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(generated from captions) are so concerned about the

Internet blockage, and also the

lack of access to the general

public by the foreign

Internet question in a moment. reporters. I'll come to the

I know you made a specific

study on that. First of all,

we saw in the first of those

reports, we saw the demonstrators last night close

to Tianamen Square, people

angry enough to risk open

dissent, saying that they'd

been removed from their houses,

their houses had been pulled

down to make way for the new

housing or for streets or

whatever to be widened. Do you

know how many people in Beijing

have been affected in this

way? According to the American

ABC reports, of the 17 million

people living in Beijing, 1.5 million, at least, have been

forcefully evicted from their

homes to make room for the

Olympic constructions. Of

course, for these people, and

the other people who are

disallowed to participate in

the Games, it's not a very

pleasant experience. For

example, I saw one media report

list ing 11 categories and 43

types of individuals. These

are Chinese, that are not

allowed to participate in the

Games, these are the Tibetans,

Falun Gong practitioners,

pro-democracy activists, all

the hostile foreign

journalists. So, this is just

a very much against the Olympic

charter number 6, which says,

you know, any form of

discrimination based on gender,

race, religion, politics is

incompatible with belonging to

the Olympic Games, sadly the

feeble IOC is not enforcing the

Olympic charter at this moment.

You've written yourself,

however, that the Beijing Games

will be an occasion of

nationalism, pride, and hope

for many Chinese. That's not a

bad thing, is it? It's not a

bad thing. The Game itself has

high ideals and high hopes, and

the Chinese people deserve to

celebrate this opportunitiy.

On the other hand we don't want

the Government to utilise this

sports event to politicise and

set up legitimacy for

themselves while suppressing

the dissenting voice and

cover-up, you know, the evil

doings that they've been

conducting. How do you know

that this exposure, the spotlight of the world to at

least some degree being on

China won't lead inevitably as

some people hope to a new

openness, rather than entrench

the regime and the one party

state? Well, the way it shows

that this Game is highly staged

and highly orchestrated by the

regime. We see the big foreign

sponsors , corporate respond

sores, you know, spending --

sponsors spending over $50

billion to share the limelight

over the game, not pressuring

the regime to open up the

media, open up the society to,

you know, truly comply with the international community

funders, and also we are - we

see that the high security

essentially, you know, isolate

Olympic Village become a small

society in China, which has

nothing to do with the true

reality of society, where you

have, you know, 150 million

floating population from the

rural countryside with no jobs,

and you have people in labour

camps and mental institution

because of political religious

beliefs, those realities are

not presented. There was a

wave of her when it was

revealed that the Chinese

authorities did not intend to

allow open Internet access to reporters who are going to

report on the Games. Of

course, the problem still

exists, no matter what changes

they make for the reporters, it

exists for the whole country,

does it not, because of the

system put in place, which I

think is known as the Golden

Shield creating - instead of an

Internet, a giant intree net.

Can you tell us how that

works. Starting in 2000, the year

year 2000 Beijing determined that the Internet is perceived

to be a threat for undermining

the author tarian regime so

they spend $800 million to

build up a firewall system

called Golden Shield, nicknamed

the Great Firewall of China,

they hired over 50,000 to

monitor the online information

flow and build up three

gateways between the Chinese

Internet and the world

cyberspace in Shanghai, gang

Joe and Beijing. Every

information that is

communicated between the

Chinese Internet and outside

world has to go through the

three gateways, so all that

Beijing needs to do is filter

and control the three gateways.

That, effectively turning the

Chinese Internet into an

intranet. Are you saying

there's 50,000 cyber sensors

working at the gateways. Yes.

Monitoring sites the Chinese

Government doesn't like, or

specific information. Yes, you

know, with the three gateways,

and a 40 plus monitoring

centres throughout China, the -

what happens is they filter and

block information such as the

websites of Tibetans, Falun

Gong, the pro-democracy,

Taiwan, even human rights and

including the name John chow

Min was blocked, the former

Head of State. Any information

deemed as dangerous or

threatening to the regime will

be block. It is effective

because the - they use a key

word filtering, they use the

domain name, redirection,

connection, quite a number of

ways to effectively block the oversees Internet information.

