show them our

muscle. I think in our view the

stevedores have to stand up to

them. It's not an armed

robbery, we're after CPI,

reasonable outcomes, the same

outcomes that were delivered in

the 3 years previous during the

global financial crisis. We're

dealing with high technology,

high productivity, 24-hour

shift work. We're not running

away from performance and

productivity but we expect

reasonable wage outcomes and we

expect the company to put that

on the table. The Australian Competition and Consumer

Commission has been monitoring

productivity levels at the

ports for the past decade and

says the most dramatic fall

since Patrick's infamous

dispute has been in the last 12

months. They put it down to a

worrying increase of industrial

action. Instead of a high level

what you've got is one union on

the water front and a duopoly

negotiating with them and there

seems to us to have been a bit

of a stand off in those

relationships over the last 8

to 10 years where largely wage

increases are flowing through

but there's no productivity

offsets. They say along with

industrial reform the water

front urgently needs more

capacity, additional investment

and increased competition. The

possibility of escalating

industrial action is also

concerning retailers. If

there's a hold up in the supply

chain and if you're coming into

a major selling season, a

summer or a winter season and

obviously you're waiting on

those goods to come in, then

yes, it can be very crippling

when the stock isn't there,

when you expect it. You want to

get that stock in and sell it

at the right time. Stevedoring

companies Patricks and DP World

who have both been hit with

recent strikes were reluctant

to talk to the ABC while

negotiations were still under way. Now here in Australia as

across the Asia Pacific all the

talk is of the 21st century

belonging to China. But what if

it turns out to be America's

century, just like the last?

