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(generated from captions) Live. This Program is Captioned Good morning, welcome Network, I'm Whitney fitss Business Today for Australia

Simmons. Coming up on the program - debt pressure, EU

borrowing rates rise on of more bail outs for troubled borrowing rates rise on fears

economies. Competition Google under economies. Competition probe, Google under investigation over

its display of search results.

And growth reading, GDP data expected to show Australia's

economy in good shape. Those

stories coming up shortly but first let's take a quick look

at the market and trade locally

is about to start for we'll have more on that in a moment. I'm joined by Stephen Craft from Bell Direct. from Bell Direct. The local mark

mark about to open for the day,

does look like what are we likely to see? It

negative start this morning does look like flat to slightly

although we can although we can also expect more volatility during the day

after bewildered US investors really fluctuated wildly overnight. We could see resources bounce back a little

today after base metals traded higher in London last night

with copper up about 1.7%. still 6% with copper up about 1.7%. It's

in early November but still

trading higher and we saw

nickel and tin up more than

2.5%. BHP and reap o were about 0.5% higher in London last

night. Less good news for the

energy sector with oil falling

$1.63 coming into today's

session. Over-Saul a session. Over-Saul a fairly

we're expecting flat start to the day. Now

we're expecting some economic

data out today, how will that

affect trade? A lot of that's

already factored in

see markets move. Of course midmorning we'll get GDP

numbers for the third quarter,

for the September quarter. The consensus is for about 0.4% rise. That would give us an

annual growth rate of about

the 3.4% which is much better than

the previous year's 1.2%

although it has been trimmed a

little bit lately. Early in little bit lately. Early in the

week we had more mixed data

coming in from the Bureau of Statistics with operating profits falling Statistics with company

for the operating profits falling 1.5%

expectation of 4% rise. You

also saw export volumes

declining in yesterday's figures. In particular iron ore

fell by 6% and coal exports fell by

fell by 4% so all of that could

impact today's numbers but

generally the market has

factored in a lower figure for

today although as I say, if there's a surprise on the

upside or the downside it could

see markets move. Now if we

look at the US, did those consumer confidence numbers impact investor sentiment?

night. They certainly did help last

confidence coming in stronger board index of consumer

than expected. It came in at

54.1, any number over 50

indicating an increase in

was after a revised September figure of 49.9, just below an

increase. So that was a good result, that was one positive.

market confidence that Another positive was more

President Obama was likely to

reach a compromise with

Republicans on doing away Republicans on doing away with

the Bush era tax cuts sorks well. Less positive was a that helped markets along as that

release of the index of house

prices which fell by 2% versus expectations for expectations for a rise. But

last night were further really weighing on US markets

concerns about Europe plus some local concerns with Google concerns about Europe plus some

subject to an subject to an anti-trust

investigation in Europe. You had private talk s privatation talks for Seagate had private talk s -

failing, you had eBay with an

analyst downgrade, all of that

weighed on the tech stocks and

they really pulled the market

down, particularly the S&P 500 which is off which is off 0.6%, the NASDAQ

down 1% as well on those tech

concerns and the Dow Jones down around

around 0.4%. We'll have to

leave it there, thanks for the

update. Now let's take a closer update. Now let's take a closer

look at what's happening with

currency and commodities.

As we heard investors remain far from reassured by esm policy makers efforts to refuse sovereign debt fell for a dipping to a 10-week low while borrowing rates have increased in core

in core EU countries such as Italy, France and Belgium. The yield compared to German benchmarks jumped to their highest levels jumped

since European Central Bank President since January 1999. Meanwhile

attempting to calm Jean-Claude Trichet is

says both Greece and are solvent and insisted that says both Greece and Ireland

is under investigation after the European Commission received complaints practices deliberately excluded

compet frrs user. The detailed probe could

hit last months and Google could be

found to hit with large fines if it's

are investigating whether

Google used its market power

The probe, which is the first

for Google's business, for Google's business, could

potentially result in billions in fines. searches display sites competitors low down in their prevented advertising partners from from placing competitors' ads

on their site. By opening investigation what we are on their site. By opening this

saying is that the allegations we

investigation, this is we have received merit further

are doing and we are informing

you because we

number of best practice according to which number of best practice s

when we are starting a investigation. The European

Commission has also said that it was premature to say that there was something wrong And the company has said it will cooperate with regulator

s. The company defends algorithm saying it was built important point always to competition is really one competition is really one click away, that the user is away, that the user is never locked in and with a click of his mouse, with a click of his mouse, to go somewhere else and go somewhere else and find information on Internet. Microsoft and Intel

have in the past been hit have in the past been hit with huge fines for breaching EU rules. With the fine companies up to fine companies up to 10% of global global turnover. The investigation could drag national accounts figures national accounts figures will show the economy for the nation. A