Fortunately, according to

yesterday Washington post,

there's a group called global

Internet freedom consortium.

This group has - web site is

called Internet,

they offer several free anti

censorship software that people

can use. Some journalists in

Beijing are using this software

to access overseas websites,

and sending secure emails.

It's highly recommended to

people to use - to access, you

know, the Internet

to get all this free software

to operate in China. It will

be interesting to see whether

this interview gets sensored,

and it appears on the Internet

in China, we'll look at that

overnight when it appears on the Internet and see what

happens tomorrow. In the

meantime, where did the

technology come from to

actually do this, for the

Chinese Government to do

this? Well, thanks to the

foreign conglom rates like

Yahoo!, Google, Cisco and

Microsoft, over 300 foreign

companies have signed a

so-called self-sflinry pledge

with the Chinese authorities -- self-disciplinary pledge with

the Chinese authorities,

meaning they'll self-sensor

themselves based on content,

deemed as dangerous by the

Beijing authorities. So the

Chinese users, inside China,

are unable to access foreign

prohib ted websites, and the -

there's one reporter who tried

to send an email overseas and

got sentenced to 10 years jail

term thanks to Yahoo!'S email

system, they provide his personal email to the Beijing

authorities, and this is a case

that we know. We believe there

are many other people who have

been sent to jail without the

public awareness. The argument

made by these companies is that

the system, the regime will

change over time, becoming

freer, and inevitably things

like this Internet site you are

talking about, which will

unscramble the censorship will

emerge in China, and they'll

get free access to information.

Is that how you think it's

going to work. It's not likely,

because the facts speak the

opposite. The people in China

are still unable to access, you

know, the overseas websites

including the Chinese language

web site of BBC, until

recently, limited within the

Olympic Village for the media

centre. The majority of people

cannot access, you know, to

overseas sites, and the most

alarming thing is recently

there was a media report in the

United States, reporting that

the Cisco company internal document indicates they agree

to collaborate with Beijing in

terms of sensoring any content

related to Falun Gong websites.

So that's alarming because the

US company are not allowed, you

know, to collaborate with

foreign Government in terms of

such a censorship on the US soil.

soil. Tell me, we are nearly

out of time unfortunately, but

what do you think will happen

inside China once the

spotlight, the international

spotlight goes off again. It

will be on for the period of

the Games, there'll be a period

of great hope and so on. What

will happen afterwards, do you

believe. People will come back

to the reality. You have the

inflation rate is up 11%, 7.1%,

compared with the past. Then

you have, you know, I mentioned

150 million so-called floating

population of peasants

migrating from rural area to

the city looking for jobs. You

have 20 million each year

people looking for jobs, and

plus 20% of the college graduates looking for jobs and

the disparity issue, you have,

between the inland and the

coastal residents, and then you

have the disparity between the

rural and the urban dwellers,

so there's social unrest factor

in the year 2005. The

Government admitted there was

87,000, you know, large scale

protests, that's tenfold

increase compared with 1993.

That's an indicator of, you

know, the grass root

dissatisfaction with the

regime. Also, if you look at

the financial sector, 70% last

year probably 50% of the

Chinese girls come from the

capital investment, foreign

investment, so exported economy

not self-sustainable over, you

know, if they want to continue

the 10% GDP growth over the

natural resource and energy

supply domestically. We are

out of time Erping Zhang,

hopefully we'll speak to you

again at some point, maybe

after the Games are over.

