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Business Today -

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Good morning. Welcome to the

program. I'm Alicia Barry. In

'Business Today', recovery

agenda, the US President

delivers a positive pitch on

America's economy. Heavy

weather - Qantas forecasts a

big loss and cuts jobs. And capital influx - they're

illegal but China's underground

banks are crucial. Those

stories are coming up shortly

but first let's take a quick

look at the market numbers.

Well, for more on that market

action I'm joined by Chris

Weston from IG Markets. Chris,

investors on Wall Street sold

out of the market this morning.

Can you run us through the

session? Ultimately we did see

the Dow down 1.7%, we saw the S

and P down just over 2%. What

we have seen on the S and P

recently with 30% gains in 5

weeks, we are prone to down

side risk and that's what we

saw last night. Saw retail

sales numbers down 1.1%. They

had been expected to grow 0.3%

and we saw worse-than-expected result said from the producer

price index. We saw the market

open 1.6% lower in the US and

that traded flat until we saw comments from Ben Bernanke and

Barack Obama about the state of

the economy which helped pick

the markets up from the lows.

We saw the KBW banking index

down 8% and it replicated or

stemmed from what we saw from

goldman's with their capital

rating. A negative day that

should be replicated from our

markets today. Investors

weren't happy about the capital

raising from Goldman Sachs. Why

was that? I don't necessarily

think it was them being upset

about it, certainly no investor

likes to see a capital raising, it's always quite negative at least in the short-term. I

think people want to see them

repay their tarp funds, it's

the main toxic asset they have

at the moment but I think the

fact we saw them come out of

their capital raising 5.5%

below their closing price. It

was always going to dilute the

share price and then we saw S

and P come out and say the good

earnings they have aren't

sustainable. That's when we saw

their share price down 12%

throughout the session and that

hit bank as well. The weaker

US economy data has hit the oil

price. Where's it trading now?

It's close to pretty much where

it has shut in the session. We

saw it down 0.5% for the May

contract, closing around 49.

14. It's trading relatively

close to that at the moment. We

saw it trade to a low of 48.92

before it tracked the equity

markets back up. People are

looking at tonight's inventory

report, looking for over-supply

which is going to affect the

price we saw the oil industry

saying we'd see up to 6.5

million barrels added to the

report. Look out for tonight's

figure. We'll see a big

movement in the oil price

replicated in our oil price

tomorrow. Are we expecting a

jittery day on regional

markets? I think it's not

going to be the same day as

yesterday by any means but

we're expecting the ASX to open

around 37.21 in cash, down

0.8%. We're expecting the

Nikkei to open around 87.giks

and we've got the hang seng to

open 152.43, down 2% since the

cash close in the US we have

seen futures down 30 or 40

points so those figures are

prone to further weakness but

we expect the bourses to open

slightly weaker today. Thank

you. That was Chris Weston from

IG Markets there. Now let's

take a look at what's happening

with currencies and


Despite the unexpected drop

in US retail sales and market

jitters, US President Barack

Obama has told Americans their

economy is on the path to

recovery but he also warned

there's more pain ahead and

there will be many more job

losses and home foreclosures

before the end of the year.

There's no doubt that times are

still tough. By no means are we

out of the woods just yet but

from where we stand, for the

very first time we're beginning

to see glimmers of hope and

beyond that, way off in the

distance, we can see a vision

of an America's future that is

far different than our troubled

economic past. President Obama

identified moves to re

capitalise banks, strengthen

the housing market and

restructure the car industry as

key planks to reviving growth.

The steps by President Obama's

economic team are being closely

watched by policy makers world

wide. A new high speed rail

initiative is tipped to be

unveiled in the next few days,

part of the stimulus package

that's being channelled in

transport. The ride is about to

get cleaner and quieter for

those who use mass transit to

get around Santa Monica. The

city had scrimped and saved to

buy 10 new hybrid buses at

around $700,000 apiece but then

came the stimulus money so they

ordered six more. There is

going to be an immediate

economic impact to our

community by having these

additional vehicles available.

You're thinking, "I don't ride

the bos in Santa Monica, why

should I care?" The next time

you ride any bus, consider how

many sets of American hands

went the to making. It comes to

life as a steel skeleton at

this plant in California and

the parts added on are built in

plants across the company. Our

bus company has 300 suppliers

across the United States and a

lot of subsuppliers. The

flooring is made in Ohio, the

doors in Illinois, the route sides come from north Caroline

scpo at the American seating

company in grand rapids,

Michigan, more bottoms on buses

means more workers hired. If

the stimulus package didn't go

through we'd probably be laying

off. We'll hire more people to

build the seats. It's a perfect

storm in a positive way. It

creates jobs for people. It

pays our bills, pays their

bills. At least 15 communities

across the country plan to

spend $115 million this way. It

may be a small percentage of

the total stimulus package but

it is a first tangible example

of the money working to create

jobs now and a smooth ride

later. Singapore has

effectively devalued its

currency by around 1.5% in a

bid to revive the island's

flagging economy. The central

bank's move came after official

figures showed GDP had plunged

at an annual rate of 19.7% in

the March quarter. The trade

ministry warned Singapore's

economy could shrink by as much

as 9% this year as the collapse

in world trade deepens.

