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Lateline Business -

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(generated from captions) charges. Now, if it's

pornography on my computer, why

isn't it pornography in the

gallery? That's the question

that I ask. If it's not

pornography in the gallery,

it's not pornography on my

computer. Do you think it's pornography? I haven't seen

them b, to be honest. I don't

really know. But from what I've

saerd they seem like pretty

confronting images. Now, I am

just not sure that we really

need that kind of thing to

further freedom of expression,

to further the creative

impills. Shocking people is all

very well. But I don't think we

need to be shocked by

everything. I think some things

are offlimits. Chris Bowen, who

do you line up with - Turnbull

or Tony Abbott? I'm with Tony

Abbott on this one. Look, this

is a vexed issue but I have to

say the courts are the

appropriate place to sort this

out and I don't think we should

second guess the police. I,

like Tony, haven't seen the

pictures. I've only seen the

enterpretelecommunications media

after the pictures and they do

disturb me. I don't think we

should be criticising the

police for taking action and I

agree with Tony, these sorts of

images by what we've seen on

the tele vision portrayal of them would be a very concerning

if they were found on

somebody's computer and that

should be worked through in the

courts. Who would have thought

we would have ended the

interview with both of you in furious agreement. Maybe Chris

is a closet Conservative after

all! Like Kevin! I am not going

to suggest that Tony is a

closet member of the ALP.

Nobody would believe me if I

said that. The BLP

perhaps. Thank you very much

for join ing Lateline. Thank

you. Pleasure. Thank you.

As the death toll from China's earthquake nears

70,000, survivors are facing

another threat. New lakes

createded by the quake are

about to burst their levees and

flood the areas. Chinese

soldiers and engineers are

working around the clock.

They're trying to prevent a

second round of disasters

following the country's major earthquake. Falling rubble from

landslides has created dozens

of so-called quake lakes, by

damming mountain rivers. It's

caused a huge build-up of water

which could burst through at my

moment, so soldiers are trying

to release the pressure

slowly. At this lake, the water

has risen by 2m every day, and

it's threatening a catastrophe

downstream if the dams of

rubble burst. Constant

aftershocks are increasing

pressure on the newly formed

dams.

TRANSLATION: The lake is on the

other side of the plountain and

you cannot get there. So for

only soldier s have made it carrying equipment up on foot.

hours climbing the The soldiers spent over eight

mountsain. Bulldozers have

been air lifted into the area

and tonnes of explosives

carried up the mountain to be

used to clear walls of mud and

rubble that have plugged the

narrow valleys.

TRANSLATION: I fell many times.

It was really dark. We had to

have flash lights. There were

1,000 of us and we carried 700s

of explosives up to the lake.

Everybody carried 24 kill grams

of stuff. With the water

rising, the rain coming down

and the drains still a week

away from completion, there are

fears that workers will run out

of time to avert massive

flooding. As a precaution, the

houses of almost 160,000 people

were evacuated today. Villagers

who survived the earthquake

packed their essential

belongings, closed their doors,

and were trucked out of the

area. If the new dams burst,

authorities are preparing to re

locate 1.3 million people from

33 towns. Chinese television

reported that Premier Wen

Jiabao said that the danger

posed by the quake lakes was

the most pressing task right

now and the Government has

allocated $30 million to make

them safe. As the days go by,

with still many thousands of

bodies buried in the rubble,

Chinese emergency workers are

increasing a program of

chemical spraying to try and

stop the spread of disease.

After almost 240 years as a

monkey, Nepal today became a

Republic. The newly elected

constituent assembly was sworn

in yesterday and today's first

item of business was to dismiss

King Gyanendra. Peter Lloyd

reports. They've been in the

streets all day, waving banner,

welcoming the new Republic and

celebrating the end of the

239-world S Shah dynasty. The

last king didn't wait for the

palace. He drove out of the

palace last night. It was a

final and very public humiliation. This sprawling

estate in the centre of Kath

man due that's been the Royce

household for more than two

centuries is ear marked to

become a museum. Nepal' newly

elected squant assembly is now

in session, it's a body that

will rewrite the constitution

over the next two years but the

first order of business is

desolving the monarchy and

sacking the king.