Thank you for taking the time

to come and talk to us, a very

different per spect TV of

what's going on in --

perspective of what's going on

in China right now. Thank

you. Thank you. Well, they are

standing tall while helping cut down greenhouse gases,

Australia's remaining natural

forest contain some of the most

efficient carbon devouring

trees in the world, research

showing the green warriors can

store three times more carbon

than previously thought. Sarah

Clarke reports. Stretching 80

metres high, up to 4 metres

wide, these gigantic trees make

up some of Australia's last

remaining natural forests. Scientists, who have got up

close, have also found they are

soaking up three times more

carbon than previously

thought. They can potentially

store around - it's a big

number 33 billion tonnes of

carbon dioxide. That's the

equivalent of about 80% of Australia's total greenhouse

gas emissions every year for a

century. The natural forests,

if we allow them, have an

enormous Christmas to make to

helping Australia address the

-- enormous contribution to

make to help Australia address

the climate change problems.

The most carbon hungry trees

were found in the tall wet

eucalypts of Victoria and

Tasmania. Big old trees with a

high amount of carbon, and also

coarse woody debris, the dead

standing trees and dead logs on

the ground. Trouble is those

forests that have been

disturbed or logged absorb only

half the carbon of those left

untouched. Green groups say protecting these areas is

crucial if Australia is to soak

up its excess greenhouse gases,

it's the forests enabling us to

act early and make the deep

cuts, that applies whether it's

in Australia or globally. Even

so, the Kyoto protocol to cut

the plants emissions is yet to

recognise the vast remaining

for etc as a part of climate

change solution. A quick look

at the weather now, early rain

in Canberra, rain at night for

Melbourne. Showers and thunder

in Adelaide, showers in Sydney,

fine in Brisbane, Hobart and

Perth. That's all from us,

'Lateline Business' coming up

in a moment. If you'd like to

look back at the interview with

Erping Zhang or review the

stories or transcripts visit

the web site at But now

here is 'Lateline Business'

with Phillip Lasker. Thanks,

Tony, tonight a clear signal of

a change in direction. The

Reserve Bank indicates the next

interest rate move will be

down. Interest rates have now

peaked, it's a question of when

they cut interest rates, not whether they'll cut interest

rates. Stand by for rising

unemployment. Australia's

biggest employer, the services

sector is going backwards. I

think it's reflecting really

the lack of business and

consumer confidence, the

consumer sector is hit hard. A

clear winner in Beijing, the

Seven Network posts a better than expected result on the

back of the Olympics. We think

they've done a smart job. Most

of the Olympic revenue was sold

February, March April, before the collapse in the economy in

the June quarter. First to the

markets - Australian shares

finished in the red for a third day.


After weaker commodity prices

dragged down mining spots. All

Ords shedding 1.5%, the late

rally in banks limited ASX

losses to 67. Nikkei down.

Hong Kong's Hang Seng plunge

jing. London rises in banks

and insurers pushing the FTSE

2% higher. 2% higher.

In Australia the markets are

factoring in a drop in official

interest rates. The Reserve

Bank kept the rate at 7.25%,

but economists say it's clear

the next move will be down. In

a statement the rank governor

Glenn Stevens signalled there

was scope to cut interest

rates, Andrew Robertson

reports. Something had

changed. With the economy

rapidly losing steam, the

Reserve Bank has openly and

strongly canvassed the

possibility that its 6-year

tightening of monetary policy

is over. Never certainly making

it pretty clear that it is very

possible that they can cut as

early as within a month. The

punchline came in the last

sentence of a statement issued

this afternoon by Reserve Bank

Governor Glenn Stevens:

The credit crisis has

continued to persist.

Therefore it has tightened

financial conditions and likely

further than what the RBA

anticipated. On top of that

recent activity data continued

to print weekly. The Reserve

Bank began raising interest

rates in May 2002, after the

official cash rate was cut to

4.25% in the economic turmoil

following the September 11

attacks are, the last of 12,

0.25% increases was this year.

Even though inflation is still

running at an annual rate of

4.5%, there may be a rate

cut. They are taking the view

that the weak demand will look after the inflation problems.

