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Live.

Good morning. Welcome to the

program. I'm Alicia Barry. In

business today - trading losses

- China's ex ports sink more

than expected in February.

System overhaul - IBM urges

the Australian Government to

make tech smart reforms. And

reopening sale - rising from

the wreckage of the global

downturn. Those stories a

coming up shortly but first

let's take a quick look at the

market numbers. It's shaping up

as a subdued day with profit takers expected to move into

market after a major rally in

financials yesterday. While

While the bounce on regional

markets was a welcome break to

the steady slide that's seen

equities since the beginning of

the year. Stock exchanges from

Sydney to Seoul surged on the

glimmer of positive news from

Citigroup, Australia's ASX 200

recovered a week of losses.

Early gains of 2% were

sustained as financial stocks

which have been steadily

slipping into the red reversed

course. The month of February

and early March has been really

been terrible in terms of

performance. Clear ly markets

are looking for a catalyst to

rebound somewhat and certainly

now with Bernanke putting to

some extent a timeline with

regards to the end end of the

recession has inspired the

market to rally. But Australia

lagged behind Japan, where

jaded investors seeds on the

rebound in sentiment. The

Nikkei jumped 4% in early

trade, again big Banks like

mits bish you UFJ and

financials underpinning the

rise. There were warnings,

though, that bargain huntsers

with driving the buying and the

gains were fragile. In Seoul, a

good day for the Wan helped the

market to its highest close in

a movement foreign investors

slashed out on KP financial.

Early gains in Hong Kong

tapered off later in the

session but HSBC's longal unit

hang keng bank climbed 7% while

the bank of east issua host add

more modest 5%. Even news of

Kathay Pacific's billion dollar

loss didn't dampen the rally as

investors focussed on the

Citibank profit. Investor

sentiment has improved

dramatically because of

developments in global

financial markets yesterday

where banking shares rallied

after Citigroup said that they

are actually making profits in

the first two months of this

year. But any reprieve may be

short lived economists are

warning with unemployment rates

spike & around the region, and

further erosion of company

profits expected, there's still

scope for more market

instability. For more on that

market action I am joined by

Chris Weston from IG market.

Now, Chris, Wall Street

struggled for direction this

morning. Can you run us through

the session? We did open around

69.23 - 6923. We immediately

traded to a high of 7040. And

private investors will get

loans to help by these - buy

these distressed assets and

provide some valuable lick

which did - lick whichdy. -

lick witty sh - liquidity. The

market was driven by

financials. An un eventful

session. So a lack of direction for the

for the market. Both UBS and J.P. Morgan have made comments

about their earnings. How did

this impact financials? It was

good. It was another positive

that we can take away. The KPW

banking was up. We saw the CEO

saying that they're going to be

ploftable in January and

February. UBS, the swies giant

bank says they made a loss of

20.9 billion Swiss francs, that

included a write down of francs

to settle a US tax

investigation and the stock s

still rallied 2.5% and that as

the taking a bit of sentdment

from offshore. Hong Kong

securities an futures

commissions is investigating

HSBC's 12.5% plunge on Monday

in Hong congress. What can you

tell ussant that? That was

pretty much of of that moment

was driven by one trade. We

we've seen the financial

services look at market

manipulation. They want to know whether stock brokers have

acted against the code of

conduct. The people put that in

average their bid on a volume weighted

average and because of the side

size of the trade it's moved

the market significantly down. So that's what they're

investigating and they're look

to potentially cap that around

2%. Just before we go, what

will all of this mean for

regional markets today? Well,

we're going to probably see mixed leads today. I don't

think we will see too much in

the way of classic direction.

The ASX will

The ASX will open around 3253.

