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Lateline Business -

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(generated from captions) coped with major climate

variability and scientists are confident this will be no different. It's a glass half

full. Some places that have

previously been too wet will be

better for cropping and maybe

this is very true where we may

be able to grow our winter

wheat successfully. Some

growers like Ian Carter are

already reaping the benefits of

conservation farming. A quick

look at the weather. That's all for Lateline this evening.

Tonight's interview with Chris

Richardson will be on our

website shortly. You can

download stories, or stream the

entire program from our

website, too. Maxine McKew

will be with you in this seat

tomorrow night. For now, it's

over to Ali Moore with Lateline

Business.Tonight - investors

unimpressed by Westpac's $3 billion profit. The Seven

Network forecasts a 40% jump in

first half earnings and

Australia's superannuation

funds advised to vote against the appointment of Geoff

Cousins to the Telstra

board. The board's made it very

clear that they don't want Mr

Cousins whatever his intrinsic

worth may be where else. They

don't want him and so you're

going to have a divided board.

CC

Straight for the markets now

which for the second time this

week retreated from previous

records, despite its big profit

increase Westpac fell on

concerns about margins. The

All Ordinaries and the ASX200

both drifted down seven points.

In Japan the Nikkei closed at

its lowest level for a month as

investors shied away from

buying ahead of a 3-day

weekend. In Hong Kong the

haeng hit a record high as

buyers piled into HSBC and

China Mobile. Wall Street

trades in a couple of hours.

Overnight the Dow closed at

12,031. For the latest from

London we crossed to Tom

Hougaard from City Index

Limited. Tom Hougaard thanks

for your time. The FTSE opened

weaker but it's regained some

ground? Yeah, we've seen quite

a lot of interest in some of

the oil stocks and in

particular some of the mining

stocks like Rio Tinto and BHP

Billiton. We've seen a little

bit of a surge in gold prices

and some of the commodities are

seen to come back to life

again. All in all despite the

poor performance on Wall Street

last night it looks like we are

finding form here in the UK and

in Europe as well. What's

driving gold? That is moving

higher? Well, gold went to

exuberant highs around $730. A

lot of was driven by

speculation on the part of the

hedge fund. What's driving

gold after seeing a couple of

hundred dollars fall in the

shiny metal over the last month

is the weakness in the US

dollar. When you take out a

weekly or monthly chart of the

US dollar and in particular the

US dollar index where you see

its relation to the pound, to

the yen to the Australian

dollar, you really see how weak

it is performing. And I think

a lot of the gold buying that

you're seeing is this inverse

relationship you have between

the US dollar and the gold.

Gold has always been perceived

as a storage of safety in times

of uncertainty and that is

exactly what you're seeing in

the US dollar right now. All of

that is going to be affected by

key numbers out on Friday in

the US? That's going to be a

key, of course, and right now

if I'm looking at the bond

market, the bond market is

sending an extremely important

message to anyone watching this

over the last week. What it's

pricing in now is not a rate

hike but a cut in the US market

and, of course, if you start

digging into what does this

really mean? It means that

growth is probably going to be

impaired because otherwise the

bond market wouldn't be pricing

this in. The bond market has

always been a leader of the

stock market. It's very

interesting what's going to happen with the equity market

now. The bond market is

pricing in - I wouldn't say a

recession - but certainly a

diminished outlook for growth

in 2007. Finally, briefly Tom,

what's the outlook for New

York? Well, right now we're

going to trade sideways because

the big report coming out

tomorrow is the non-farm

payroll. I don't think players

will take any big decisions

ahead of this key number.