for the nation. A survey by the Bloomberg news service Bloomberg news service shows

most economists think Australia

0.4%. That will put annual GDP

at 3.4% which is at 3.4% which is in line with trend rates. Australia Bank's chief economist Alan economist Alan Oster says while

reer s are struggling the overall the economy is going well. patterns around the globe, particularly

r affecting soft commodity closely at this Jonathan Barratt. Welcome to rains are really playing havoc

with soft commodities, what moment it's all basically the

area, wheat and barley area, wheat and barley where we

actually started the harvest we were expecting really robust crops out of eastern Australia and with the rain it's certainly hurting a

lot of yields farmers. Of course there is

more rain on the way which means these conditions won't

let up for some

damaging will this be significantly damaging because we said, robust harvests. What said, robust harvests. we've actually seen is major said, robust harvests. What we've actually downgrades in we've actually seen is major downgrades in downgrades in wheat conditions, somewhere close somewhere close to around about

$50 per tonne which basically means the farmers aren't going

to get the income what they expected torrential rain that are actually just walking off

and they're not even harvesting any of

any of their crops because it's

actually, what we call, sprung which basically means wheat's germinated on the

stalk. So it's at the moment when I look at the moment when no doubt this will push prices

them reaching? At the moment

we've not only got weather

concerns in Australia we've got

dryness in the US for the

winter crop and that's certainly going to certainly going to affect

production and we production and we probably feel that production this year will be down by about that should see prices in my

mind start to move to the top side and I wouldn't be surprised

surprised to see prices move

anywhere from 15% to 20% higher over the coming months. We saw

earlier in the year that Russia

put a ban on wheat exports

to weather impacts on the

sector there. Would something

like that happen here if it

gets worse? Australia is gets worse? Australia is a major exporter of wheat so I

don't think it will happen here because we obviously produce and consume. So when most of the wheat's going overseas the wheat's going overseas I don't think lit happen at all. If

all. If we look at another soft commodity area that's commodity area that's sugar.

It's slumped after 5 positive sessions, what's behind that?

That was an That was an actually

interesting move because sugar

has, once again due to weather

Kearns. We've seen the price of sugar continue to sugar continue to trade higher

but India, I think in more of a

surprise move, announce ed it will resume come from a condition where

they were holding back to now

where they're going to resume

exports which gives us an indication that this year's production hasn't been as bad

as what we've expected. So

they come out and confirm they come out and confirm that then you could probably see

that sugar prices could

actually start to head down to

support which is around that

23.30 level. Thainge brs me to

my next point. Sugar has gained

22% in the past 5 months, so

you see it coming off these

highs? I do. On the back of that news

it - I mean we had quite a

large fall last night and I

think we're starting to get a bit ove story around commodities are actually

heading due to what's happening in in Europe, but when you focus

back on sugar it's had a run

purely on the back of the

concerns that India, which is

the second largest the second largest producer,

will not produce or will not

export as a result of that with them turning

them turning around you can

probably see prices head to the probably see prices head to the lower end again. There's also

issues surrounding the corn sort of area of the commodities sector,

soft commodities sector, can

you just give Australia little

update on that? With corn, I

guess corn and soy to me

in the same group. We have

concerns once again on what's

happen ing in terms of weather side of the effect but happen ing in terms of the

more pornly we look to China as

to whether or not China will

resume its demand for corn and

soy and that's exactly what we're seeing at the moment.

There was an area thought China There was an area where we

but just only the last 48 hours they've come back into the

positive sign for both of those market and I think that's a

commodities. What's bulk-bill weighing on weighing on China's demand for soy and corn? In particular

for soy a, soya China doesn't

really produce and it is really produce and it is a major part of their diet and what we've found is the last month, two months what we've found is that over

there's been that story that China's slowdown, economic slowdown is going to cause a

concern on their imports of found is that China has resumed soya

its traditional buying and

that's a good thing for both

the fierce of inflation on food those commodities. What about

prices as well, does that play

some sort of part? Look, it is

a worry. I think if China

didn't import the food or corn

a concern because food and soya that would be more of

inflation would conto rally in

China. Now remember we had food

to 22% over 18 months ago, so I

think that will weigh on

concerns for China and for China to continue these food stuffs. And just China to continue to import

briefly before we go, let's

move away from soft commodities

and on to crude, now it seems

to have gained some ground?