TRANSLATION: This is an Epoch

making day, an historic making

day for the Nepalese

people. The new interim Prime

Minister is the former mowist

guerrilla commander. Le led

insurgents in a long civil war

to tours monarch y. What he

failed to do with bombs and

bull bullets he's done at the

ballot box. There have been

small explosions at the edge of

the meeting, a sign perhaps

that neppial's time with a king

is not over yet. Swimmer Nick D'Arcy says he is still a

member of the Australian

Olympic team despite a court

ruling today he did bring

himself into dis repute. The 20-year-old was axed from the

team last month after he

allegedly assaulted former

swimmer Simon Cowley, living

him with serious facial

injuries. The court also found

John Coates alone didn't have

the power to dump D'Arcy.

D'Arcy beliefs he may still

have a slim chance of competing

in Beijing. I am still going to

keep training because even if

that slim chance getting up I

want to be in the best

shape. The full AOC board is

expected to meet within two

weeks to decide whether to

ratify the original decision to

terminate D'Arcy's place on the

Olympic team. Now to the

weather - showers and a possible thunderstorm for

Brisbane, an early shower or

two and then fine in Perth.

Early fog nor Melbourne and

Canberra. Becoming fine in

Hobart and fine in the other

capital cities. Lateline

Business coming up in a moment.

If you would like to look back

at tonight's forum with Chris

Bowen and Tony Abbott or re

view any of Lateline's store

yoifrs transcript, you can -

stories or transcripts, you can

visit our website. And now

Lateline Business with fill

Lasker. Tonight abrupt slowdown, Australia's economy

under the pump. What that means

is the domestic economy is

slowing quite abruptly and

that's expected to continue

towards the end of 2008. The

magic is gone - the Wizard of

home loans faces

refinancing. Wizard is going to

continue what it's done, take

market shares. And a windful

for LNG, two states vie vie for

a $12 billion processing

plant. We have been a bit

cheeky. We've crossed the

border. We've made our pitch to

Inpex and we said if you're

finding it all too hard to do

business in WA, come and have a

look at the Northern Territory.