Westpac has become the latest

bank to unveil another record

profit lifting full year

earnings by 14% to just over $3

billion. Full year dividends

have been lifted 18% to 60

cents a share but investors

marked Westpac down today

noting its performance has not

been as good as the other big

banks. Andrew Robertson

reports. 2006 has been a

watershed year for Westpac as

it's attempted to throw off its

image of being ultra conservative and according to

chief executive David Morgan

the change in strategy has paid

off. In late 2004 and early

2005 we fell behind system

growth. Since then, that operational underperformance

has been progressively

eliminated with momentum-building consistently. But it was a

story of two halfs and although

on the surface the first half

of the year was stronger than

the second, the bank sees it

differently. We had two factors

that if you like hid the underlying performance. One

was that the trading income

that we saw in the first half

didn't occur and the second was

that we had that one-off adjustment for our credit card

over accrual and so when you strip those out you actually

see the true picture of the

half on half story and the half

on half growth, in fact, was a

7% lift in cash earnings in the

second half. All the major

parts of the Westpac business

had solid results. Business

and consumer banking which

contributed more than half the

group's earnings saw profit

rise 11%. Westpac

institutional bank was up 20%,

BT financial group lifted

profits 10%. And while

interest margin was down,

analysts have welcomed

Westpac's decision to more

forcefully pursue

customers. The fact they

haven't aggressively chased the

market share and more marginal

lending has hurt them. Other

banks have been more aggressive

in their wealth management

strategys and pursuit of those

and I think we'll probably see

Westpac get a bit more

aggressive on that front going

forward. With the business

community's role in global warming hitting the headlines

this week, David Morgan was

keen to highlight Westpac's

green credentials. He's

adamant in future Westpac will

refuse to lend to customers

whose businesses damage the

environment. So we look at

environmental risk as

absolutely embedded in our

credit processes and it is part

and parcel of our

decision-making today. The

Westpac boss says he's certain there'll be an interest rate

rise next week with another one

possibly early next year,

adding that Westpac has already

factored them into this year's

forecasts. Andrew Robertson

there. From banking to media and the chairman of the Seven

Network has refused to comment

on whether he will take a

bigger stake in West Australian

newspapers. But he says the

company is in a strong position

to take advantage of changes to

media laws. Kerry Stokes told

shareholders in Sydney that

seven's recently acquired

investment in the company was

straight and would help p Seven

development. Sue Lannin

reports. Seven's annual

general meeting lasted around

20 minutes. No-one asked any

questions, despite repeated

requests by Seven chairman

Kerry Stokes who said he took

that as meaning that investors

were happy. Mr Stokes said

higher advertising revenue and

lower legal costs from the C 7

court case are expected to lead

to a 40-45% rise in earnings

for the first half of the year.

That forecast was also boosted

by the sale of Seven's

investment in the Telstra Dome

in Melbourne. It's a pretty

remarkable result really, we

certainly wouldn't have thought

that it was going to be that

good even though Seven have got

momentum at the moment. Mr

Stokes told shareholders his

14.9% stake in West Australian

newspapers was a positive

investment which forms part of

Seven's long-term development

strategy. But he wouldn't say

if he plans to increase that

stake. We're very happy with

our investment in West

Australian newspapers and very

proud to be involved with that

fine company. Thank you.

Either he wants a seat at the

table when the Government

finally puts the legislation

and dates into action for the

shake-up to the media industries. Certainly any

action with regard to increase

in the West Australian news

stake would have to be clearly

explained by management with

regard to those strategic

regard for that asset. Kerry

Stokes wouldn't be drawn on the

C 7 case in which Seven is

suing its rivals over the

collapse of its pay-TV arm. I

have no comment on C 7.

REPORTER: Are you spending more

in legal costs than what you

may get in damages? No comment. Seven says it spent

$85 to $95 million in legal

costs. Investors say they've

factor in that bill but the uncertainty surrounding the

case is a concern. Federal

Court judge Ronald Sackville is

expected to make a ruling next

year but the decision is likely

to be appealed. Look, the lack of resolution on the Channel 7

court case is weighing on investors' minds at the present

time. But we are focussed on

the underlying business.

