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Lateline Business -

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(generated from captions) you. Just a clarification,

Allco is not a company which

has collapsed. While it does

have significant debt issues,

it's been given time by its

bankers to try to restructure.

Back to the well-worn question

of art versus pornography.

Police tonight shut down an

exhibition by photographer Bill Henson. Sydney police are

speaking with one of the girls

and her parents.

They'd come to this gallery in

Sydney's east for the opening

of an exhibition by one of the

country's most celebrated

photographers. Instead, they

stood outside as police closed

the gallery minutes before Bill

Henson's work was to go on

display. Sorry, I can't help

you. Cheers. Unfortunately, the exhibition has been

controversy around the cancelled, there's a lot of

show. Some who arrived at the

gallery were shocked. I'm

surprised, to say the least. I

know Bill and I know his work

and I just think... I remember

an outbreak like this back in

the '60s. These are some of the

pictures to be displayed, among

them portraits of a nude girl.

Since one of the more explicit

shots was released as the

invitation to the show,

pressure has been building on

'Sydney Morning Herald' authorities to act. Today the

columnist Miranda Devine

attacked the images saying they

were of 12 and 13-year-olds and

Hetty Johnson called for Bill

Henson to be prosecuted. NSW

Opposition Leader Barry

O'Farrell weighed in saying it

was unacceptable. When police

moved to close the gallery they

issued a statement saying:

Bill Henson is highly regarded

in the art world in Australia

and internationally. Among his

many expeditions he's had major

retrospectives and he's no

stranger to criticism that his

work exploits the young

subjects of his photographs. I've always

believed the most important

thing is to do what's necessary

and, you know, as Feleni said

sometimes the most outlandish

things are necessary. He has

supporters, too. He is

somebody who is I think undoubtedly, Australia's

biggest name in contemporary

art. The 'Sydney Morning

Herald''s John McDonald hasn't

seen the exhibition but says

Bill Henson's work has always

been controversial. I imagine

that these photos are not wildly different from what he's

been doing in the past. I

think his work has always been

extremely edgy. His prices

will probably go up by about

100%. The gallery owners are

hoping the show will go on.

Ros Oxley said the problems -

as she put it - would be

resolved in a few days. The

Defence Department has issued

an unreserved apology to

Zanu-PF for naming her in a

leaked document detailing alleged inappropriate conduct.

The defence briefing note

detailed allegations that Tania

Zaetta had sex with soldiers in Afghanistan during a recent

entertainment tour. The

unclassified document was sent

to around 4 pun people in

defence. The minister has now

ordered an inquiry. Such

horrible, disgusting, vicious,

nasty allegations. This

information should never have

been made public. This is a

gross invasion of her privacy

and extremely unfair to

her. Defence has tonight issued

a statement saying the document

containing Tania Zaetta's name

was a draft and was withdrawn

minutes after it was written

because of privacy concerns.

If you'd like to look back at

tonight's interview with Tony

D'Aloisio or review any of

Lateline's stories or

transcripts you can visit our

website. Virginia Trioli will

be with you tomorrow night and

I'll be back next week . For

now, 'Lateline Business' with

Emma Alberici. Tonight - crude

reality - $135 US a barrel and

counting, are we in for a third

oil shock? We could see the

higher end first, and then I

actually do think the market

will taper off. Tax ruling -

the cost decides GST is payable

administrative nightmare being on forfeited deposits. I see an

created for the Tax Office and

taxpayers. Conversely, there's

opportunities for taxpayers to

structure their affairs. Deadly

mine - Xstrata faces further

legal action after children in

Mt Isa are diagnosed with high

lead levels. I think it's

unacceptable that 11% of the

children surveyed had an

evaluated blood lead level.

First to the equity markets,

and big gains in energy

companies limited early losses

in Australia. Ongoing concerns

about the health of the US

economy kept gains on the All

Ords to a minimum. The ASX200

managed to reverse earlier

losses to end 4 points higher.

In Japan, the Nikkei closed 52

points higher. Hong Kong's

Hang Seng bukd the trend,

shedding 1.5%. In London the

FTSE 100 is down 25 points. The High Court has been accused

of botching the first case

that's come before it on the

GST. A full bench of the court

has backed the Tax Office's

view that GST is payable on a

deposit, which is forfeited

when a purchaser pulse out of a

contract to buy. But tax

professionals say far from a

victory for the Tax Office the

decision opens up the way for

transactions to be structured

in such a way as to avoid GST.

Andrew Robertson reports.

