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(generated from captions) over the last 40 years, with a

test that already in place. The

opposition supports the test

but but says it's been poorly

planned. If a year later you

can't provide us with the full

batch of questions, then what

have they been doing? 74

people are expected to sit the people are expected to sit the test nationally tomorrow.

A quick look at the weather:

That's all from us. If you

would like to look back at

tonight's interview or review

any of our stories or

transcripts, visit our web

site. Now here site. Now here is Lateline

Business with Andrew

Robertson. Tonight - how can it

go? The Australian dollar

climbs above 89 US cents for

the first time in 18 years. The

run of data in Australia

suggests that the Reserve Bank

will raise rates here sooner or

later, then the dollar could

easily above 90 US cents. And

movie attractions. Using

Bollywood films to encourage Bollywood films to encourage

tourism. That's one of the most

sure-shot ideas of promoting

tourism around the world for

the simple reason that

Bollywood has an effective

reach of over a billion people.

First to the markets. With

much of the country enjoying a

public holiday, Australian

shares today took a breather.

With trading volumes at a nine

month low the All Ords

month low the All Ords end its

record-setting run. The ASX 200

closed 4 points down. In Japan,

a stronger than expected manufacturing survey helped the

Nikkei rise 60 points. Hong

Kong's Hang Seng was closed for

a public holiday, and in

London, the FTSE is 5 points

higher. It's not just gold

that's glistening. The

Australian dollar seems to be

much sought after at the

moment, rising above 89 US

cents for the first time in 18

years, with many traders

predicting it will go higher.

It owes its rise in part to the

surging bullion price which has

hit a 28 year peak and also to

interest rate perceptions. The

Reserve Bank meets tomorrow to

considerates and most analysts

expect no change. It could be a

though. different story next month,

though. Here's Phillip Lasker.

The Australian dollar almost

reached 89.3 US cents in local

trading, propelled by a

combination of factors. The Australian economy continues to

grow in momentum, and we're

also getting growth from the

Asian region. Growth that has

seen a host of commodity price increases, including record

28-year high prices for platinum and a

sinking American economy 28-year peak for gold. A

reflected by a weaker US dollar

has also played a part. The

greenback continues to be

undermined by expectations that

the US Federal Reserve will cut

rates again, as it attempts to

rescue the world's biggest

economy from recession. Those

expectations could intensify,

after this week's US employment numbers. If the

numbers. If the US Federal

Reserve does cut rates again or

if the markets price a rate cut

after Friday's employment

figures whilst the run of data

in Australia suggests that the Reserve Bank will raise rates

here sooner or later, then the

dollar could easily move above

90 US cents. The per senses

have already seen Aussie two year bond

year bond spreads nearly 2.5%

above US yields for the first

time in nearly three years. So

it possible one Australian dollar could seen be worth one

American dollar? The last time

we reached parity was back in

1982. It's unlikely to reach

those sort of levels. And its

unlikely the Reserve Bank will

push it along by raising

Australian interest rates after

tomorrow's board meeting.

Analysts say the dollar's fate

won't figure as prominently in the interest rate

deliberations, as the current

subprime upheaval and credit

squeeze. The Reserve Bank will

be more cautious about raising

the official cash rate while

financial markets are still as

affected by the increase in

risk aversion globally as I think they still are, notwithstanding that some of

those tensions have lessened.

We still think that raists will

be higher in six months than

they are now and that if the

Reserve Bank doesn't raise

rates in November because of

their concern about

exacerbating the consequences

of global financial market

turmoil, that they will almost

certainly have raised them by

February. But some predict the

next inflation numbers could

trigger another rate rise in a

matter of weeks. Saul Eslake

doesn't see it particularly

against the credit squeeze

against the credit squeeze

backdrop. The inflation figures

out at the end of this month

would have to be particularly bad to prompt the Reserve Bank

to raise rates in November.

Although we think the inflation

numbers will be uncomfortably

high when they're released at

the end of this month, I'm not

sure they will be so bad as to prompt the Reserve Bank to

raise rates again in this

particular context. It's a

view the government would hope

an holds true, in the context of

an approaching election.

For all the other action on

local markets I spoke earlier

to Lucinda Chan at Macquarie

Private Wealth. A public

holiday in three States today.