Companies shed an estimated

10,000 workers in the first

three months of this year with

the Government moving to reduce

taxes and subsidise some jobs.

There are some 10ative signs of

recovery in the Australian

economy with key business

survey s showing a pickup in sentment. The National

Australia Bank study shows business confidence has lifted

for the second month in a row.

Business conditions have also

improved but there's still near

levels last seen in the

recession of the early 1990s.

NAB says employment remains the

stand-out area of weakness with

almost all sectors shedding

jobs at a rapid rate. Official

figure chosed lending to

business dived almost 15% in

February in a sign that

companies are scaling back

investment and facing tougher

lending standards from banks.

NAB is now forecasting a

jobless rate of nearly 8% next

year. There's always interest

surrounding China's growth

rate. The country's first quart

GDP figures are due outlet this

week. Many economists think

it's probably crawled to the

slowest pace in almost 10

years, brought on by a collapse

in exports. But what could be

considered more intriguing is

how the country's managing its

image and the social economic

issues arising out of the global downturn. To discuss

these I'm joined by John Lee a

visiting fellow at the Centre

for Independent Studies. Good morning, John, welcome to the

program. Good morning. Thank you. We'll see official growth

figures out this week. What's

the expectation among economist

s? Most economists, including

those from the World Bank who

have been very optimistic in

the past, believe it will be 6

to 6.5%. The Chinese Government

has always maintained they will

reach the 8 to 8.5% range but

statistics coming out of

Beijing are notoriously

suspicious and I think you'll

see a bit of massaging of the

numbers there. With a

winding-down in the GDP, more

than 20 million jobs have been

lost so far. The Government's

facing mountain social economic

problems. Can you run us

through a few of these? Yes,

they're very serious. The main

problem comes from the 140 to

150 million migrant workers

roaming the country looking for

work. Lot of them have unpaid

salaries, they have no place to

go and no place to go back to.

From all anecdotal accounts,

social unrest is rising as a

result of these workers losing

their jobs in the mainly

manufacturing and export

industries. Bear in mind that

even a couple of years ago at

the peak of China's boom,

social unrest was actually very

high. In 2005, for example,

there were 87,000 incidences of

mass unrest according to

official figures. Beijing has

stopped issuing social unrest

figures since then which is

actually a very bad sign for

the country. Do you think

Beijing has come to the party

fast enough in terms of

reinstating a social welfare

net? No y don't think they

have. Beijing took away social

safety welfare nets such as

education and health even as

inequality was rising. China is

now at a most un equal society

in all of Asia, whereas a

generation ago it was the most

equal. Around a billion people

who are largely a missing out

on the fruits of prosperity and

, for example, you have 400

million people who have seen incomes decline over the past

10 years. A lot of people

wonder why China cannot raise

its domestic consumption.

That's because people save to such high levels because they

fear for their futures so

there's certainly a problem for

China there. Can we expect the

$5.5 billion stimulus package

to be make ming difference in

the second half then? It will make some difference in the second half but the difference,

one, will be small and, second,

will be very short-lived. Bear

in mind with the 500 billion

package, around two-thirds of

that had already been earmarked

prior to the announcement of

the package so it's really a

150 or 175 billion package

which is still large but there

are two problems. First, most

of the money are going to huge

infrastructure projects of

questionable value. The second

reason is it's up to Local

Governments to largely spend

and administer this money and

they are notoriously corrupt

and inefficient. OK, now moving

on to a different issue, I

mean, despite the slow-down,

Beijing appears to be using

this positive growth rate in

order to garner some sort of

clout on the world economic

stage. Would you agree? I

think Beijing is certainly

trying but in many ways China

remains a very unconfident

country and China's still a

very lonely great power in many

respects Er not a country

trusted by the other great

powers in the world right now.