First to the markets and

despite a positive lead from

Wall Street, Australian shares

closed at a one-month low, down

more than 1%. The All Ords fell

64 points with resource stocks

dragged down by weaker

commodity prices and the ASX

200 shed 66 points. In Japan,

the Nikkei was down for a

second day. Hong kang's hang

essential also lost ground. In

London the FTSE is defying the

trend with a 39-point

rise. Record oil prices have

forced Qantas two into another

round of Belt tightening, the

airline says next year's fuel

bill will jump by at least $2

billion or a third of its total

expenditure. Despite two fare

rices in a month, higher fuel

surcharges and a recruitment

freeze, Qantas says it's facing

a widening cost gap. The

airline will cut jobs, and

flight also also be reduced at

both Qantas and its budget

subsidiary, Jetstar. For an

analysis of the Qantas

announcement, I spoke to Martin

Lakos from Macquarie Private

Wealth. Martin Lakos, thanks

very much for joining us. My

pleasure. What is your view of

the move by Qantas to cut jobs

in capacity? On two fronts

certainly the cutting of

capacity and also retiring some

of the older planes actually

has a positive impact. One it's

going to improve load factors

and two, which is probably why

the market is positive about

the outlook, it will assist on

the hedging of fuel side. Which

means effectively for 2009 the

pressures of higher fuel price

also come through for Qantas on

a more positive note. In terms

of staff reductions, again,

it's a focus by the company

with regards to staff and

general costs. Also the company

made some notation that they

were looking at making an

announcement next week with

regard to international route

closures. I does appear the

group is focusing more on the leisure routes than the

business routes. So we will

wait to see which routes are cut. Was the market surprised

because we've seen Jetstar

recently announce

changes? We've already had some

guidance given to us by Qantas

over the last few weeks, which

the market has been reasonably

comfortable with in terms of

their operating profit. But

clearly the market has been

concerned about the rising cost

of fuel. So this partially

addresses that. There is no

question of that. And the share

price reacted favourably to the

announcement today. The Qantas

share price was in stark contrast to the rest of the

day. The market seems to be

losing momentum. What is going on there? It's interesting to

see the market is really

falling by stealth to some of

extend but on lower volume s as

well. We certainly are in a

period whereby we've just had

bank results we're now leading

up to a major reporting season

for 30 June and entering a

period that we call the

confession season. So if

there's any material changes to

market expectations in terms of

guidance by company, now the is

the time company also come up

with the announcement. So the

market is a little nervous of

that so we might see downgrades

in earnings as well and some

concerns there might be tax

loss sellings next month

leading up to 30 June. That will pressure the market a bit

too. On the positive side,

there is a lot of cash sitting

out there waiting to get

engaged with the market.

Between now and then the market

today was down about 66 points,

pretty much across the board

with BHP down $1.60 to 45.10.

Andriyo down too. Oil stock s

understandably down. Wood side

is down and gold stocks also

got sold down. Lihir gold down

17 cents to $3.12. Or nearly

5%.S We farmers is up 71 cent s

and Qantas stand-out up 16

cents to $3.45. Thanks very

much for your time. Thank

you. Now to the other major

movers on our market today:

Origin Energy remain in a

trading halt amid speculation

that BG Group is about to

change its bid.

There's growing nervousness

about the change - chance of

another rate rise this year.

Both the Commonwealth and ANZ

banks expect rising inflation

to lead to higher interest

rates, with the ANZ predicting

two increases before Christmas.

While inflation is expected to

stay high, today's important

Westpac-Melbourne Institute

survey has pointed to a sharp

slowdown in the economy latest

this year. Michael Troy reports. Despite four interest

rate Roo rises over the past

year, the inflation genie won't

get back into its bottle. ANZ

research economists are tipping

under flying inflation to peak

at 4.9% in the September quarter, following a rate of

4.5% in the June

quarter. Things like food

prices are gone up, petrol

prices have gone up: We know

that private health insurance

premiums went up this quarter.

Also alco-pops, ary fares and

rents. When we started to put

some numbers into our spread

sheets it was telling us inflation story has deteriorated over the last couple of months and significantly. The figure s

prompted ANZ to increase its

forecast for interest rates. I

says the RBA will lift the cash

rate half a per cent to 7.75 by

the end of the year. We were getting increasingly concerned

that the amounts were leaning

towards higher interest rates

and benow expect the Reserve

Bank to raise interest rates by

25 base us points in August and

there's a strong possibility of

another rate rise in November. We always had 2 view

that the economy had some

movement for another rate rise.

It seems to be more people

coming on board to that view. Not all economists are

there yetd and in a Lateline

Business poll we found 80%

believe the Reserve Bank would

not raise interest rates this

year. However, there was

general agreement that in the

June quarter inflation would

remain high around the 4%

level. And about half believe

the economy would not slow as

much as the Reserve Bank wants.

Mainly due to the resources

boom, a rebounding farm sector

and tax cuts. Domestic demand

was growing at 5.5% in the last

quarter of last year. They

really need that to drop to

almost half that pace to ensure

that inflation drops back into

the target zone. Whether the

central bank needs to step on

the interest rates brake s

again is not clear. It's very

uncertain outlook look at the

2009. While we do have interest

rate s clearly slowing in parts

of the domestic economy we're

getting another surge in terms

of our commodity prices and

this's likely to fuel other

parts of the domestic economy

in the medium term. The

Westpac-Melbourne Institute

leading index of economic

activity today showed a further

fall. The predicted growth rate

of 3.3% has almost halved since

its peak last year. What that

means basically is that the

domestic economy is slowing and

quite abruptly and that

slowdown is expected to

continue right to the end of

2008. It's easy to forget that

much of the economy, second is still travelling very well and

importantly is still very

stretched. It doesn't have much

capacity. Chris Richardson from

Access Economics says the

Reserve had only one leave tore

control inflation. That leaver

still needs to be set very much

with inflation risk in mind. This is an economy at fall

stretch, at the fullest

stretch. We've been in over 30

years. Unemployment remains

very, very low. And those are

the classic preseason force -

precondition force inflation

risk. The June quarter

inflation figures are due out

in July and will be a key point tore the direction of interest

rates when the Reserve board

means in August.