Prime Minister Kevin Rudd has

started a trend in the Federal

Government. If it's OK to

speak Chinese to Chinese, why

not Italian to

Italians? (Speaks Italian) The

tax commissioner was addressing

the Italian business community

in Sydney, and when he settled

down to serious business, he

was naturally pleased that his

first High Court battle over

the GST had ended with a

resounding victory. The

underlying policy of our GST

law is to actually ensure that

supply is a wide concept so

that people don't misunderstand

what might be a supply and what

might not be a supply and the

High Court has affirmed it is a

wide concept. The case stems

from an offer in 2002 to buy

the premises of Melbourne-based

retailer Reliance Carpets, a

$300,000 deposit was paid and

when the deal fell threw,

Reliance kept the deposit but

the Tax Office requested

payment of GST. The company

refused on the grounds that

nothing had been supplied. The

ATO's actions attracted the

attention of the legal

fraternity with Ambry Legal

taking the issue up as a test

case. It's clear on the facts

of this case that GST is

payable on a forfeited deposit,

definitely in regard to a sale

of land and I think in regard

to a forfeited deposit in all

instances. In its unanimous

judgment, the High Court said:

Which in layman's terms means

GST can apply if a contract is

signed, even where the contract

is not completed such as the

Reliance Carpets case. The

High Court also ruled there was

an issue in deciding which

parts of a contract for sale

can be identified as liable for

GST and according to the tax experts Lateline Business spoke

to, that's the issue which will

cause substantial grief for

both the Tax Office and the

business community. According

to Keith Harvey, who's written

extensively on the GST, it will

allow businesses to structure

transactions to reduce their

GST liability. The court seems

to be saying that we do

unbundle transactions, at least complicated transactions such

as the sale of businesses or

sale of land, or perhaps large property development

transactions, and we need to

look sometimes at least at the

various individual elements of

the transaction. For example,

before today the sale of a

business attracted 10% GST on

the total purchase price. With

the High Court decision, that

transaction can be broken down

into components. Something

like accounts receiverable

would not attract GST because

it would be a financial

transaction. GST on goodwill

could be deferred which may

mean only building and

equipment attracts GST

immediately. Lachlan Wolfers

is a tax partner at accounting

firm KPMG and says the High

Court has taken a very

legalistic approach. When the full Federal Court considered

it they said, you entered into

a contract to buy the commercial property, you didn't

get it, therefore no supply.

The average man in the street

can understand that. The

difficulty the High Court's

approach is really you get

stuck into the real detail of

the provisions of the GST

Act. The High Court has also

moved Australia out of step

with other countries which have value-added taxes and according

to Lachlan Wolfers, it's

created a GST system which will

not only cost the Government

large amounts of revenue, but

also become very expensive. One

of the risks that we run with

this approach is that we've

moved away from a system that

can be applied by small to

medium businesss and we end up having a situation where we've

got a tax that needs to be

administered and applied by an

army of lawyers and accountants. Both Lachlan

Wolfers and Keith Harvey are in

agreement that the Pandora's

box opened by the High Court

today will guarantee that the

Tax Office has to fight other

GST battles which will also end

up back in the High Court. The Australian Competition and

Consumer Commission has

attacked GE Money for harassing customers over outstanding

debts. GE has agreed to

compensate more than 1,000 people for what the corporate

regulator found was:

Kie ASIC says GE's hallmark-branded insurance

companies were poorly managed

and it criticised and company

for failing to comply with

warnings issued two years ago.

The corporate regulator has

imposed additional licence conditions on GE including the

hiring of an independent expert

to review operations and

limiting the insurance advice

its staff provides. The US

Federal Reserve has slashed its

growth forecasts and at the

same time, increased its

inflation outlook. That's

reignited fears of staglation

at a time when some analysts

are tipping oil could hit US

$200 a barrel within the next

12 months. Neal Woolrich

reports. Stagflation, which is

a combination of slower growth

and rising prices, dogged

policymakers in the 1970s. Now it seems to be resurfacing in

the US. The minutes from its

April meeting show the US feve

has cut its growth forecast and

expects inflation to gather

pace. It's quite an unusual set

of revisions there, but I think

the other aspect of the minutes

is there's quite a strong view

coming through now they've put

a lot of monetary stimulus in,

now they need to sit back and

see that stimulus work. The US

economy is tipped to grow

between 0.3 and 1.2% for the

year. One percentage point

lower than the Fed's February

estimate. But the US Central

Bank is not expected to cut

rates again because of

inflationary concerns. Really

take a dramatic change in the

medium term economic outlook.