Resolution will likely see some

uncertainty removed in other investors' minds including our

own. Analysts say they're surprised no shareholders asked

questions about C 7. I would

have expected some comments but

it just shows you how much

trust he's engendered with the current shareholders. Shareholders

agreed to raise the payouts to

non-executive directors by

$500,000 to $1.5 million a

year. The company's shares

jumped nearly 7% to $9.96 - a

record closing high. Now to

retailing and Coles Myer has

toughened its performance

hurdles for senior executives

to receive bonuses bringing

them into line with updated

profit forecasts. The company

has responded to criticism by

major shareholder Solomon Lew

that the hurdles for executives

were set much lower than next

year's earnings target of more

than $1 billion. Previously senior management could have

achieved their bonuses if the

earnings growth translated into

a net profit of just $893

million. Virgin Blue has

announced it's ordered 20 new

aircraft for a total $950

million. The fuel efficient

Brazilian aircraft Embraer 190,

and 170s carry 70 to 114

passengers and will be used on

scheduled services in the Australasian region. Virgin

says the new jets will allow

the airline to serve the

corporate market better by more accurately matching seat

capacity and frequency with

demand. Deliveries of the

planes will begin next year.

With Telstra's annual meeting

less than two weeks on,

institutional shareholders are

being advised to vote against

the appointment of Geoff

Cousins to the board. The

Federal Government as a major

shareholder in the telco has

nominated Mr Cousins as a

Telstra director. But there

are concerns about the move and

both corporate governance

international and international

shareholder services have

produced reports recommending big institutional investors

don't support the appointment.

Shortly we'll be talking to the

President of the Australian Council of Superannuation

Investors, a group which

provides independent research

to 39 super funds with nearly

$200 billion under management.

But first Brigid Glanville

backgrounds the controversy

surrounding Geoff Cousins'

nomination. It's been a

turbulent year for Telstra.

Along with a falling share

price and the stoush between

the senior management and the

Government, came the nomination

of Geoff Cousins to the board.

It's been claimed he's there to

do the Government's bidding.

John Howard is one of his

biggest supporters. Mr Cousins

has outstanding qualifications

to be a director of Telstra. And despite the criticism, the Prime Minister

is certain Geoff Cousins is the

best person for the job. Our

position is very clear. We

will be voting the Commonwealth

shares in favour of Mr Cousins

because he is eminently

well-qualified for the job.

That's the reason we're putting

him up, there's no other

reason. He is the right man

for the job. Before his

nomination to the Telstra board

he was a key adviser to the

Prime Minister. Critics say

he's too close to be

independent. But James Strong

the chairman of IAG another

board Geoff Cousins is on, is

another supporter. He has a

very sharp mind. He's not

backward in expressing his

views. He's quite a forceful

director, and whilst I don't

always agree with everything

Geoffery says you can be sure

that there's some good thinking

behind it and he comes up with

some unusual ways of thinking

about things. I consider him

to be a good director. Geoff

Cousins himself believes he

will be a truly independent

director. I'm not anyone's man

except my own and I think if

you have a good look at my record as a public company director that's been demonstrated pretty clearly. Telstra shareholders