How did you see the

market? Certainly a very thin

trading day today. Despite a

weaker US market, the

Australian share market opened

mildly positive this morning, mildly positive this morning,

hitting a rise of 30 points with the All Ordinaries

reaching 6,6616. I think

towards the end of the day, the

market refocussed again on the

US data due out this week, in

particular the manufacturing

activity, the Australian home

sales, and the payroll numbers

are due out. So the market got

a bit nervous and we eventually saw the All Ordinaries

saw the All Ordinaries lost 1

points to close at 6,579.

Given most Sydney traders

weren't at their desks, can we read much into today's

action? Possibly not a great

deal. Traders who are aware

that the markets are open did a

bit of trading. The Asian

market was also very quiet. A

relatively flat day. The US

dollar is really struggling at the moment. Is that the moment. Is that being

reflected in any impact on

equity markets? To a certain

extent it has, particularly

companies which make big

profits or earnings from

overseas. They are concerned at

the rise in the Aussie dollar,

that it could erode the value

of overseas profits. Companies

such as Westfield, we saw

losing about 30 cents. They

closed down about 21.40.

Support services company

Brambles, also weaker, losing

about 16 cents to close at at

14706. The biggest loser was

insurer QBE, they closed at

33.24. Certainly they do have

some impact on the companies

with offshore earnings. CSL

did quite well today. What's

behind that? Well, CSL, the

health care pharmaceutical

company moved into the US market for the market for the first time, with

the vaccine, particularly the

flu vaccine. That certainly had

FDA approval and the stock

rallied very firmly, finished

at about 107.80 on the day.

Very briefly, a small oil

company called Inamika

Petroleum announceed a very

significant oil discovery

today? Yes, they had some

drilling results out in their

finds in the Cooper Basin. It

could be the country's largest

onshore oil discoveries. 120

million barrels of oil. We saw

the stock had a big jump. The

share price rose greater than

$1.10, up to a high of 1797. It

eventually closed at 1.49. Lucinda Chan, thank you very

much for your time. Thank you.

To the other major movers on

our market today.

European markets were

shocked today when UBS the

world's biggest wealth manager

said it had lost $3.8 billion

from the US subprime mortgage

crisis. Credit Suisse also says

its earnings will be hit. For

more on that we're joined by

Tom Hougaard from City Index in

London. Exactly what did the

two companies say about their

earnings today? They said they

had more exposure than the

market had originally

ascertained, and it wasn't very

long after the UBS numbers we long after the UBS numbers we then saw Citigroup announce

that they too were going to

report earnings that were 60%

lower than the same time period

last year. And what this really

boils down to in my mind, UBS,

Citigroup or whatever financial

group we're talking about, it

seems like everyone has had

their fingers in this subprime

pie and now they will all get

burnt. It really is to some extent, it's rather surprising extent, it's rather surprising

that the markets can still hole

as tight as we are currently

doing. The FTSE is trading near

the highs for the day and it

hasn't really - we will a

slight setback, but it seems

that the investors' confidence,

despite these appalling numbers

is unabated and speculating for higher prices. What's

surprising for many people is

that Swiss banks of all banks

are among the best run and most

conservative financial

institutions in the

world? You're absolutely right.

When you compare this to Citigroup and we're talking

about a 60% drawdown as we also

heard fra UBS, it shows the

magnitude of the leverage

involved in these

institutions. When it has

spread as thin as it has, it

really is quite shocking that it isn't worse

it isn't worse than it

currently is. UBS has always

been perceived to be a safe

haven for those who have less

of a risk-taking nature. This

is not going to stop UBS. It

will continue to filter out as

the earnings season

progresseses. What do you see

driving the market today? I

think what's market is think what's market is the

little side note is that Alan

Greenspan seems to have more

power than Ben Bernanke

himself. Greenspan felt the

credit crunch would be over.

One of the things you have to

be worried about right now is

what do you combat, the credit

risk or do you combat

inflation? It seems to me that

most central banks now are voting to combat the voting to combat the credit

risk and let inflation become a

second-stage or second-tier,

something we can look at later

in the year. What do you say on

Wall Street today? As you can

probably see on this chart

behind me t looks like we'll

have a fairly rosy opening. The

Dow up some 20, 30 points up

for the time being. Thank you

for your time. Thank you.