That is a big rise in the...

unexpected rise in the

employment rate or a dramatic

breakdown in financial markets

that's entirely unexpected at

this period of time. If we

don't get those, rates are

hold, we may have seen the

bottom in the Fed's fund

rate. The surging price of oil

is creating headaches. West

Texas crude hit a new record of

US $135 a barrel a night. It

could go anywhere. It could go

to 150, some are talking $200 a

barrels. It wouldn't surprise me. While speculators are

partly blamed for pushing up

the price of crude, analysts

don't expect a rapid return to

lower prices. There is an

argument to say there's

speculative activity there

certainly, but there's real

structural issues within that

market and in terms of how oil

is priced and how oil has been

priced over the past 30-40

years and over the next 5 years

we may see changes on that

front as well. The Federal

Reserve's sobering assessment

of the US economy and a slump

in aviation stocks sparked a

1.6% slide in the S&P 500 last

night. Markets had largely been

expecting the Fed to remain on

hold for a while and I think

the perception was that the

minutes highlighted rising

inflation and the idea that

they were a little bit more

hawkish than some had expected.

They actually opened the door

to the Fed raising rates - I

think that's really the

concern. It's also a nod to

growing inflation risk. Despite

losing ground early, the Australian market recovered in

the afternoon to finish steady,

led by energy and resources

stocks. While the Australian

dollar has consolidated above

US 96 cents, many are

forecasting parity with the

Greenback. The key to me has

been comments from the Central

Bank in their board minutes and

even from the Treasury

Secretary Ken Henry where they

spotlighted and terms of trade

and gave a green light for the

Australian dollar to go higher.

They see it as part of the way

they can control inflation. But

imported inflationary pressures

mean first-world economies like

the US and Australia might have

to settle for lower growth for

some time. The oil price

recorded highs above US $135 a

barrel on both sides of the

Atlantic today, as the market

digested news of an unexpected

drop in US fuel stocks. The

price of crude oil has slumped

close to 20% since the

beginning of the month,

extending a rally that's seen

prices more than double since

the start of last year. Qantas

today joined international

peers in raising airfares.

From 4 June, a domestic ticket

will cost 3% more.

International flights will go

up by 4%. It's the second time

this month that Qantas has put

up its prices. Chief executive

Geoff Dixon told the market

current oil prices would add

more than $2 billion to the

company's fuel bill in the next

financial year. Rob Lachlan is

a trader in the industry for

more than 35 years and he

joined me via satellite earlier

in the evening. Thank you for

being there. My

pleasure. Petrol prices are

rising faster than at any time

since Hurricane Katrina

devastated oil production in

the Gulf of Mexico in 2005. It

was clear then what was driving

the price hikes. How do you

explain the current situation,

given there hasn't been one

determinable shock? No, it's

been a roller-coaster of

events, in actual fact. But

primary reason is supply and

demand. There's too much

demand at the moment from

emerging countries like China

and India, as well as the rest

of the globe. And to be fair,

there's been too much desire

for oil and oil products, and

the oil producers have been

unable to keep up with

supply. You mentioned China,

and China now takes something

in the order of 10% of the

world's oil supply. That's now

outstripped Japan's demand,

even at its peak. How much has

that got to do with what we're

seeing and when do you expect

that demand growth from China

to plateau? Well, certainly the

demand is increasing from China

and it's the type of oil

they're taking. Years ago it

was very much that they were taking what was then highly

leaded fuel, so with a high

content of lead. Nowadays

they're wanting unleaded fuels

for their carrings, their

Volkswagens, their BMWs

assembled in China. So,

therefore, they are effectively

accumulating and queuing for more of the cleaner fuel that the rest of the world has