Wizard Home Loan franchisees

have been briefed on plans by

owner GE Money to restructure

or possibly sell the business.

After days of media reports and speculation, Wizard founder

Mark Bouris and GE Money's

Australian boss Mike Cutter

addressed branch owners in

Sydney. The review will look at

options including a complete

sale, GE taking on a strategic

partner and is a possible joint

venture structure. The rising

cost of credit has seen the

non-bank lender lose market

share as home loan customer s

tourn the big manks. Mark

Bouris says his role will be to

facilitate the review and he's

been forced to deny reports he

was planning to buy back the

business sold to GE four years

ago. But the Wizard founder

hasn't ruled out becoming part

of any new ownership structure.

For more on Wizard's future, I

spoke to Mark Bouris. Thanks

for joining Lateline

Business. Is Wizard going to

survive? Um, Wizard is going to

continue what it's always done.

It is not a matter of survival.

We will continue to push on and

take market share. I don't

think this whole process is

about survive aifrmt's about GE

Money being opportunistic given

the changes in the sh ringing

of the market. GE Money is

saying who out there would like

to partner up with us or even

potentially buy us out of this

brand that can get new market share. How has it come to

this? The mortgage markets

globally have been under a lot

of pressure, as you know. Not

only for organisation s like GE

Money but for the banking

sector Goebbelly, and in

Australia and in the UK and US.

So I don't know if it's come to

anywhere other than if time

that it's look at the unts in

the market place and the

opportunities for GE Money and

re assessing their position.

What might turn out of this is

there may be no change. This is

ge. U looking to see what

opportunities there are to

improve the service and the

offering that Wizard makes to

borrower out there today. The

reports have indicated that you

were interested or started to

be interested in buying the

business back off GE earlier

this year and you were sounding

people out, put ing a proposal

to a number of franchise. Is

that 2 case? I have not put my

hand up, nor have I offered to

ge. U nor had GE offered to me

to sell the business, to buy

the business. We have - we are

always looking at ways to

restructure the business to

make it more efficient. I am

not going to deny that. Whether

someone has mis interpreted

that I don't know. Were you hatching a plan? Absolutely

not. We have not been hatching

any plans either me, key

branches, Wizard, GE murn,

there's been no hatching of

anything. So what is likely to

happen from here on in? Are an

interested buyer? No, and I

said that publicly yet. As I

also said yesterday, as this

process transpires, if a buyer

comes along and said to me,

"Would you like to get involved

in our bid or would you like to

get involved in the business

going forward?" I'd certainly

would consider that. That would

depend on a number of things

and most importantly would

consider my current arrangement

with GU Money so I won't be

doing anything to put that into

jeopardy. So it's got nothing

to do with GE and the way

that's worked out. It's very

easy to blame a company like GE

Money with what's happening globally. Relative to everybody

else in the market place, GE's

performing advieribly compare

ed to everybody else. This

business is up for sale for a

price and if they get the price

they're contemplating they may

sell it, or it's up for

partnership at a certain value.

If they get that value they

will contemplate it. This is

not up for sale at any price.

If it's not sold, GE will run

this business as it has always

done. What do you think the the

most likely structure we might

get as a result of what's

happening right now? I don't

really know. There will be a number of people very

interested in this distribution

opportunity. And we will see

how that all transpires. What

is your response to reports

that you aproeverned GE and

offered to take the business

off their hands for a fee of

millions of dollars and a stake

in the company or they

approached you and wanted you

to take the business off their

hands, is that true? That's a

nonsense. I've never been

aproevened by GE or made an

approach to GE. Did they

approach you to take the

business off their hands? No,

the first I ever heard this

business was for sale is in the

last seven days. It seems that

Wizard couldn't survive if it's

cut off from GE unless a bank

bought it in the same way that

Westpac gobbled up Ramms. Does

that make sense you to you? The

reason I told the GE Money back

in 2004 was because it needed a

balance sheet to go forward. I

wasn't predicting the subprime

crisis but I was predicting that organisations like

Australian financial investment

s Group which I sold to GE, our

funding business, were not

going to be able to continue in

the future to get money in the

future at a cost flat. GE has

the big balance sheet and the

banks in Australia have

similarly big balance sheets

and can do that. There are a

number of other places out

there that have the balance

sheets that can do that and

various other combinations too.