Crude in itself, it's interesting because we're

getting good economic data out

of the States and as the number one consumer we're seeing crude

Graf state Tate to the top

side. But on the bad side of it

I guess is the concern's escalating in Europe and also the potential slow down in

China. Crude is in China. Crude is in a range

tious there's no doubt about it tious there's no doubt about

and at the moment I and at the moment I actually

feel that it can't move too

much to the top side. I think

around that 85, 86 is pretty

much resistance on the top and

I actually see it come back to I actually see it come back to

the lower end, back to the US

$80 a barrel. Just before we

go, doin want to hold you too much longer you think their next move will

be? I think it will be steady

as she goes. I don't think wle see much movement out of see much movement out of OPEC

at all. I feel that they want stable, global price just as

does get down to 70, 75 you much as everyone else but if it

will probably see they will put

quota their hand up and change their

quota aslittle bit. We'll have to joining the program. Thank, Whitney.

The UN climate summit has

opened in Mexico with opened in Mexico with the delegates urged to make real

progress on half a dozen issues

relating Carbon emissions remain a European sticking point with the

European Union calling on

China, the United States and India to agree to their carbon output. Security India to agree to fair curbs on

might their carbon output. Security

might be tight but few attending. 200 countries have attending. international leaders are

sent officials to

attending. 200 countries have resort. Speakers sent officials to this Mexican divisions between rich and poor countries

Copenhagen climate summit a

year ago. A tapestry with holes Copenhagen climate summit

only be filled in through compromise. On the agenda this time around is finance for poor

countries to adapt, deforestation and a system to countries to adapt, reducing

measure emissions. It's hoped

to pave the way for a global agreement at to pave the way for a binding

next year. We hope next year. We hope Cancun

action signifies a major step in

action to deal with challenge of climate change. action to deal with the

The available justifies it and the community rightly expects justifies it and the global

it. Australia's Climate Change

next Minister will head to Mexico

Minister will head to Mexico

next by 2020. That's a third less This is a significant Copenhagen target. But last year at

prepared to go further. The Copenhagen Australia had been

Government had a briefing document that's now released saying developing countries had already enough for Australia to countries had already promised

to a 15% cut. The Australian

Greens say since then Greens say since then China alone has done enough for

Australia to now have a get into serious emissions

all of us. The Minister insists agreement from the world. agreement from the rest of the that's not expected in Mexico.

Toyota denies it's a recall that's not expected in Mexico.

fwu bu the car giant has offered to fix a defect on

650,000 of its Prius hybrids.

The company will repair a could affect cooling pump problem which

Japan and 70,000 in Europe. The fault could fault could cause the electric petrol models to overheat and haven't been any report lose power although there

accidents or injury. Earlier in

the year Toyota came under

response to a global recall of

more than 8.5 million cars

fix problems with gas medals,

floor mats and braking systems. The Reserve Bank believes the

key source of competition to banks in the home where it was before the global financial crisis. Assistance governor Guy Debelle has told a

conference in Sydney that the

showing signs of life but is also continuing to be adversery

affected by poor investor

sentment caused by the ongoing together Europe. Bundling home mortgages

together an then selling them to investors was the life blood of smaller of smaller financial

institutions prior to the GFC

well over 20% of home lending, securitisation accounted for hitting in 2008. In

now it's less than 10%. The investor base for crisis. We should not expect it to get back the market that it was in 2007

at any time soon if ever. At its peak the market for

securities was $50 billion. It plunged to around $10 billion in

in 2008 and is now at around $18 billion however that figure was

buying of securities to stimulate the market. It's stimulate the market. It's a program of institution, it can tailored to help of institution, it can be phased out of institution, it can be

phased out easily. The likelihood that the Government

losing money on its investment

is very small and there is is very small and there is no ongoing contingent liability to the government for providing

the support. Also speaking at

the conference on securitisation was securitisation was the head of structured securitisation from

Lloyd's banking group in

Britain. He's also a fan of the Federal Government's attempts

to keep the securitisation market functioning. I think

there is a point in time where

they will probably have to or

want to pull out of that want to pull out of that market

and let spreads go to whatever the natural level is the natural level is but clearly that will have economic

consequences for the end consumer. So

consumer. So really it's political decision. I think

generally the expressions of support support from Government support from Government here, which are similar to what's happened in the happened in the US, has been

great. Many people are great. Many people are yearning

for the securitisation market

to get back to where it was

before the GFC to provide real lending lending competition for the big 4 banks. However both Guy

Debelle and Robert M Plehn

believe that 20% level of securitisation was unsustainable. Guy Debelle telling me after the conference

that 20% market share is not needed

needed for securitisation to be a competitive force. However

one of the biggest issues for to stop its current reduced market share from falling. A rough calculation suggests that today annual issuance of around

25 to 30 billion would see securitisation maintain its current share of housing

credit. Which is up to two

thirds higher than current lending and while a healthy securitisation market may

provide competition for the big

banks, it will also provide

some protection for them. Something which occupies the

mind of ratings Moodies. We think it's a useful source of funding diversification. As you know,

the Australian banks are very heavily reliant on offshore wholesale funding to fund their

balance sheets and anything

that can provide a that can provide a different

set of investors is going to be

very useful to them. That

concentration on wholesale

funding is one of the main

reasons why moodies has reasons why moodies has a negative outlook on the AA

credit rating of all 4 big

banks. Grocery Metcash is warning that challenging conditions could

keep a lid on future profits.