The Nikkei might see profit

taking there. Down 80 points. The hang essential

we're calling up around 73

points up about 0.1% so a bit

of a directionalless stay Day

to start with today. Thanks for

the update. That was Chris

Weston from IG markets

there. Now let's look at what's

happening with currencies and

commodities. US President Barack Obama

has called for a united

approach to jump start the

local economy. At joint news

conference in Washington,

President Obama and Treasury

secretary Timothy Geithner

outlined their goal force the

G20 summit in - goals for the

G20 summit in April. The first

is to make sure there's

concerted action around the

globe to jump start the

economy. The second goal is to

make sure that we are make sure that we are moving

forward on a regulatory reform

agenda that ensures that we

don't see the same kinds of

systemic risks and the

potential for this kind of

crisis again in the future. Mr

Geithner is due to hold

preliminary talks with finance

leaders this weekend. He's

acknowledged developing nations

need more help. We need to

bring the world together to put

in place a in place a very substantial

program of support for

recovering growth. And we want

to bring together a new

consensus globally on how to

strengthen this global

financial system. Finance

chiefs from the G20 group which

includes Japan, China, India,

Australia, South Korea and Indonesia meet in London this

weekends. And the full force of

the global downturn has

delivered another blow to

China's economy. Ex China's economy. Ex ports

tumbled by a record 25.7% in

February, well above predictions. The official

figures show the country's im

ports also slid. That's taken

the country's trade surplus to

just under $5 billion in

February, compared with 39

billion the month before. And

the Chinese Government expects

demand for its goods will

continue to suffer. This downward trend has already

caused a wave of factory caused a wave of factory

closures and rising

unemployment. An cysts say the

latest figure also increase

pressure on Beijing to boost

domestic con consumption.

Will Whilst few commentators

predicted the current global

economic woes, with the power

of hindsight it is becoming

easier to see where it started

and where to attribute blame.

Many have placed at least part

of the blame on the monetary

policies of the US Federal

Reserve. Now someone who has an

insiders perspective to this is

Dr Jerry Jordan h. Eshe a

former President of the

Cleveland Federal Reserve and a former member of the Federal

open market committee. He joins

me now. Good morning, Dr Jerry

Jordan. Welcome to Business

Today. Thank you, good morning.