Accessing the traditional

market is a very difficult

proposition for anybody What

are some of the other

businesses that might be

interested in Wizard apart from

the other banks? It's been

suggested to me that other

Banks wouldn't be interested un

less they couldn't pick it up

for a song? I haven't heard of

that suggestion. I think the

Bankses would be interested in

a business like Wizard. It's a

premium distribution business

which can gain market share

were rapidly and it's a very

low cost business to run. So I

don't accept that proposition. And the

proposition is that this is a

very attractive proposition,

very attractive business to a

whole series of people who have

the capacity to use their

balance sheet to lend. Or over

time have the capacity to

access warehouse funds and/or

capital markets. I can't sit

here and name them but I am

sure there should be global

entities as well as local

entities who could fit into

that category. They know who

they are and no doubt over the

next month or so we will hear

from them. Mark Bouris, thanks

for your time: You're

welcome. For its part, GE Money

says it will go through the

process and decide on the best

outcome for Wizard. The

Australian chief of GE Money,

Mike Cutter, says tran chiezes

were told yesterday that Wizard

would be put up for sale. I

spoke to him earlier today.

Mike Cutter, thank you for

joining Lateline

Business. Thank you. Are you

disapond birr Wizard's

performance since you bought it

disappointed with the four years ago? We are not

performance of the Wizard

business a very strong brand

and a very strong distribution

network. What has happened in

the recent times is that the

structure of the funding

environment, particularly for

whale funders is very dramatically changed. We've

heard from Wizard with your

credit rating you can get

funding cheaper than banks.

Doesn't Wizard benefit from? ? What Wizard benefits

from is GE's triple A credit

rating and we have no issues in

terms of our liquidity. We can

certainly meets our obligations

and grow the business. The cost

of the funds from a whole sale

perspective has gone up. That's

affected everybody in the home

lending arena but what it has

done is affected people who pre

dominate through whale funding

more than - wholesale funding

more than those with retail

funds. We've been reading that

franchisee s are finding other

funders to deal, with they're

not getting good deal through

GE and the use of GE as a

source is falling. Is that not

the case? As the cost of our

funding has increased, we've

taken pricing action which has

meant that some of the products

and niches and segments that we

serve have been more difficult

to serve. We have had no issues

in terms of funding our

book. Is it true that the

Wizard tran chiezes are using

be. E less? What happens with

the Wizard franchisees, if we

have a product available for

them through the Wizard branch

and - brand, then they use that

product. There is a - there are

some products that we don't

offer and what we have found is

more of the whiz business they

are writing sit s in outside of

the parameters that we're

currently writing. How would

you describe your relationship

with the franchisees. It's

essentially strong. They're a

very powerful sales force for

us. They service the customers

in the way that the customers

want to be served. And I think

they appreciate that we are

trying to do everything we can

to maintain the momentum of

their businesses. You don't see any disillusionment, any

dissafs out there, any concerns about the way you're running

the business? It would be wrong

to say that there were no

concerns. There are always

going to be things that can be

improved in the business and as

I said the impact of the funding environment means that

some of our products have

become a little bit less

competitive than they

historically have been. That

naurm play s in the

relationship with the franchise

owners. When did you decide to

put the business up for

sale? We decided to put the

business up for sale very

recently, within the last week

or. So We committed that we

would tell our stake holder

rltion our internal stake

holders, our staff and our

branch owners as soon as we

could after that. Which is what

we did yesterday. And there's

been no discussions with Mr

Bouris about this before

that? That's correct. Mark p is

an integral part of the

business. We have a contract

with him and as you will have

seen he makes continuing to be

a major part of our brand

development and he is part of

the process that we're going

through today. So as far as

you're concerned, what would be

the best outcome for Wizard?