The Reserve Bank's change of

stance on monetary policy

coincides with three new pieces

of data highlighting the slowing of the Australian

economy. Among them a survey

by the qunk and the Australian Chamber of Commerce and

Industry showing business

confidence at its lowest level

in 14 years, the survey shows

starkly that the impact of

slowing domestic demand is

starting to take its toll on

Australian business. A point the Reserve Bank showed it

clearly understands and Greg

Evans believes the quicker it

cuts rates the better. We think

an adjustment of something like

0.25% in the first instance

followed over the next 12

months with reductions, we

don't think it's enough to

overstimulate the economy. How

far and how quickly it plans to

reduce rates may be clearer

Monday when Glenn Stevens

delivers his semiannual

statement on monetary policy.

There are more signs pointing

to a slow down likely to

influence the Reserve Bank, the

Australian Industry Group

services sector index fell to a

record low, and the mining

sector, widely perceived to put

res the Australian economy is

concerned about rising costs.

Simon Palan with the story.

The services sector makes up

two-thirds of the Australian

economy, and by the latest

measure, it's not looking

haghtszy, activity in the --

healthy, activity slumping to a

record low, under the burden of

high interest rates and rising

fuel prices. It's reflecting

the lack of business in

consumer confidence, consumer

sector is hit hard, business

confidence is reflected in some

of these areas. The Australian

services index fell:

It was the worst result in

the series, which began five

years ago. What What is

worrying it's an ordinary

outlookment the now orders part

was weak. As was the ARG's

employment index, declining by

6 points. It's not just today's

survey, there was ANZ job

vakancies, the announcement of

lay-offs, Starr bucks, Don.

Qantas. We've seen the best

of jobs numbers for some time

in the eastern states like NSW

and Victoria. The labour

market has been a resilient

part of the Australian economy

and a weakness in job adds to

the case for an interest rate

cut. The ofish figures out

Thursday. It's likely to show a

small gain of 5,000, perhaps a tick up in the unemployment

rate. Another resilient part

of the Australian economy is

the mining sector, but it, too,

is showing early signs of being

squeezed by high energy costs

and interest rates. The energy

costs costs of capital,

production inputs, labour, they are all factors that are

leading to some of our

companies working to double

digit inflation. If the Reserve Bank needs more

evidence to justify a rates cut

in the coming months, it

doesn't need to look far. The

prospect of lower interest

rates didn't soothe the

markets, a short time ago I

spoke to market commentator

Marcus Padley about a torrid

trading session. Marcus

Padley, thanks for joining us.

Big falls on the share market,

but not across the board. What

is the mood of the market

today? Not good. I've been

looking up Jim's mowing

franchises it's more profitable

and fun than the stock market.

A shocking day on the market basically because the last

engine of the market, the

resources sector bust a gasket

and fell over today, the sector

down 6.5% or so. The

financials for the one sector

are doing OK, up 2.4%, most of

the banks up 3-4% on the back

of the RBA statement this

morning. This afternoon. The

market overall down 67, at its

worse down 129, and

particularly commodities taking

a big hit, oil price taking a

big hit overnight. Oil stocks

in particular down, we saw gold

stocks absolutely smashed.

Gold prices down $8 people

giving up on the sector. In

the news we saw AXA up 7% on

the results, Macquarie Airports

up 6.8% on results and

guidance, and Seven Network up

3% on results and a share

buyback. The broader market

has been in a bear trend and

the resources sector, as you

pointed out technically entered

a bear market. What is driving

the turn around in the

resources sector. Yes, now down

20.7% from the top. So officially a bear market.

Driven by a few things. I

think there's a concern that

China sentiment is going to

peak over the Olympics, which,

of course, starts at the end of

this week. There's a general

feeling that the demand from

China is plateauing, and that

prices won't be stronger

forever, may be for longer, not

forever, there's a suggestion

that big funds are shorting,

all are resource stocks. What

is going on there is if the RBA

are going to be cutting rates from here and the clear

indication from the RBA meeting

was interest rates have peaked,

then the Aussie dollar will

fall, and the international

funds want to be out of Aussie

dollar denominated assets,

including the equity market.