Well our next guest thinks that

is the eventual outcome after

another crisis. He's Charles

Dumas chairman of Lombard

Street Research in London and

author of 'The American Phoenix - Why China Will Struggle After

the Coming Slump'. He joins us now. Welcome to the

program. Hello, glad to be with

you. A Phoenix rising from the

ashes, many might see your book

as a work of fiction, those

glut nous Americans back on

top, what are the fors that

will drive this? First of all there's the ashes and what

we're talking about here is the

United States tightening its

budget very severely and probably therefore precipitating a recession next

year. At the same time the

Chinese have a huge over

commitment to exports and to

investment and as a result, and

because they have been under

valued they've got a major

inflation problem so they have

to slow down as well. So I

don't have to tell you Europe's

a shambles so the whole world

is basically turning down, so

that's the ashes part. The

recovery of the Americans lies

in the fact that the Chinese

inflation has finally achieved

for America what the Chinese

tried to deny them which is a

reasonable valuation of the

dollar because all along the

Chinese latches their yuan on

to the dollar created an

artificial dollar zone in which

China was undervalued and

therefore America was over

valued. Now the Chinese

inflation has stopped that. You

see the result of this is that

the labour gap between China

and America will be closing

considerably? It is closing a

lot, yes, in dollar terms

Chinese labour costs are rising

more than 10% a year, this is

after allowing for productivity

and all of that stuff whereas

in America they're flat to

falling. So the bilateral

relationship is changing 10% a

year and in fact this has been

going on for about 18 months,

will continue at a lesser rate

by the middle of next year the

Americans will have got a 20%

leg up viv-a-viz and the

Chinese will find America

essentially restricting its

demand because it has to get

rid of all the excessive debt

the export leg growth model no

longer works and they've got to

find out - sorry No, I

understand that BCG has put out

a report recently called Made

in America Again and the idea

that many of the jobs that have

been exported will actually

come back. What sort of

industries are we talking

about? Well, I mean the most obvious industries are things

like high tech but you've got

to remember that the American

industrial complex includes

Mexico and so they have plenty

of cheap labour close to home

and they found that, you know,

these kind of very distant

lines of communication of

specialised product lines have

not been too effective in

conditions of disruption over

the last 2 or 3 years. So

having stuff close to home

makes sense and with the

Chinese costs going up usually

quite a lot of stuff in a whole

range of industries is just

less competitive coming out of

China. How important is fuel in

your scenario? Well, I think

it's important not only fuel

but more homely for Australia

is metals because the Chinese

basically lived off dirt cheap

labour and have been very

wasteful of capital, energy and

metals and materials generally

and what we're saying is

because they're now not getting

such cheap labour they will

actually have to start

economising on all of these

things so we would expect that

the big 12-year up cycle in oil

and metal prices is going to go

into reverse and of course that

has huge implications for the

Australian economy. Meanwhile

you see that America will

actually become self-sufficient

in its own energy? I don't know

about that. It's certainly

become less dependent on

imports and of course there is

this shale gas business which

is very positive for the United

States. But the main burden of

our argument is the same thing

as Boston Consulting Group

namely the new economics means

China is less favourably placed

in terms of costs so a lot of

stuff will be done at home in

America and there will be

better investment there too. Of

course all this is happening

further down the track.

Immediately we've got the uoh

euro financial crisis to deal

with with the latest dram

arvings - dramas with Greece

jooefr - overnight, how do you

see that playing out? If you

look at the debt levels and the

cost competitiveness levels of

Greece but not only Greece ,

but also Italy, Spain and Portugal you will find there's

no way they can stay in the

euro and grow. So they don't

want mind a depression they can

stick around in the euro and

take orders from Berlin and

Brussels but if they've got any

sense they will make a

negotiated exit and it looks

like the Greeks will move down

that road rather messly sooner

than we thought. You don't see

a great future for

Germany? Well, the problem with

Germany is they've been further

embedded in the euro like the

Chinese with their cheap labour

costs. As a result the growth

rate of output per hour works

in Germany which yiezed to be

2% in in the 1909s has been

less than 1% in the last

decade. People have got a bit

slack and the. The currency is

strong and the industries have

to work harder and try harder to improve their productivity

and cut their costs. Charles

Dumas, some very pro -

provocative thinking, thanks

for joining us. A pleasure,

nice to be with you. To the

banks now and hot on the heels

of National Australia Bank's

solid result comes a near $7

billion bottom line from

Westpac. The bumper profits

made it more difficult for the

banks to pass on anything less

than a full interest rate cut

to their home borrowers but NAB

took that risk and faced the

expected attacks. NAB has

cashed in on its image of being

different and true to form it

stood out from the pack again

by passing on only 20 of the 25

basis point cut announce bdity

Reserve Bank yesterday. The

uncertainty in Europe, the

volatility going on in overseas

markets and that is leading to

a rising cost of funds. What's

important though is we've been

able to maintain the lowest

standard variable rate of the

major banks. It didn't go down

well with the Treasurer who

earlier this week told banks to

pass on the full cut. It's a

kick in the guts to working

families, it's a greedy

decision from the NAB, and it

is not justified in my view by

the fundamentals. The funding

cost pressure argument didn't

wash with one of NAB's rivals,

either. I think that's a

forward looking view. As I

said, as I see it at the moment

there's no reason not to pass

it on. I think it's important for the Australian economy and

good for customers at this

point. The Westpac chief denied

her bank's decision to pass on

the full cut had anything to do

with the timing of today's

thumping big annual profit

announcement, close to $7

billion. But second half profit

was down 13%. Analysts say core

businesses like the Westpac

retail and business banks and

St George are doing quite

well. They've got a fairly

strong volume growth and also

margins actual expend it over

the year so Wen you have that

going through it's going to

underpin revenue growth. The

issues are costs and

productivity, particularly in a

weaker growth environment. But

Gail Kelly was careful not to

confirm that Westpac would be

outsourcing more functions at

the expense of in-house

operations. But sit a new model

of operating, as I mentioned

this morning, moving from a

model where suppliers and

others provided staff and

resource to us to assist us

with our work to a position

where we're working with suppliers to manage whole

functions or processes for

us. A lot of branches but the

revenue potential isn't there

so I think you could tighten up the net rope a bit and the

other thing is cross-sell.