Good to be with you. Recently

we've heard influential US

investor Warren Buffett

describe the US economy as

having fallen off a cliff. Have

you ever seen a situation this dire? Well, that certainly

sounds fatal. I prefer to say

we went over a waterfall and

are unable to swim back up the

top but we did not drown. The

point of these analogies is

that this is not your garden

variety recession caused by

restrictive policies to combat

inflation and all we need to do

is ease up a bit on the brake

and away we go. That's not the

case. They never did actually

get on to the brake. This was a

profound crisis, a

discontinuity with the past,

and we've landed on a lower

level of economic activity and

now it's a matter of trying to

resume growth from this lower

level. OK, so what do you

believe is responsible for

taking the US into this current

position it's in? Some f it was

certainly over stim lative

monetary policy in the first

half of the decade that led to

a bubble in the housing

industry. But probably the

bigger, broader factor that

made it so pervasive and hit

all sorts of sector -er -

automobile companies but

furnishings and aplien an

electronics and so on - had to

do with the politic sization of

the home mortgage market creating the situation where

people were able to extract

literally trillions of dollar s

of equity out of their homes

during the bubble in house

prices and use that to buy

second and third homes to buy

car, to buy boat, to buy all

sorts of things and because

that's now stopped, there's no

more re refinancing, there's no

more zero downpayment loans so

the other things that allowed

them to do all of this, then

that level of consumption simp

will cannot be restored. Now US

policy makers are desperately

seeking stability in financial

market. What are they working

on? The first things has to be

the stop the decline. And

this's principally got two

parts to it. One is get the

banking system functioning

normally again, either by

walling off the bad assets into

a subsidiary of the banking

companies or to put them out of

those banking companies into a

new hybrid banking company partnership between Government

and private sector, but managed

in the private sector, funded

in the private sector to take

care of dealing with those bad

assets. In the meantime, the

banking companies normal

operations after stripping out

these bad assets need to start showing some positive results

and just this week we've seen a

number of banking companies say

that that is in fact what is

happening. The other component,

though, is that the kind of

house prices - decline in house

prices has to be brought the

the a halt. As long as appraisals are still going

down, you can't get an ordinary

hone with 20% down because no

banking company is going to

lend to you if they expect appraisals to continue to

decline. So they're work on

some programs to try to get

house prices stieblised. -

stabilised. We're seeing some stimulus packages come out of

Tus. When can we see such a

strategy from the Obama

Administration? Well, the first

part has to be the financial

system. The fiscal package that

is designed to produce a

redirection of resources are

going to be a lot slower in

kick in. The tax revenue part,

getting tax reduction, get ing

money into the hands of

business and consumer, that

goes out fairly quickly. The

spending part comes in a bit

little bit more slowly. None of

that is intended to pump us

back up to the level of

autosales, home sales, home

construction that we saw a &

couple of years ago. Most of

that in the fiscal package is

to take news a new direction,

new social political

priorities. OK, now looking I

guess back at the banks, we've

seen major moves toward bank

nationalisation in the UK. Are

we seeing a similar progression

in the US financial system? ,

no I don't think so. Not

nationalisation in the same

sense that people would

normally think of that. There

is references to the Government

being the dominant stock holder

in Citigroup as being de facto

nationalisation but there is no

thought that the Government is

actually going to run these

banks. But rather it's a

mandate that a new board of

directorappointed. The moerd of

directors will have to review

the management and decide on

changes where appropriate in

management. But it will still

be run by the private sector

and it is still a matter of

working p into a solid bank so

the Government can then sell

its share of the stock. OK, why

do you think the US has steered

a way from this strategy? Because of our

experience with the savings and

loan industry in the 1980s. You

get into a situation where the

Government owns whatever there

is on the balance sheet that

represents net worth, equity to

someone, then they need to

think about the possibility of

actually having to run these

companies. If you're not

prepared to do that, then you

set up a situation as we did

with savings and loans where

the management can roll the

dice, if they come up with good

they walk away with the

profits, if they come up bad

then the taxpayers take the

losses. And they want to avoid

repeating the experience we had

with savings loans on a much

bigger scale with the

commercial banking companies. OK,

companies. OK, now broad ly are

we expecting a radical over

haul of the global financial

system to result from what be

we're seeing now? I wouldn't

call ate radical overhaul. Some

of these are very much needed

changes that have been long

dlaitds because of inertia and

there was nothing to move us

off the centre on them. So we

will see a lot of proposals

coming outs of the bank of

international settlement, the

financial stability financial stability forum,

other par tis pantses in this

of things they thought should

be done for some time. We need

to change the capital standards

with regard to home mortgages

and assets backed by home

mortgages they're not as risk

free as the old capital

standards im plied. We needs to

a - we need to re address

issues of too big to fail and

in they're operating on a

global basis who has global basis who has primary

supervisery responsibility for

these companies? I think all of

those thing also come out of

the G20 meeting and I think

also reforms of the governance

and maybe the funding and

management of the World Bank

and the IMF needs to be re

addressed to fit today's problems rather than the

problems immediately after

World War II. Now, turning to

those comments from theism f and the World

and the World Bank - IMF about

the World Bank about

contracting growth this year,

how worried should we be about

a slowdown in Asia? There's

certainly going to be a

slowdown in Asia because of

their dependence y on

export-led growth. But that

statement if the World Bank

really declined or contracted

in growth that doesn't really

represent the situation very

well. This is a contraction in

the level of economic activity.

That's why the analogy of

falling off a dlif or over the

waterfall. We are at a lower

level, it's been a sharp

decline and it's a matter of

what shape of a recovery we're

going to have. The Pes miss

will say this is going to be a

sort of big L shaped pattern

where we drop straight down and

then we went flat for some

period of time. The optimist,

if there are any left, if there are any left, would

say there's going to be - going

to bounce back up and jump to a

higher level. I don't believe

that. We run the risk of a W if

we try that. It's going to be

more like a U shaped patd wrern

the decline was fairly steep

but it's a very long rounded

bottom before we resume growth

some time out there in the future. Could be as future. Could be as much as two

or three years. OK, Dr Jerry

Jordan thank you for your time.

We do appreciate it: Good to

be with you.

Global technology giant IBM

has called on the Australian

Government to focus on the

country's digital

infrastructure as it tries to stimulate the economy in the face of the global face of the global economic

downturn. It says Australia is

full of what it calls dumb

systems, which are hindering

productivity and growth. As the Federal Government spends

up big to try to keep Australia

out of recession, IBM's

Australian chiefs set its time

to seize the moment and embrace

technology to build for the

future. Building power grids

that are efficient, building

health systems that look at electronic health records,

building water systems,

building transport systems for

the future. Mr Boreham says

Australia is full of what he

calls dumb systems which don't

take advantage of digital and

computer technology. Our

systems and by this I mean our

electricity grids, our water

systems, really were built in

an industrial era to provide information and information and services one

way. We now have this coming

together of what we all know as

physical infrastructure,

including roads into that. And

digital infrastructure. And now

one and the same. It's that

entergraetion of computer

technology into physical

systems which Mr Boreham says

will drive big savings and

greater efficiency. If we could

just squeeze 5% more efficiency

out of the power grids, you

think of how much less

therefore we have to generate

and then the benefits to that

to both the provider, 2

consumer and of course the

environment. And lead cork to

Simes from Access economic, bringing Australia's key

infrastructure system boss the

digital age will give a much

needed boost to Australia's

productivity. In the 1990s,

total productivity growth

averaged around 2% a year in

Australia. In this decade it's

fallen back to half a per cent

a year. Lots of things are

going on but that I think is

the reflection at least in part

of a slowing in the pace of

reform. Mr Simes says global

financial crisis is a wonderful

opportunity for the Government

to restore that pace of reform,

pointing to a precedents from

the recessions of the early

1980s and 1990s. In the early

'90s, a whole series of re

forms came out of that

recession. Things like the

establishment of enterprise

bargaining on a much firmer basis, tliention the

establishment of competition re

forms under Hilmer, the reform

of the electricity market and

the like. The principles

outlined by Glenn Boreham and

Ric Simes are already at Ric Simes are already at work

in drought stricken

Murray-Darling River Basin.