The selling has been overdone

already in the financials, and

where they do have big

positions are in resources, so

there's BHP in Rio down 6% today, if the international

funds are doing anything, it's

baling out of Aussie dollar assets, including resource,

that's one of the things gone

wrong. All that money coming

out of the resources seg tore,

where is it finding a home, how

far of that is fuelling support

for the financial stocks. I

think there's clearly some

moneys gone into financials

today, they would have had a

lift anyway from the idea that

interest rates have probably

peaked. There may well be a

rotation out of resources into

financials, I would suggest

it's a weak one. But certainly

there have been supported what

the market will reward at the

moment is certainlity, knowing

there's no other disasters to

come, and we have had a profit

warning from the National

Australia Bank, saying they

have cleaned the sheet on

losses from the US mortgage

market. If that's the case you

may imagine earnings are

getting realistic or forecasts

are realistic on the National

Australia Bank much Might we

see a positive take on the

RBA's thinking in the

future. Very much so. Everyone

has taken the last line of the

statement which said "the

board's view is that there is

scope to move towards less

restrictive stance on monetary

policy in the period policy in the period ahead", and that basically has been

written up by all the brokers

today as saying that interest

rates have now peaked, it's a

question of when they cut

interest rates, not whether

they'll cut interest rates. A

lot of brokers are suggesting

that September will be the

first interest rate cut.

Others say it's too early,

December is more likely.

Marcus Padley, thanks for

joining 'Lateline

Business'. OK, Phil. Now to

the other major movers on the

market. Oz minerals formed

following the merger of Zinifex

and Oxiana dropped 13%.

Incitec Pivot falling 5% after

the fertiliser and explosives

group flagged a 20:1 shares

split. The day after a private

equity takeover Asciano

advanced 4%, and the banks

found themselves back in favour

the Commonwealth enjoying the

biggest gain of 4%.

Expectations the RBA will cut interest rates saw the

Australian dollar tumble.

Solomon Lew's Premier

Investments claimed a partial

victory in its bid to take over

the fashion retailer Just

Group, Premier Investments

secured more than half the

shares in Just Group, and

declared its takeover bid

unconditional. The company is

aiming to get 90% of Just Group

shares and trigger the

compulsory acquisition rules to

mop up the rest. Solomon Lew

says he looks forward to

working with Just Group

management to steer the company

through challenging times.

Just Group's shares fell 8%,

Premier Investments was steady.

The Seven Network released

today a better than expected full-year result two weeks

early at a media briefing

chairman Kerry Stokes, and

Chief Chief Executive David

Leckie said advertising revenue

from the Olympic Games helped

Seven deliver a strong result,

having a drop of 90% in bottom

lig profit after a change in

the ownership structure,

underlying profit down slightly

to $171 million, pleasing

analysts and investors, pushing

the share price up 3% to $8.39.

Desley Coleman reports.

Seven's executives don't love

the cameras, which were not

allowed at the television

network's full year results.

The media briefing was for

journalists only, no recording

allowed of the event. Afterwards Seven's executives left for the Beijing Olympics

leaving analysts with the tough

job of assessing the New look

company. They would be

difficult to analyse, the

company is in a vastly

different position than a year

ago. Over 12 months ago Seven

Network sold 50% of its media

assets into a joint venture

with private equity group KKR,

it's called 7 Media, housing

the television and magazine

businesses and the Internet

partnership with Yahoo!7. The

results today showed profit

coming in at $142 million, down

91.3%, the number looking bad

but represents the reduction of

profit shared with private

equity partner KKR. Stripping

out write-downs from Seven networks broadband phone

company Engin and GDR and gains

from the structure change the

networks profit was down 2.2%.

Essentially you have a 50%

owned TV which in TV

profitability terms topped out.