Back home now - tensions

between Telstra and the Federal

Government continue to escalate

with neither side at the moment

looking for compromise. In the

latest salvo, Telstra is

writing to its 1.6 million

share holers criticising the government's refusal to allow

it to turn off its 2G mobile

phone network, including CDMA, phone network, including CDMA,

until its 3G network has

comparable coverage. The main

battleground has been broadband

Internet with Telstra refusing

to build a high-speed network prompting the government to

grant nearly $1 billion to the

SingTel Elders consortium.

Who's right and who's wrong? Dr

Paul Kerin from the Melbourne

Business School is a former

consultant to the telco

industry, and I spoke to him

earlier this evening. Welcome to Lateline

to Lateline Business. Thanks,

Andrew. Telstra is constantly

telling anybody who will listen

that government regulation is

stopping it building a

high-speed broadband Internet

network. Is that truth or

spin? It is true that it's stopping Telstra building a

network under the conditions

that it would like. However,

the government has to decide

what's in the public interest

and the conditions that Telstra

have wanted you could argue

were not necessarily in the public

public interest, the issue was

the level of wholesale prices

that Telstra would be able to

charge its rivals. That has

implications for consumers and

broadband penetration on the

the network. The government has

to make a call and ointments

not always in the interests of

the incumbent that matches the

public interest. You would

expect Telstra would be

fighting for what it believes

it best for

Telstra? Absolutely, and the

management and board of Telstra

have an absolute obligation to

maximise shareholder value. But

maximising shareholder value

for Telstra may be different to

maximising the public interest

if you like. So is Telstra

trying to hang onto its auld

monopolistic ways? Yes, but

again that's in the public

interest to do so. Every day

that Telstra manages to hold

onto its market power is worth

a lot of money

a lot of money and over the

years, Telstra and other

players who are heavily

regulated have spent lots of

resources to manage the

regulatory environment N

telecommunications and airlines

and some other industries,

managing the regulatory

environment which is really

about managing regulators and

politicians is THE No. 1 driver

of shareholder value and so

Telstra has a strong incentive

to do that. The issue is whether they've whether they've really overshot

and gone too far in the right

position and I think they

probably have. Why do you say

that? Well, if you think about

how aggressive an incumbent

that is regulated should be,

it's probably true that under

the previous Telstra regime,

the management and board,

Telstra was too docile and

reactive and took government decisions decisions without really

objecting to them too much.

Telstra under the current team

has certainly been much more

aggressive, and that can be

worth while, but if you push it

to too far than you can destroy

the political and regulatory

relationships an those

relationships can be very

valuable in the future. So

there is a short-term, long-term trade-off. My personal view is in the personal view is in the Australian context with our

culture etc., I think they've

probably pushed it too far. If

I contrast that with, say,

Qantas, Qantas CEO Geoff Dixon

is a master in managing the

regulatory environment. He

trades off the short term and

long term in how far he can

push politician and regulators. Telstra has pushed that

trade-off too far. What could Telstra learn from Geoff Telstra learn from Geoff

Dixon? I think Geoff is very

good in working behind the

scenes. He does make public

statements but they don't

totally trash the government

that's supposed to make

decisions in the public's

interest. And hopefully Telstra

can influence that to partially

suit its interest, although

unlikely to be fully that way.

Geoff Dixon is very good at

pushing the, if you like,

social comeback. Qantas, social comeback. Qantas, while

it's a profit maximising firm,

it also has obligations to

society and governments care

about employment and other

things. Geoff Dixon has pushed

that as much as he can very

well to enable him to get

significant cost reductions but

he has drawn the line on some

things that if you are purely

looking at Qantas as a private

enterprise company,

unregulated, you would unregulated, you would

certainly do, for example,

offshoring a lot more

maintenance, cuts a lot more

costs, breaking out so business

unit, all of those sort of

things you would naturally do

if you were running Qantas as a stand-alone competitive private

enterprise, Dixon, realises though that the trade-off

between those benefits versus long-term political relationships and the

protection that that offers in

terms of limited competition on

some routes is very valuable. So I think So I think he manageed that

trade-off very well. Do you

think part of the problem is

that Telstra now has Americans

at the top, who are probably

not here for the long term, so

they don't have to give due

respect to the Australian

cultural way of --

culture or way of life or

whatever you like to call

it? Well, that may be partially

true. Of course, people's

personal background, the

cultures that they're used to,

do influence how they operate.

do influence how they operate.