People talk about wealth, the

wealth space and I think

there's still going to be a lot

of rationalisation in that

area. Like many companies,

Westpac is cautious about the

future given the turmoil

offshore. We've seen that

during the course of this year

the actual underlying strength

of the economy in Australia

should be such that we should

be performing better. However,

we have been impacted by the

concerns, the volatility, the

challenges in Europe and in the

US. And like her rivals, Gail

Kelly was warning about higher

funding costs. In effect,

putting borrowers on notice not

to expect to get the full

amount of future cuts in

interest rates. Plenty to talk

about on the local market today. Earlier I spoke to

Marcus Padley from Pattersons

Securities. Well another

wobbly day but about half the

losses were pared back in the

afternoon session? Yes, with

were down - 92 but closed down

48. It's made that recent rally

which broke the downtrend for a

while and got a few people

thinking maybe we were going

oto see a long-term rally has caught everybody out. I think

you call it a bull trap. And

the down trend has resumed and

the volatility is scaring

people off. It kills trade

rather than generates trade.

What's the headline tonight?

Greece calls off referendum and

the markets bounce 3%. It's not

investment, this is casino. Speaking of debt trade

we've had a few more

indications of how far the MF

Global collapse extends,

haven't we? Yes, and in Australia there were a couple

of announcements from Iris who

said it may cost them 1% of

revenue and Bell Financial

Groups who have got clients

with $2.9 million frozen at the

moment and also it's the big

operators like Westpac online,

e trade, Commsec who have got

some CFD, presumably they're

using the MF Global engine and

some of those clients have been

affected but it's tiny stuff

for them and if they had to

make - I can't put words into

their mouth but they will

hopefully sort their clients

out. The exposures for them are

tiny and Westpac announced a

profit today where they've

earnt $315 per man, woman and

child in Australia in profit.

So this sort of thing is pretty

irrelevant unless of course

you're a client whose accounts

have been frozen and that's

where the real lesson is, you

know, you deal in equities, you

deal in bonds, you own the bonds, you own the equities,

the money stays in your bank

accounts, you deal with these big leveraged derivative platforms, the money goes in

their bank accounts an when you

go bust it's their money and

you really have to read your

paperwork and that's the lesson

from this. OneSteel's profit

warning was partly due to the

strength of the Australian

dollar. We're going to get a few more warnings like that

about the dollar, do you

think? Clearly they've got

other problems which is the

iron ore price going up. I

don't know whether you know but

Chinese steel maker Ann steel

just announced results. Profits

were down 90% and the reason

why is because their input prices have gone up so much,

iron ore prices, and yet the

steel prices are are flat. So OneSteel's got its problems

there and to stort of blame it

on currency where the Curran - currency's been over a dollar

for most of the last quarter is

probably overdoing it on the

currency but it's clearly a

problem for people and other

currency stocks including

Bluescope Steel was down 6%,

Cochlear down 5%, Westfield

3.7, the other currency stocks

didn't do well on the back of

it but I think basically

they've got the problem all

steel makers have got. They've

got input prices going up and with the Aussie dollar doing

what it is they are just not competitive. Marcus Padley,

thanks for joining us. My pleasure. To the other major

movers on the local share

market now and Qantas fell 3%.