I think I I think in terms of

China's political clout t can

be overstated. We need China

for the world economy but China

equally or more so needs American and European economies

for its exports and needs to

park in safe havens such as in

American tee bills. I think is

a much more equal relationship

of need between China and the

rest of the world than is often

stated. And we saw that example

that you just mentioned of it

voicing its clout or its

opinion when it referred to

American Treasury bills. Do you

think those comments really had

much resonance across the

globe? I don't thin so. It

fell on deaf years and was

almost dead on arrival. I know

in terms of the Chinese

proposals for rev currencies y

know our Prime Minister Mr Rudd

supported that but there was

really no support for it

worldwide. Let's look at its

attempts to, I guess, put its

soft power across. Do you think

its soft power attempts are

still as strong as they were

before the global recession?

No y don't think so. I think

the world is starting to

realise that the role of the

Chinese Communist Party in

Chinese economy and society is

far more pervasive than had

occurred in east Asian

countries such as South Korea

and Japan and in southeast

Asian countries such as mu

Malaysia or Indonesia. I think

that breeds suspicion,

especially in the West. especially in the West. That

limits Chinese soft power to an

extent. During the Olympics

last year, the more China tried

to impress the world with the

spectacular nature of the show,

the more suspicious we became

it was a propaganda exercise

for the Chinese Communist

Party. Even by its owned a

mission, Chinese self-power has

a long, long way to go. Thank

you, John Lee. A quarter of all

loans in China, roughly $1.5

trillion, are made outside the

former banking system and

despite official efforts to

shut them down, they're vital

to the economy, carrying out

all kinds of banking operations

from foreign exchange trans

actions to investment loans.

Armed police bust into alleged

underground banks in south

China. Suspects drop to the

floor amid piles of cash. This

particular sting by Chinese

authorities aims to

ex-terminate a network of

underground banks that reachest

the farthest corners of the country.

TRANSLATION: We have full plans

to tackle underground banks. I

believe all illegal and

underground financial

activities are harmful. The

underground banks are illegal,

they're also widespread. It's

estimated nearly 10 trillion

yuan is moving underground in

quart aer, that is about a

quarter of all loans are unregistered. Any type of

small business, whether it's

the local tattoo parlour or a

factory owner who has 20, 30,

40 employees making lighters or

toys or something, most of them

end up going to the informal

banking sector. In fact, the

majority of small and medium

enterprises in China don't have

access to official banks. They

don't qualify for loans so they

rely on unofficial lenders

instead which raises the

question how is the underground

banking system faring in the

global downturn? China has

insisted its official banks are

sound but analysts worry about

all that money that's changing

hands unofficially, with

exports plummeting and

factories closing, an untold

number of borrowers are likely

defaulting. That on top of the

new State crack-down on

underground banks could

undermine a crucial source of

funning. Small and medium

companies tend to be more rapid

in productivity growth and more

innovative. From that point of

viewerators good thing because they're servicing the healthiest part of the economy

which the big banks are not

servicing. Yes, the underground

banking system is unregulated

and difficult to control but if

underground banks in China are

struggling, there's no telling

which companies will survive.

Regional airlines Kath ai

positive and Singapore Airlines

could well have to make staff

reductions as carriers battle

further falls in passenger

numbers. Qantas will cut around

5% of its workforce in

anticipation of a record loss

caused by a drop in business

travel. Less than a year in the

chief executive's seat, Allan

Joyce is maintaining control

despite the global economic turbulence. Market conditions

have deteriorated especially in our

our international business. We

are experiencing significant

lower demand, particularly in

premium classes and

considerable price pressure

with extensive sales and

discounting by all carriers.

Last month, Qantas shed 90

management positions after

revealing expected full-year

profits to drop by 66% to

around $500 million. The

carrier was even more

pessimistic, saying its

full-year profit will now drop

to between 100 and 200 million.

An additional 500 management

positions will go and a further

1250 fulltime staff will lose

their livelihoods. We hope

everybody will recognise the

need to do this, why we're

doing it and it is in the best

interests of the vast majority

of jobs in the company. Qantas of jobs in the company. Qantas

has parked 10 planes which are

now for sale and delayed the

delivery of new aircrafts.

We're taking a further 5%

reduction in flying capacity,

affecting our frequencies with

Qantas domestic and inter

national services. We're

cutting our freight capacity both domestry

clainternationally. Which is

just as well because the

airline's fourth quarter is set to be

to be the company's worst on

record. Our profit for the

half year was 288 million. If

we're at the lowest ends of our

guiditance bead a headline loss

in the second half. The

company's saving grace has been

the airline's Frequent Flyer

business and low cost carrier

Jetstar. I almost think if

Qantas hadn't have brought in

Jetstar when it did, it wouldn't exist

wouldn't exist today. That's

perhaps a bold statement but it

would be a shadow of its former

self if it wasfront Jetstar. A

raft of rating agencies have

down graded the airline.