This may well be fine in the

US. I do think that that change

in culture at Telstra to some

extent was needed. The question

is the extent to which they do

it. Now, even if they're here

for a short time, though, the

market is pretty cluey in

evaluating the trade-offs and

Telstra's shareholder value,

even though they're not going

to be here long term more than

a few years I would a few years I would guess, the

market when it decides what

Telstra's share price is is

going to look at whether the

platform they've put down in

terms of regulatory and other

factors is going to produce

future long-term benefits, so

Sol Trujillo and Phil Burgess

and others have a strong

incentive to consider the

profitability of Telstra in the

long term, even though they

might not be here for more than

a few years. a few years. How do you see

this impasse being

broken? Well, not much will

happen before the election, of

course, other than continuing

arguing in public, I guess. I

guess from Telstra's

perspective, they would probably see that the

government is likely to change.

If the government does get

back, I think Telstra's share

price will probably drop,

because it wasn't be the

favourite party of the

government if it does get back. On On balance, though, it looks

like Labor is going to get in.

Now, who knows what Labor will

do? Of course, they're not

saying too much. Stephen Conroy

has said in the past that

Telstra should be more heavily

regulated, although he disagrees with the government

on some of the current

decisions, such as CDMA. I

think what happens depends on

the issue. For example, CDMA,

where Telstra wants to close

down the network in January, I

think both sides will probably

say "You can do that, as long

as Next G the replacement

network actually has the

service required." Others

issues they disagree on -

things like the Opel win to

roll out a broadband network in

rural and regional areas,

that's a done deal. There is a

contract for that. There's also

the ongoing issue the ongoing issue about competitive bidding for

high-speed broadband in urban

areas. And Telstra, if it

chooses, can be part of that,

although it's stood out of that

for the time being. How that is

resolved with the incoming

government, the final decision

is not due until some time in

the new year. Depends on which

government is in power. Sounds

like some interesting times

ahead! Dr Paul Kerin thank you very much for your time. Thank very much for your time. Thank you.

India's film industry is one

of the biggest and most

profitable in the world.

Recently, it's been using

Australia as a location for

some of its features and the

potential that represents for

promoting Australia as a

holiday destination has been

recognised by the New South

Wales Government. It's launched

a tourist campaign on the back

of a recent Bollywood film

release in the hope of luring

Indian movie goers down-under

as Ross Bray reports.

You can always count on

Bollywood to be loud and

flashy. And this is just the entertainment for the red

carpet guests for the preview

of Bollywood's 'Hey Baby'.

While the red carpet has many

of the film industry notables,

there are other people here. They come from They come from the tourist

industry in Australia and

India. They're looking at this

film in a very different light.

Where others see entertainment,

they see people in large

numbers and dollar signs. 'Hey

Baby' a film about three

bachelors whose lives are in turmoil after they find a baby

on there are doorstep, has also

delivered a little bundle of

joy to New South Wales tourism. joy to New South Wales tourism.

It's showcasing Sydney to a

massive Indian audience. We

think it's really, really

important. People do relate to iconic things such as the Opera

House, the Harbour Bridge,

Bondi Beach. To be able to see

that, see people enjoying

themselves, interacting around

these icons, really will have a

powerful impact, we think, with

the Indian audience. 'Hey

Baby' is the first Bollywood

film to feature an Australian

location as central to the

entire film. The Indian

bachelors in the story are

living here.

This man is a producer who

handles the Australian end of

Bollywood filming, including

'Hey Baby'. He has seen tourism

on the back of Bollywood movies

work well in other countries

such as Singapore and

Malaysia. That's one of the

most sure-shot ideas of

promoting tourism around the

world for the simple reason

that Bollywood has an effective

reach of over a billion people,

but most importantly messages

sent out sub text actually as

part of a script or story are

more effective and more

attractive. 'Hey Baby' is not putting up putting up a play card saying

"This is Sydney, come and visit", it's actually got

Sydney as part of its

storyline. But if they see it,

will they come? For the past

decade India's economic boom

has spawned a vast new upper

middle class. These people have

money and they travel. And from

the experience of

the experience of An apum Shah

ma, if they see Sydney they will be on their way. Absolutely. When Indian

films started scripting

Australia into the script, the

number of series we started to

get would be "Can we go and see

the place where that song was

shot?" There were competitions

on how to spell didgeridoo in

India when a certain film was

released in 2000. Film is a religion in

religion in India.