Magazines did well. It's in a

highly-geared entity. Of the

2.5 million on cash, they spent a bit on Western Australian

newspapers, it's a difficult

company to follow in those

circumstances. Mr Stokes said

that talks with the Western

Australian newspapers Board are

proceeding and he was still

intent on wanting

representation at board level


Mr Stokes would not be drawn

on his intentions for Seven's 4.8% holding in Consolidated

Media, the parent of rival

Channel Nine. With the

Olympics opening ceremony three

days away, Seven's focus was on

the television revenue,

outpacing overall market

growth. The Beijing Olympics

couldn't have come at a better

time. Chief Executive David

Leckie went so far as to thank

god for the Olympics. Analysts

agree without the extra revenue

locked in at the start of the

year 7's results would be

different. We think they've

done a smart job. Most of the

Olympics revenue was sold in

February, March, April, before

the collapse in the economy in

the June quarter. It's taken

money out of the market, drying

it up for the others. Four

months ago Seven's Chief

Executive David Leckie was in

an induesed coma, today a

healthy looking Mr Leckie was

focussed on the future, and is

confident that the network's

television line-up post

Olympics will benefit from the

Games audience, a $40 million

share buyback program was announced today shareholders

able to vote on the plan at

next month's extraordinary


Insurer AXA Asia Pacific was

one of the star performers on

the market today even though

net income fell 75% to 94

million, thanks to the

financial market turmoil. I

spoke to CEO Andrew Penn a

short time ago and asked him

how he explains the market

reaction. I think what we

reported today was a very

positive result in the context

of what is a challenging mark.

Our operating earnings were up

11%, and that's contradictions

from our significant businesses

in Australia up 22%, and Hong

Kong up 23%, and I think it's

probably inappropriate to read

too much into what happens with

share prices on any particular

day, particularly in these

current volatile times, overall

we are pleased to report a good

result in the challenging mark.

On the investment side a $93

million profit last year was a

$230 million loss. Could it

get worse, do you think? I

think it's difficult to predict

how the market will play out,

what the impact of the current

environment will be on the

overall economy. Earnings in

China outside Hong Kong and

India dropped. Are you still as enthusiastic of those

regions. It's the nature of a

life insurance company

business, that as you set up

your operation, the faster you

grow, the more that impacts

your P & L account in the short

term and early stages, it's by

virtue of new business strain,

the cost of investing and

setting up the businesses, so

we've been growing the

businesses strongly, and that's

been - that's been why those

losses have increased in the

short term, over the longer

term we created businesses of

value, if up compare that with

the experience in south-east

Asia, where we have come

through that cycle of the start

up through to adding profitability, operating

earnings in south-east Asia are

up 84% in the half year. How

long will it take for China and

India to become profitable. Typically in start-up operation insist a

life insurance company, Tas

four to five year period. It

depends on the rate and pace

which you grow and get to

scale. The New Zealand operations didn't perform too

well. That was because of the weakening economy, I

suppose. Yeah, I think New

Zealand is obviously in the

same volatility and investment

markets and same reduction in

equity markets that the rest of the world and Australia has

seen. I think they have

additional challenges relevant

to our industry around their

long-term savings, environment,

the market conduct regulatory

environment and certain tax

aspects of the many fund

systems, I think the good news

is that there's been a series

of Government policy challenges

in New Zealand which will

address most of those

disadvantages over the longer

term, but it will take some

time for those to bear fruit.

Could the Australian

operations go the same way to

some extent with our softening economy. I don't think the

issues are the same time in

Australia, the issues I

mentioned are to do with the

structure of the industry and

in Australia we continue to

have compulsory superannuation

system further enhanced with

the tax changes coming through

the 2006 fra budget driving

long-term growth in

superannuation, and Australia

remains underinsured. In the

current environment people have

a particular focus on their

level of life insurance and income protection insurance

they have. The underlying

dynamics for Australia continue

to be positive, but nonetheless

we need to acknowledge that

it's a difficult environment at

the moment, as I mentioned a

moment ago, it's hard to

predict how and when things

will improve. They will do

eventually, and we will get

through this cycle as we got through each of the other ones

before it. On the issue of superannuation, the Federal

Government as you know is

reviewing super, and it's

understood it wants fees to

drop below 1% of funds under

management, is that possible. Look, I think, you

know, our industry is no

different to any other

industry. Our customers, if

you like, you know, continually

look for more service, more

product for lower costs.