already been using. I can see this trend only growing

further, and as they host the

Beijing Olympics within the

next month or so, we are going

to see a build-up that they're

storing of diesel and other

such fuel ingredients for their

power supply. Now billionaire T

Burn Piccuns said he expected

oil to hit $150 a barrel this

year. Goldman Sachs is

sticking by $200 prediction by

2010, how easy is it to

forecast what the price will do

given the variables at play

here? For T Burn Piccuns it was

an easy thing to say, it would

be a psychological level. But certainly for the time being,

the market has got what we

would say " the bit between its

teeth" and certainly the trend is we're driving further

forward. It's been driven by speculators, the funds et cetera, as well as the

fundamentals. There's no one

ingredient that's driving the

market forward. You're out

there in the market. You're in

the business of buying and

selling crude oil contracts. What's the mood like at the

moment in the market? I think

to be honest it's been one of

shock. To be fair, the way

we're seeing the intra day

moves, that's the daily moves

you see taking place on crude

oil, I can only recollect that

happening before in, say, the

first Gulf War that we're

seeing these $5, $10 moves in a

day. These are aggressive moves

that I've only witnessed once

before. So it's one of more surprise. But at the end of

the day we are concerned about

oil supplies from countries

like Nigeria who've obviously

got political problems. Iran -

a major supplier of oil within

the world, the fourth largest

supplier - it's got nuclear

enrichment issues. These are

reasons why we're more

concerned about a continuity of

supply in the future . Who is

it - is it speculators in the

market at the moment creating

this frenzy? No, it's easy to

accuse one body, but it's not actually speculators. I think

they've played their part in

earlier moves upward. But I

think this has been more of a

supply issue, because people

are certainly needing oil

companies need continuity of

supply. The airlines for

instance who are getting very

hurt by high oil prices,

because they've already made

commitments to sell tickets. You can only surcharge so much.

The holiday companies, they're

going to be also victims of

this because people have maybe

booked for their holiday to go

with the family. The fuel is

the most expensive single

ingredient of that

holiday. British Airways took the unprecedented step of

actually grounding some flights

in reaction to the rising oil

price. We only saw yesterday

American Airlines has taken the

unusual step of charging people

to check in their baggage, and

Qantas here in Australia today

increased its airfares both

domestic and airline. It's clear that this oil spike

really has the potential to

effect and infect not only the

travel industry, but the world

economy much more broadly? It's

going to effect everybody and

certainly over here, where

we're an island as well, you've

got very much a transportation

issue, food for supermarkets

has got to be transported

around. This is - diesel

demand is going through the

roof at the moment. Unless we

get cleaner fuels. Unless we

get for instance alternative

fuels that are available now,

then we're going to see this

continuation, this problem

just, I would say, getting

worse in the future. Now the

oil cartel OPEC tried to

reassure concerned Western

Policymakers it would boost

production if needed. Will it

be that easy for them to

increase supply? Not many oil

producers could turn on the

taps more. Of course remember

as we start seeing these record

high prices, it means you can

drill deeper and explore more

for additional fields and farms

you can get the oil from. But

I suggest to you at the end of the day certainly throwing more

crude oil at the problem is not

the answer. I think at the

moment, we've got to cut back,

we've got to be more aware

because we can't keep having

demand increasing like this. I

don't think any supply issues

are going to be enough. Is the

market seeing any evidence

whatsoever that consumers are,

in fact, changing their

habits? Not really. It's going

to be pain and it's going to be

pain probably in the pocket

that hurts first. I think

there are some people out there

who are suggesting that they

will be cutting back some of

their usage, especially as we

start coming into our driving

season and the US, in

particular, their driving

season. It tends to effect the

elderly people first who are

living on sort of pntions et

cetera. But petrol... it's

rather like alcohol and

cigarettes, it's one of the

last things people actually

give up on or cut back on. But

certainly it's going to effect

all the various food prices.

So it's going to be taking time

to filter through to the economies. The 'Wall Street

Journal' is reporting that the

International Energy Agency is

about to release a forecast

that shows it expects companies

to produce 100 million barrels

a day by 2020, lower than the

116 million they'd previously

forecast. If they're right,

what's the reaction on the

market likely to be? I don't

think we'll be too panicking

about what's happening in 2020.

There's still a lot of water to

go under the bridge yet. We're

more concerned about 2010 than

anything else. Realistically

these surveys are suggesting

obviously a lot of non-APEC

countries like Russia may have

exasperated in terms of

exhausting a lot of their

oilfields. I would suggest to

you by then we won't be more

reliant on oil. We'll be

looking at the development of

renewable energies. People are

seeing the writing on the wall

already and investment in those

areas is growing at a

phenomenal rate. Some analysts

are predicting it will get as

low as $70, while the others

are sticking to their $200

forecast. What might be the

catalyst to get back to that

sort of number? There'll always

be two sides of the story -

that's what makes a market at

the end of the day. I would

suggest we could see the higher

end first and then I think the

market will taper off, because

I think the economic slowdown,

the credit crunch, whatever you

like to call it we're seeing

within the globe, is actually

going to get worse before it

gets better. I can see more

pain and that may well bring

demand as we see come to - not

a grinding halt - but certainly to subside. Thank you very much

for your time. My pleasure.