So far, everyone is upbeat

of the benefits to be had on

the back of a Bollywood film

and if all the Indian tourists

do flock to Sydney, they expect

it to look a little more like

the Bollywood city they know

from the film. In fact, some of

Sydney's icons may need the

Bollywood treatment to keep

everybody interested!

Now a look at tomorrow's

business diary. The Reserve

Bank board meets to determine

interest rate settings. No

change is expected when their

decision is revealed on Wednesday.

Health fund Manchester Unity

tables its annual earnings and

overseas in just over pan hour

in the US the latest index of manufacturing will be released.

In Paris, Bank of France governor Christian Noyer will

deliver a speech on the

subprime mortgage market. A

look at what's making news in

the business Stock Exchanges of

tomorrow's newspapers: the

'Australian' says John Fletcher

has taken responsibility for

coalition' poor performance by

reject ing $4 million in

bonuses. Kevin Rudd says that

if elected, Labor will cut

spending. And the 'Sydney

Morning Herald' charts the

seemingly never ending rise of

the Australian dollar.

That's all for tonight. As I

leave you, the Dow Jones index

has not opened just yet, the

futures are predicting it will

be down slightly tonight, and

the FTSE up 8 points. To review

tonight's program, you can

visit our web site. You can

watch the entire program

on-line or download it as a vod

cast. And to write to us, our cast. And to write to us, our

email address is:

I'm Andrew Robertson. Goodnight.

Closed Captions by CSI

( EDGY ELECTRONIC MUSIC )

For 25 years, he's been trying to show that improvements made to the body in one generation he will have to shatter one of the great foundations

of science... ..Charles Darwin's theory of evolution. Ted Steele has been howled down, exiled and called a heretic.

Either he has made a monumental blunder or a discovery that could change our understanding

when he was working with a group of young scientists on cutting-edge research Here he met Reg Gorczynski, who would come to play a key role in his future work. MAN: Well, I met Reg first. And he was giving a seminar in the swashbuckling tradition of a young scientist

That was Reg. And I was very attracted to that, for obvious reasons. Well, he was very vibrant He was very enthusiastic He was very down-to-earth And I thought this fello would be fun to work with It was at this time science writer Arthur Koestler In it, resurrected a 200-year-old theory of evolution. Jean Baptiste de Lamarck proposed that characteristics acquired during our lifetime could be passed on to offspring. If Lamarck was right, then improved immunity in our lifetime

could be passed on to our children. But if correct, this would shake evolutionary theory to its core. It just dropped out, you know. And a great feeling of peace came over me. "Well, that's solved that one." Little did I know, a quarter of a century later, where it would lead!

For Ted Steele, it would mean embracing one of the most discredited theories in the history of science. by reaching for higher leaves, passing the trait on to future generations.

50 years later, this theory of evolution was abandoned when Charles Darwin proposed that evolution is the result of natural selection. The giraffe's long neck, Darwin's theory suggested, of acquired traits being passed on to offspring, but of accidental mutations that, over thousands of years, helped the species adapt

But Ted Steele remained convinced, As soon as I saw Reg, I said, "Reg, I've had this idea."

where they first discussed Ted's theory. We were just talking Then Ted's supervisor asked him to give a seminar The seminar ended in disarray.

after five to ten minutes because quite clearly, no-one wanted to listen He was coming up agains a number of people her with worldwide reputations who were well establishedn to some maverick who is going to change th whole fabric underneath them,

are they The DNA-based model, the model where mutations are introduced... RON GORCZYNSKI People couldn't handle the way the messag was trying to be presented "This is a very controversial subjectn "It challenges a lot of your dogman "and talk to you about it again tomorrow. "Here it isn The bloody data's unequivocaln

"You accept it "You don't accept it?! Jesus! What Ted Steele was challenging was not only Darwin's theory of evolution, but one of the most fundamental principles of biology... ..the Weismann barrier.

that acquired traits could be passed on. He chopped off the tails of hundreds of live mice to see if their offspring would be born without tails. not one mouse was born without a tail.

between body cells and reproductive cells.