It says it's feeling the

effects of deflation as well as

higher wage and utility costs

and Metcash's boss has spoken

out on its stoush. Metcash

isn't the first retail tore bemoan tough trading conditions

in recent months. Its biggest

problem is falling prices

across a wide range of products

due to both a strong Australian dollar and

benefits being passed straight

through to consumers. But

despite that the despite that the grocery wholesaler and distributor has

posted a first half posted a first half net profit of more than $110 of more than $110 million, that's up 0.9% from year

earlier. So very happy with the

first half in very, very difficult environment difficult environment created by de-Africa flation. We by de-Africa flation. We did recognise from the AGM commentary that the commentary that the company was

going to be caught with price deflation impacting their top line. That came through boss Andrew Reitzer said the deflation is only going to deflation is only going to get

worse. What the board is saying

that given that we that given that we would like our shareholders to exercise caution because the guidance

that we've given for the full

year is at risk. They make

their money by charging a

margin on selling goods through

to the independent supermarkets so in a deflationary environment which we're

suffering at the moment it

makes it harder for them to grow their top greatly enhanced if it were allow to proceed with allow to proceed with a proposed a takeover of the

Franklin supermarket chain.

Metcash says a takeover

lift its share of the NSW grocery wholesale market and

challenge the dominance of challenge the dominance of the

Coles and Woolworths. This is

an opportunity and it's a once

in a lifetime opportunity because when it's because when it's gone it's gone to increase the independence

independence market share to

18% and with that comes better

supply chain and lower costs and and better promotions. It gives

them increased scale, it gives

them increased relevance when competing against Coles and Woolworths. But the competition

watchdog is opposing Metcash's bid for Franklins. The ACCC

argues it would effectively

give Metcash a Mo Noll pli this

NSW markets. That to us was anti-competitive particular

plrk as we are aware that plrk as we are aware that there are other parties that have

expressed a strong interest in

aquairing the whole of the Franklins business and pursuing a competitive wholesale operation for

independent retailers. The

matter will play out in the

Federal Court early next year. The Federal The Federal Government says

China hasn't banned Australian

rock lobsters but there's sphil

sto official reason why they're

not allowed into the not allowed into the country. The local industry wonders

which way to go as tanks fill

with lobsters meant to be sent

overseas. At this Adelaide

processing factory containers

that would take lobsters to China instead China instead sit empty,

waiting. There's still been no official word from the Chinese

about why it's decided to halt

imports of Australian rock lob sters. The Australian

Government through its embassy

officials in Beijing are trying

to examine and find out what

the facts are in relation to this matter. Australia doesn't

have a free trade have a free trade agreement

with China and import tariff on

live lobsters can be as high as

40%. That means many South

Australian exporters send their

lobsters to Hong conwhere there's

there's no landed into Hong Kong and it's

up to the importer to be able

to get the lobster into China. And that's one theory

why the Chinese have been stopping stopping Australian lobsters at

the border. They want the proper duty paid so they don't

want the lobster to be going

through Hong Kong. They

through Hong Kong. They want

the lobster to be landed into

China but dues to be paid 100%. If the problem isn't resolved soon the resolved soon the South Australian Government will

extend the lobster season by a

month. It gives them the flexibility to still meet their

financial targets. We've just

got to rely now on common got to rely now on common sense

prevailing and the issue being resolved. The exporters' loss

could be the retailers' gain. In the lead up to Christmas and

with prices falling household favourite could be much more

affordable. And now let's affordable. And now let's take a look at what's a look at what's making headlines around the region. The Hong Kong Standard reports

the latest round of bonds from Chinese Government are set Chinese Government are set to fetch a coupon fetch a coupon rate of just 1.6%. 'Financial Times' says

India's economy grew close to

9% in the 3 months to tend of September and the 'Wall Street

Journal' looks at Toyota's prms

to repair 650,000 cooling pumps

on Prius models as it tries to

regain its reputation for

reliability after a series of recalls. That's all for this dition of Business Today. dition of Business Today. I'm Whitney Fitzsimmons, thanks for joining me, enjoy joining me, enjoy your day. Closed Captions by CSI

This morning - the count -

countdown is on - Australian

gates arrive in Zurich ahead of the soccer World Cup announcement but there's

speculation a deal has already been done. This Program is Captioned

Live. Also today - a soggy

start to summer - Australia

records its wettest spring on record. The Federal Government

facing a fresh battle over nuclear power. And Internet

giant Google under investigation for anti-

competitive behaviour. Good

morning you're watching ABC

News 24, I'm Joe O'Brien.