It agreed to ACCC demands to

compensate stranded passenger s

better. While Qantas counts the cost

of its battle with the unions and political missiles continue

to be fired around the fleet grounding, Virgin Australia is

working overtime to capture a

bigger chunk of the most

lucrative part of the domestic

market, business customers. And

the gloves are off. At a

business lunch today CEO John

Borghetti announced the

airline's business fares would

be up to 30% cheaper than

Qantas. I spoke with him

earlier. John Borghetti, nice

to have you on the

program. Good to be here. Last

year, last financial year

Virgin Australia Posted a loss,

this year two of your

competitive airlines have been

grounded, Qantas and Tiger,

this has got to be your year,

hasn't it? It's been a difficult year, actually,

because if you look at all the

events that have happened since

January with the floods and the

ash cloud, the earthquake in

Christchurch, it's been a very

challenging year but on the

positive side I think what I

can say with a great deal of

confidence is that the strategy

on which we embarked we are

still pursuing and in fact not

only have those events not

distracted us, but we are are

marginally ahead of where we thought we would be in

implementing that strategy

which is so important in

ensuring going forward this

company has a strong financial

base. It's all about the battle

for market share, isn't it?

Qantas is allegedly losing $20

million a day. How much do you

reckon you're going to pick up

from that? Well, I don't know

what Qantas is losing other

than what's in the paper but,

you know, it isn't about market

share for us. It's about market

share of a particular segment

of the market. What we are

trying to do is change our

revenue lines so that it is

less reliant on the leisure and

to that end we are trying to

increase the business component

of our revenue from 10% which

it used to represent to a level

of 20%. Now are we achieving

that? We set ourselves a period

to which - in which to reach

that and we are, I'd say,

marginally ahead of where I

thought we'd be at this

time. You've said what I've

wanted is yield and you

mentioned your 20% target which

I think is for 2013, pressure,

of course, as a result of what

Qantas has been up to is on in

that premium class now, of your

46 aircraft, I believe you had,

how many have you managed to

convert over to business class

cabins? Well, we have 90

aeroplanes all up in our fleet

and you're right, just under 50

in terms of the domestic fleet.

We set ourselves a program that

said look, by the middle of

January all of the fleet will

be done and we're right on

track on that. In fact as we

implement the new cabins and

roll them out en routes we

introduce new pricing strauck

churs an cabins. From a timing

point of view though are you

going to be able to take

advantage of this opportunity

when the chips are down for

Qantas? Absolutely. Today we

announced that on 18 January we

will launch business class on

Melbourne, Sydney, business

route and it will be with the

new interiors, and we also

announced that the fare

structure will be up to 30%

less than the current business

class fare. Now that's very

important because when you look

at, for example, the

Sydney-Melbourne route that is

the 4th busiest route in the

world. Alan Joyce, of course,

will be very sensitive about

that market, do you think that

is why he chose to ground the

fleet over a weekend so that it wouldn't impact his premium

customers so much, his business

customers? I don't know. That's

something you will have to ask

Alan. All I know is that when

it did happen, and as I was

watching the news conference, I

very quickly called my

executive group together and I

can tell you that within a

matter of a very short period

of time we had implemented

plans and by the way, may I add

that some of those plans that

we were implementing, such as

obviously putting on extra

capacity and so on, required

certain regulatory approvals

and to that end we've been obviously working with the Government and they've been

incredibly helpful in helping

us do that to keep Australia

moving. Things such as the cur

- curfew in Sydney and things

that needed to be flexed in

order for us to move Australia

and we carried over 30,000 disrupted passengers in that

short period. Big part for this

battle for the premium market

is the frequent-flyer angle.

You've been working very hard

on that angle too? Yes, we have

and you're right, it's a

critical element along with so

many other things and the

alliance strategy that we

embarked on with our key

partners was critical in

formulating a network that

allowed us, and by the way it's got over 400 destinations

around the world. But also

you've actually now, you first

of all you're offering to match

for Qantas customers the same

level, silver, gold, platinum

status they are and then more

recently you're offering now to

double status credits,

presumably this is quite a

costly exercise for you? Not

really. Look, a cum of thing -

a couple of things there.