will have their say on 14

November. The Federal

Government can use its majority

share holding to ensure Mr

Cousins is elected to the board

as Telstra's annual general

meeting is being held before

the T3 sale is completed. But

the move is still being opposed

by a number of advisers to big

shareholders. Earlier this

evening I spoke to Michael

Council of Superannuation O'Sullivan from the Australian

Investors. Michael O'Sullivan,

welcome to Lateline

Business. Thank you, Ali. You

say vote no to Geoff Cousins

joining the Telstra board. Why? Well, fundamentally

because the rest of the board

doesn't want him and when

you're electing a board you're

electing a team, not a - if you

like it's the difference

between a champion team and a

team of champions. You're

trying to get a cohesive group

of people who can work

cooperatively together, all

contributing their skill set

but working together and the

board's made it very clear that

they don't want Mr Cousins

whatever his intrinsic worth

may be where else they don't

want him and so you're going to

have a divided board. Secondly you're going to have someone

who's seen rightly or wrongly,

as a plant for the Government

at the last chance they had to

plant somebody. So you've got

somebody who represents the

regulator, the legislator who

legislates the company when the

company is flat out saying that

legislation is the greatest

obstacle they have to building

the company. Do you think

he'll be a Government

stoug? I've no idea. He says

he won't be and I guess you

have to take him at his word

but certainly it's difficult

for him to say that when he's

been working as an adviser to

the Prime Minister for such a

long time and it's the Prime

Minister and the Cabinet that

puts him in there against the

will of the board. At the same

time, the board works for the

pleasure of shareholders,

doesn't it? So the major

shareholder does have the right

to make an appointment, to make

a recommendation? Yes. In every normal circumstance you would

say that a majority shareholder

has a right to board

representation of its choice.

But this is an extraordinary

situation where the majority

shareholder has for a long time

had a policy of becoming a zero

shareholder and would be a zero

shareholder by now if it had

its way and is now selling down

immediately after this election

the Government will sell down a

third of its holing and place

the rest as you might say, in

escrow, out of its own

direction, or so it says. So

it really is a very unusual situation, particularly when

the future of the company in

the eyes of the board and the

expectives of the company

rightly or wrongly depends on

the behaviour of the Government

going forward as to its

profitability. Even if all your

members vote no, though, this

is a done deal, isn't it? It's

a done deal but I think it

would be wrong for us to say

well, the result is inevitable

we'll just roll over. I think

it's important for

institutional shareholders like

we are and superannuation funds

who have many people whose

retirement depends on the

success of these companies to

register the true view that we

hold. We have no objection

personally to Mr Cousins and if

the board had proposed Mr

Cousins to us we probably would

have voted. But they haven't

and they're strong in their

view they don't want him. Even

if they're forced to have him

they may not regard him as sufficiently independent to

take part in discussions about

regulation. So would you say

the right thing for Mr Cousins

I don't think he's in the to do is to withdraw? Oh look,

position now of being able to make personal decisions. I

think he's accepted the

nomination from the Government

and it would be very difficult

for him to withdraw. The

reality of the situation is

that he probably can't without

very seriously eroding the

Government's position and

losing face for the Government

in a way that he wouldn't want

to occasion. But if you're

looking at it from a purely

shareholders' point of view it

would be better that rather

than receive a substantial vote

against him that he not stand.

All of those considerations

have been made and he's resolved to accept the

nomination and won't change his

mind. What will his appointment

mean for the smooth functioning

of the Telstra board? Whatever

you think of the board and

whatever you think of the strategy of the company there's

going to be now a focus almost

certainly upon the way in which

the rest of the board, which

seems united for the first time

for a long time on Mr Cousins

and how they'll handle him.

And all of the time that's

taken in dealing with that is

time with your eye off the ball. Do you think the

Government's morally wrong to

put its person on the board

just as it departs? I think

morally wrong might be strong,

but strategically wrong, yes. It's debatable whether or not

you agree with the strategy of

the board. But leaving that

aside the board has been

cohesive and united behind Mr Trujillo and the strategy

they're pursuing. Here's a

note of disunity entering the

board which we think is unnecessary and probably damaging. Michael O'Sullivan,

many thanks for joining

us. Thank you, Ali.

More economic news out today

and Australia's shoppers were

less enthusiastic in September.

Retail sales rising a smaller

than expected 0.1% for the

month. The numbers also

disappointed for the quarter as

a whole, up 0.4%. Also out

today, Australia's trade

deficit for September which

widened to $646 million.

Though net exports still added

to economic growth in the last

quarter for the first time in

five months. To look at the

day's news and the movement on

the market I spoke earlier to

Steven Milch the head of

economic research at St George

bank. Thanks for joining us.