Swiss mining giant Xstrata has

welcomed the release of a

Queensland Government report

confirming that 11% of children

in Mt Isa have dangerously high

levels of lead in their blood.

45 children living in the

Queensland mining town were

found to have unsafe levels of

lead in their system. Above World Health Organisation

standards. Xstrata's Mt Isa

mine produces copper, link and

silver. The company are facing

legal actions over allegations

of lead poising. From Mt Isa,

Mark Willacy reports. For

nearly a century, Mt Isa has

profited from the vast mineral

wealth beneath its oil. But now, there's evidence that the

ore which has made this remote

city rich could be making some

of its children sick. After

testing 400 young children for lead contamination, Queensland

Health today released its

findings. I do believe we have

a problem. We think it's

unacceptable that 11% of the

children surveyed had an

evaluated blood led level. For

mother of four Sharlene Body,

the Queensland Health report is

too little too late. Her

4-year-old son recorded the

highest led level of any of the

400 children tested, more than

four times the recommended safe

limit. I'm scared for him. You

can't replace my son once he's

gone or anything happens to

him. Queensland Health says it

will help affected families and

conduct home audits to help

reduce children's exposure to

lead in soil and dust. The

owner of the Mt Isa, Swiss

giant Xstrata, has promised to

implement the recommendations.

While many in Mt Isa blame the

mine for the lead problem, the minister responsible has ruled

out a survey of the town to

pin-point the sources of the

lead. The people of Mt Isa

have been invited to a public

forum tonight to learn more about the Queensland Health

report. The key message to residents will be - learn to

live with lead. But the

Queensland Government, the

mine's owners Xstrata, and the

Mt Isa City Council will soon

be living with legal action by

parents of some of the children

contaminated by lead. Really,

it's a case of one doing the polluting and the others

allowing that to happen,

turning a blind eye. Those

taking part in the lawsuit

reject suggestions they're

doing it solely for financial

gain. I'd rather have my son

here than all the money, yeah.

I'd rather have his

health. Another larger blood

testing survey of Mt Isa's

children will be conducted in

2010. To another company which

is no stranger to legal action,

building products maker James

Hardie has posted a loss for

the year on the back of higher

claims for victims of its

asbestos products. But

predominantly on the slump in

the US housing market. The

company says there are more

tough times ahead. Desley

Coleman reports. For once, it

was the James Hardie management

that were the walking wounded. I'm not really looking

for sympathy, because we had disappointing quarters. A

broken foot only added to the

list of concerns for the James Hardie chief executive. Only

80% of its business is in the

United States and housing

starts are down nearly 30% this

year. Higher claims for

victims of asbestos, asset

write-downs and lower sales saw

the company post a $74.4

million loss for 2008.

Good full year, but the

reality was every quarter

slipped on the previous quaer.

It's the trend that's more

concerning than the actual full

year result. On a divisional


In context, it was probably

quite a solid result. They've

been able to continue to

deliver very good margins and a

very good performance against a

very weak backdrop, being US housing which has really fallen

sharply. The market is going

to continue to come off.

There's very few signs of

optimism. The builders out there are obviously very

concerned, as is almost

everybody in the industry. And

the list of concerns for the

James Hardie chief executive

continues to grow. The

Australian company is faced

with allegations of racial

discrimination at the Amsterdam

head office. It moved to the

Netherlands in 2001 to take

advantage of tax concessions,

but that agreement will expire

in two years. Under an

executive plan called Project

Red, James Hardie management is

currently exploring headquarter

alternatives. Chief executive

Louis Gries, confirmed the

review is under way but flatly

denied suggestions that Project

Red is considering selling the

Australian business. There's

been no plans to sell the

Australian business, to sell

the New Zealand business, to

sell The Philippines business,

to sell the US business. We're

working through how we

configure the corporation

long-term. Louis Gries was then

pressed for a guarantee that

the Australian business will

still exist in three years'

time. I have no plans to sell

or recommend a sale of the

Australian business, but I'm

not going to guarantee... It

was a bad day overall for the

chief executive of one of

Australia's most battle-scarred

companies. To the other major

movers on our market today:

Now a look at tomorrow's

business diary:

A look at what's making news

in the business sections of tomorrow's newspapers.

That's all for tonight. The

Dow Jones is trading up 14

points. The FTSE 100 in London

is down 20. If you want to

look back at tonight's program,

you can visit our website. You

can watch it online or download

it as a vodcast. We'd love to

get your feedback. I'm Emma

Alberici, goodnight. Closed Captions by CSI