Firstly the initiative to

status match which you

referred, we did that for a

limited period and we believe

it is the right thing to do to

try and display to the - the frequent-flyer how good our

product is. What sort of market

share do you hope in the

premium market to get from that? From that initiative

alone we, you know, we didn't -

I can tell you the amount of

passengers that we status

matched were in the thousands

and I don't mean single, you

know, I'm not talking about 1

or 2,000, I'm talking tens of

thousands. John Borghetti,

thanks for joining us. Good to

talk to you Ticky, thanks very

much. And before we go a look

at what's making business news

in overseas newspapers. The

'Wall Street Journal' says the

commodity futures trading

commission will issue subpoenas

to MF Global and the FBI is planning to examine whether

client funds are missing. And

the financial times says senior

executives at Rupert Murdoch's

UK newspaper group were told by

their own barrister that there

was strong evidence of illegality at the 'News of the

World' in 2008, 3 years before

they admitted to widespread

phone hacking at the tabloid.

That's all we've got time for

tonight. I'm Ticky Fullerton.

Thank you for watching, goodnight. Closed Captions by

CSI

The South Pacific is a vast ocean wilderness. Its waters are teeming with life... ..from tropical coral reefs that attract the great variety... ..to the cooler, temperate waters that attract the great numbers. DOLPHINS BUZZ AND SQUEAK So why is it that in the midst of all this richness the world's largest predators can struggle

to survive in this...endless blue? Nothing brings home the challenges of surviving in the South Pacific better than the epic true story that inspired Moby Dick. On 23rd February 1821, a lifeboat was found drifting in the eastern Pacific. CREAKING In it lay two American whalemen, barely alive. FEEBLE COUGHING Their whale ship had been sunk by an enormous sperm whale. For a staggering three months, these shipwrecked mariners had sailed across 7,000 kilometres of what may be the loneliest region on Earth. For these sailors, the South Pacific had become a living hell.

So what is it about this ocean that makes survival here such a challenge? Of all the oceans, the Pacific is by far the largest, stretching almost a third of the way round the globe. It's so huge that the current in the South Pacific takes several years to complete just one cycle. SONAR-TYPE PINGING FAST CLICKING In an ocean this vast, huge distances to survive. many animals have to travel None more so than the sperm whale, on the planet. one of the greatest voyagers thousands of bull sperm whales, Every year, come to the tropics to breed. some from as far as Antarctica, CLICKING themselves up in colder climes, After 15 years away, fattening and big enough to compete for a mate. they are now back make ideal nurseries. These warm, equatorial waters already weighs over a tonne. At just a week old, this white calf he will stay by his mother's side, For the next six years where killer whales, relaxing in these tropical waters are rarely found. his only natural predator, stretches of ocean But it was in these peaceful that, 200 years ago, whales met whalemen. oil from the whales' massive heads In the 19th century, could make great fortunes. Whalemen targeted the calves first, would soon come to their aid... knowing the rest of the pod and into the range of the harpoons. the whales got their revenge. But for one ship, the hull of the 26-metre Essex. Without warning, a huge bull rammed CRASHING the broken ship was lost to the deep. Within days, With their ship gone, into three whaleboats, the 21 survivors squeezed which now became their lifeboats. The men salvaged what they could, for the trials that lay ahead. but they were woefully ill-equipped

were in virtually unexplored waters, The survivors of the Essex South America on the equator, 3,200 kilometres west of as it's possible to be. almost as far from land

They were about to find out survival in the South Pacific can be. just how challenging because of the prevailing winds, Unable to sail directly east the area of the South Pacific they were forced south and into known then as the Desolate Region. the size of Australia. A vast, uncharted, windless ocean are the clearest in the world. These beautiful blue waters But they are a watery desert, because there is so little plankton, clear and blue the key to all marine food chains. nutrients are locked in the deep, Plankton need nutrients, but most called the thermocline, by a layer of water denied access to the surface around 200 metres down. at the surface seeks shelter, The little life that does exist no matter how superficial it may be. build on the flotsam. In time, whole communities Barnacle larvae settle, along with miniature predators. Frogfish.