That's no different to any

other industry out there. It's

our job to continue to work on

ways in which we can deliver

that, and how will we improve

our product manufacturing, and delivery systems to be able to

actually, you know, meet the aspirations, I think we can,

you know, continue to provide

more service for a better price

to customers. Could the fees

drop below 1%, do you think. I

think that's too much of a

generalisation. In a sense it

depends what we are talking

specifically about. There's

certain products and services

that could be provided for less

than #%, and others which -- 1%, and others which couldn't.

You talk about the future

being difficult to navigate,

where do you see the company

making ground during the next

6-12 monthsing. We set a series

of long-term goals through the Australian and Asian

businesses, by delivering

against them when times are

difficult, and by investing

prudently and having a strong

balance sheet, there's the

opportunity to get relative

market share through additional customers, additional distributors supporting you,

through a difficult time like

this, because investors and

advisors want to work with high

quality organisations that they

know are strongly capitalised

and will be there to support

them long into the future. Are

acquisitions going to play an

important part? My philosophy

on acquisitions is you on acquisitions is you don't

build a strategy based on

acquisitions but based on your

core business, growing it

organically, if you do it well

you'll be well positioned to

take advantage of acquisitions opportunities. That's our

approach. The weaker

environment creates opportunities for

companies. The way we think

about acquisitions is to focus

on strategically on what we try

to achieve, the compatibility

with our business and cultures,

focus on that first and

foremost, not see it as a time

when things are cheaper. Are be

be going to see more of that,

do you think. I think it's hard

to comment. I mean, it's - you

know, as I said overall, it's

hard to predict how the current

market is going to play out,

what the impact is going to be

on the broader economy and

investment markets generally,

all financial services

companies will need to make

sure that they do what they

need to do to protect their

retail investors, if we had to

do that again we'd do it.

Thank you for joining

'Lateline Business'. Thank you.

The ACCC's six month

investigation into grocery

prices is in. A lack of

competition is not to blame for

skyrocketing prices. The

consumer watchdog found there

were many factors pushing

prices up, most of them out of

the Government or retailers'

control. But it also says

there's room for improvement

and has outlined some areas for

immediate action. Michael

Janda reports. Soon there'll

be FuelWatch and from tomorrow

'Grocery Choice', an ACCC web

site to help consumers find the

cheapest supermarket in their

area. Competition is always the finest discipline in a market

economy, we have that in

Australia. If competition is

meeting impediment, structural,

to it properly applying to the

discipline of competition

applying, it can affect us in

terms of choice, the quality of what we are offered and in

terms of price. Is competition

to blame for the 21% jump in

food prices? The ACCC estimates

if these increased gross

margins were derived from

increased prices paid by

consumers, they would account

for an increase of retail

grocery prices of around 0.8 to

1% over the past five years.

What is to blame is a

combination of the drought,

natural disasters, quarantine

restrictions, the international

commodities boom and higher

export prices forcing up

domestic prices. The ACCC has

a plan to boost competition,

they want to ease development

laws making it easier for now

entrants to set up, introduce a

national unit pricingsome

giving a price per gram or

litre and strengthen a code of

conduct between farmers and

wholesale retailers. With

around 12% of Australians

aftertax income spent on

groceries and prices rising at the checkout the Federal

Government had to be seen to be

doing something. While

generally supportive retail

industry groups aren't sure the

changes will make much

difference. The narrative from

the Government since the start

of the year has been about

grocery prices and how best

they can affect competition, it

found there's not much to do

other than tweaking the horde

cutural code. All we are doing

at the moment is hearing too

much spin given the current

economic conditions.

Australia's largest grocers,

Woolworths and coals support

the bulk of the changes,