If we start with those retail

sales numbers the softness of

them was a surprise? Yeah, they

were softer numbers today

perhaps indicating that that

interest rate increase from the

Reserve Bank in August is

having an impact. The monthly

data was only up 0.1% and then

you have the quarterly volumes

up only 0.4%. So as you say,

quite soft numbers. The quarterly data do feed through

to GDP which is released next

month. It's one of the

building blocks, but we still

think despite the soft numbers

today we'll get a decent GDP

report next month because we've

got other parts of the economy

still doing quite well. Does

this have any impact on the

interest rate outlook? I don't

think so. I think the Reserve

Bank is firmly focussed on

inflation at the moment and in

that regard they do seem a

little worried. So we probably get a rate rise next

Tuesday. We also saw trade

numbers out today and the balance deteriorated in

September but still it's a

pretty big improvement on four

months ago? Yeah, you're right.

It's a volatile series so this

month the number wasn't that

good. It was almost double

that of last month, in fact,

but as you say the trend is

improving. And so this will be

one of the areas which does

contribute toe GDP over the

quarter we've had firmer

exports and softer imports and

that does boost GDP. Now

looking forward we've got oil

prices sliding at the moment.

We've got some good export

prices. So that means that an

illusive trade surplus may, in

fact, be on the hand in the

next few months. If we can turn

finally to the sharemarket. We stepped back from our peaks

didn't we? It was a subdued day

the main index down 0.1%.

Energy and Telecom stocks

detracting from the index

today. At least we

outperformed the US down 0.7%

last night. Perhaps of greater

interest the Australian dollar.

It's been up for 12 consecutive

sessions but today a little

softer down around 20 or 30

points today. On those softer

retail numbers. We're

currently trading around

77.10. At least it's holding

the 77 level? We'll see. We've

got important data out in the

US tomorrow night. That could

set the tone for the next few

sessions. Thank you very much

for your time. Thank

you. There's been more takeover

action on the local market

today with the grand totally

group rejecting a $285 million

bill from Tuan Sing. It owns

Chiefley Hotels and Sydney's

Country Comfort. The bid is

12% below yesterday's closing

price and remains highly

conditional. Tuan Sing already

owns a quarter of grand hotels

and says its bid is almost a

third higher than a rival offer

from a Malaysian group. It

edged half a cent higher to

$1.26. Checking the local

movers:

And tonight we're also taking

a look at farm stocks, the

worst drought in 100 years taking its toll on the rural

sector. CommSec's agricultural

index has fallen 13% this year

while the ASX200 has gone up by

the same amount. Of the nine

stocks that make up the

agricultural index it's no

surprise AWB has fallen the

most.

To currency markets now and

the Australian dollar has

retreated from near 6-month

highs.

For a brief look at

tomorrow's business diary:

A look at what's making news

in the business sections of

tomorrow's papers. The 'Age'

reports Solomon Lew is

preparing to wage a new war on

Coles and that shareholders can

expect to hear from him

personally. The 'Australian'

says the investment community

is sceptical about Westpac

concerned it's sacrificing profit margins to achieve

higher lending growth. The

'Australian Financial Review'

looks at the Seven Network and chairman Kerry Stokes flagging

of a dramatic lift in earnings

as a revival of its television

and magazine businesses gathers

pace. And the 'Sydney Morning

Herald' reports News Limited is

well on the way to buying a

stake in part of the community

media group, in a deal worth

$170 million. And that's all

for tonight. As I leave you

the FTSE is down just one point

and although Tom Hougaard

called the start of the Dow on

even, in fact the Dow futures

is up 12 points. Tomorrow

Maxine McKew will bring you the

latest business news and I'll

be back on Monday night. In

the meantime if you want to

watch any stories from tonight

or earlier programs again, log

onto our website.you can also

download the program as a

vodcast. And if you'd like to

write to us, our email address

is on the screen.I'm Ali Moore.

Goodnight. Captions by Captioning and

Subtitling International.