Investors sold stock, pushing

the share price down 11% in

morning trade but after lunch

shares closed up 2%. Look at

many airlines over a decade and you'll find

you'll find find there's no net

change because the business

oberates in a seriously

competitive industry, it's

capital intensive, it's always

more expensive to buy new

planes than replace the old

ones. You've got labour costs

that are extraordinary, you've

got competitors competing with

you on the basis they've got no

debt and they're in chapter 11

bankruptcy and they can charge bankruptcy and they can charge

ridiculous prices for business.

It's a tough business. Global

losses of $8.5 billion are

expected for 2008, down

significantly from 2007 when

profits hit $13 billion. Qantas

maintains it will not lose any

market share and will be in

prime position if and when

conditions pick up. Many small

investors in the troubled

BrisConnections toll road

company still face the

prospects of going broke after

attempts to wind up the company

failed. The massive Brisbane

road project will proceed after

the protagonist who brought

about the meeting changed his

tack. BrisConnections is the

company charged with building

Australia's biggest

infrastructure project. A $4.8

billion airport toll road in

Brisbane. But it's been a bumpy

road. Sometimes investments

work and sometimes they

don't. Many small investors

bought shares for as little as

0.1 cent each and now are asked

to pay two extra installments

of a dollar per share which

means a $500 initial investment

could turn into a bill for $1

million. Many are facing

enormous debts they can't

afford and say they afford and say they weren't

aware of. The way it's been

structured and the way

unitholders are treaticide a

tragedy. Victorian company Australian Style Investments

faces installment faces of

nearly $150 million. That

prompted its owner Nicholas

Bolton to force the meeting to

wind up BrisConnections. Nicholas

Bolton wasn't at the meeting.

He'd already taken the

surprising step of selling his

proxies which were then used to

vote against his resolutions.

The deal saw Mr Bolton net $4.5

million. Investors who saw him

as their white knight were

livid. He's probably the most

disliked person in the stock

market today. I think his

actions are worse because he's

been very deceptive in his conduct. BrisConnections says

it can now move on. We welcome

the outcome of today's meeting.

We believe that those

resolutions proposed by ASI

were not in the best interests

of BrisConnections or its unitholders. Shareholders are

facing their first installment

payment at the end of the

month, a payment many say will

bankrupt them. Investing in

patriotism has usually been a

good bet and so far it's paid

off for the owners of two of

Beijing's most high profile

stadiums with tourists forking

out to experience a little of

the Olympic experience. At

China's Olympic venues it is

forever 2008. This tour group

from the countryside has come

to experience a bit of last

year's fun. ?8 gets you into stadiums including stadiums including the Water

Cube. You get a good seat, even

some popcorn, the trouble is

there's nothing to see but an

empty pool. It's a bit of a

change from the crowds and the

races of August 2008. This

woman has come here on her way

back from a trip to Sydney. TRANSLATION: TRANSLATION: I think China's

Olympic stadiums are great.

They're magnificent buildings.

I saw Sydney's Olympic stadium

from the car. I think there's

no comparison. This is how the

world got to know Beijing's

main Olympic stadium, the

bird's nest. The Opening

Ceremony made this venue the

symbol of a rising China. More

than half a year later, a visit than half a year later, a visit

to the stadium is a kind of

patriotic duty. Right now the

stadium's owners are getting

around 20,000 paying visitors

every day, like these women who

have come from southern China.

They don't get much apart from

the chance to sit down in an

empty seat and look at an empty

stadium, but these women seem

happy enough with their visit

and the owner's hope is clear,

if everyone in China wants to

do what these people have done

then the stadium's future will

be fine. This stadium has

become a kind of national

cathedral, a Chinese

Westminster Abbey, something

you have to tick off when you

come to Beijing.

TRANSLATION: It doesn't matter

that there's nothing to do

inside the stadium. We just

want to appreciate China's

Olympic spirit. If people keep

on coming, the stadium's

investors believe they may get

their money back in 10 years'

time. The Olympics may be on

their way to London but

everyone here still wants to

win a gold medal in China. Now

let's take a look at what's

making headlines around the

region. The Standard reports

toll charges for the Hong Kong

to Macau bridge could be kept

low because of favourable loan

terms from the bank of China.

The 'Financial Times' says

President Barack Obama and Federal Reserve chairman Ben

Bernanke are optimistic the US

economy is on the road to

recovery. The money and

investing section of the Wall

Street journal leads with

Goldman Sachs $5 billion stock

offering. That all for this

edition of 'Business Today'. If

you would like to look over any

of our interviews, please visit

our website. We look forward to

your feedback. I'm Alicia

Barry. Thanks for joining me.

Enjoy your day. Closed Captions by CSI