Would you prefer to sell the

business? When we're anything

about the best outcome for

Wizard, we're thinking all all

three major stake holder group,

the GE Money shoulder, the

customers of Wizard and the

branch owners and that's why we

have not predetermined what the

out come will be. We will go

through the process, we will

assimilate the responses and we

will determine which is the

best outcome with all three of those stake holders in mind. If

you're not dis appointed with

the business performance and

you say the business is perform

ing quite well and the

relationship with the

franchisees is fine, why do you

want to sell it? It's not a

great time to be selling a

business like this? We're

always looking at our

businesses. We evaluate them on

a frequent basis and we have

determined there are different places or there may be

different places where GE's

caple the may be better

deployed. Mike Cutter, thank

you very much for your

time. Thank you. Collapsed

Victorian stock broker

Chartwell Enterprises has gone

into liquidation owing about

$80 million to investors. About

75 people left the second

creditors meeting dis heartened

after learning it was un likely

they would see their money

again. The liquidate ors will

interview Chartwell's director,

Graeme Hoy and Ian Rau underer

oath but are not holding out

much hope of recooping

investors plun. Until such time

as we think we can recoop

thing, I have to say there is

nothing there. The final report

will be handed down in three

month s time. The Northern Territory and Western

Australian governments are both

courting Japanese energy

company Inpex which will soon

decide on the location of a $12

billion gas processing plant. A

win for the Northern Territory

would make it a significant

player in the lucrative gas

sector and could lead to

further deals to process gas

from other fields, including

the Timor Sea. Nick Luchinelli

reports. This pristine

Kimberley wilderness was

considered the natural site for

Inpex's $12 billion gas plant.

But environmental and Native

title concerns have changed the

game. The market now expects a

Northern Territory bid to

succeed. We have been a bit

cheeky. We've crossed the

border. We've made our pitch

toin pex and we've said if

you're findling it all too hard

to do business in WA, come and

have a look at the Northern

Territory. Connecting the large

Ichthys gas field off the Western Australian coast to

Darwin instead of the Kimberley

would cost billion more but with environmental concerns in

the west, it's now become

viable. It would also give

Inpex the option of processing

its vast reserves of Timor Sea

gas at a facility here in Darwin. Indonesian authorities

are reluctant to let Inpex pipe

that gas but the only other

option in the Ichthys field is

a leading LNG plant., which is

untested technology. The

Territory Government is doing

its best to add to the existing Conoco Philips facility in

Darwin harbour. Obviously

they're a company that are

looking to do their first major

project in Australia and, like

with any business, we want not

only the additional business

but in the growth in that

business in years to come. The

Territory's also offering other

insentives. While WA wants to

reserve 15% of all gas piped in

for local use, there's no such

requiren't in the north. The Opposition says that's a

mistake, and some gas should be

kept for local use. The flow of

gas into the Northern Territory

has long been a dream. That is

what will assist us in

industrialisation, the building

of the Territory. Inpex is

expected to announce its

preferred site for the LNG

plant in the next two months.

And now a look at tomorrow's

business dire yi. First quarter

private capital expenditure

figures are out. Grains handler

grain corps releases its

interim results. Overseas and

the keenly awaited first

quarter US GDP figures are

released. And before we go,

let's look at what is making

business news in tomorrow's

papers. The the 'Age' examins

Tasmania's decision to axe

unprofitable routes. 'Financial

Review' leads on the same

story. The 'Australian' says

Origin Energy is poised to

accept the sweetened $13

billion-plus offer from BG

Group and the 'Sydney Morning

Herald' looks at Sinosteel's

decision not to offer Midwest

Corporation investors more money. And this's all for

tonight . As I leave you, the

Dow Jones industrial average is

up 43 points and the FTSE is up

32 points. If you want to re

view any part of tonight's

program, you can visit our

website. I'm Philip Lasker.

Goodnight.

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