Professor Ivan Mareels has been

working at improving water

efficiency in the basin for the

last 10 years with the water

system around the NSW town of

Colleambaly now total ly

computer ides. The farmer now

asks for water, we can check is

that in your allocation, the

farmer can get the water. Then

farmer the system can say OK this

farmer needs that amount of

water, it's available on the

system, we can deliver it and

we can compute in advance

because we understand how the

water moves when he can have

that water. Typically within

two hours. Equal ly important

water usage has fallen 20%. If

that could be achieved over the

whole Murray-Darling system it

would equate to 1.5 times the

average water use of Melbourne,

making farming much more sustainable. sustainable. Australian

businesses have until the end

of the tax year to cash in on

their cut of the Government's

stimulus package. The small and

general business tax break

offers firms a 30% tax

deduction for equipment

purchased before July. The tax

break is designed to kick start

business investment. But there

is concern many companies are

un aware of their

investment has been a key entitlements. Business

investment has been a key part

of Australia's recent economic

prosperity. But there are fears

it could contract sharply and

push Australia into a deeper

downturn. As part of its plan

to cushion the economy, the

Federal Government announced a

tax break for businesses that

purchase equipment this

calendar year. That will give a

very significant boost to our

economy. The legislation, when

claim passed, would let businesses

claim a tax deduction equal to

30% of the cost of capital

equipment acquired before July

or 10% for purchases made

between July and

December. That's on top of any

deappreciation claims the

business could make against the

it yms. The full deduction

translates to an extra $900 tax

saving for every $10,000

spent. The measure is really a free kick from the free kick from the Government

to stimulate investment, to

encourage business to bring

forward investment decisions or

at least not postpone them

which tends to happen when the

economic conditions are

down. Notwithstanding those tax incentives, businesses still

need to make a commercial case

for the investment. And that

could be the sticking point in this troubled environment.

It's tough in terms of

getting finance. You have to

look at your cash flow, your

budgeting, all things to see

that your business is in good

shape because you may well have

to finance it and front the

Banks and the banks are look at

things with greater scrutiny

measure mays will be suffering these days. The proposed

from a lack of publicity.

Several small and medium firms approached by Lateline Business approached by Lateline Business

were un aware that the tax

break is becoming available.

And even though the measure has

bipartisan support, some

companies may be unwilling to

commit commit to new

expenditure until the law is

passed. National Australia

Bank's general manager of agri

business Khan Horne says it's a

worth while attempt to limit

the downturn. This package will

help, there is no doubt about

that. 30% is attract that. 30% is attract ive. I

will bring decisions forward.

Don't forget after 30 June it's

still 10%. So it will be a

stimulus that would for the

SMEs and agribusiness will

definitely assist. The

Government expects the measure

will cost 2.7 billion dollars

over four years. But, like so

many other part of the economic

stimulus ede bait, there will

be no way to accurately assess

how effective the measure has

in fact been.

in fact been. When iconic

British retailer woorls closed

its doors two months ago, it

was seen as one of the high

profile casualties of UK's

recession. But one branch is

back, a former manager has

rented the old shop, rehired

the staff and named the store

Wellworths. Three, two, one,

open. A celebrity opening,

crowds of shoppers and for a

few moments Dorchester forgot

the recession. Hundreds

turned out as the town's old

woorls transformed into

Wellworths. Wellworths is the

first of hopefully many and its Ouse dor chest they're did

it. Do you think it will do

well? It will. Look at the

people here today. We're

waiting to buy the waiting to buy the

them. Inside, a rather nervous

Clare Robertson. She ran this

store when it was Woolworths

and convifnsed that this shop

could be profitable she rentded

back the premises, le tired the

staff and restocked the

shelves. It's just as eclectic

as an old Woolworths store so

how can Claire make this

work? We are going to sell the

products that people want to

buy. If they don't sell, we

don't sell them. That's the end

of it. They took thousands of f

pounds in the first few hour s

with many shoppers heading

straight for the obvious. It's

great. You can see we have two

happy customers here. . For the

staff, who have been out of

work for nearly two months, it

was a bit overwhelming to be

back in business and back

together. This is like my back in business and back

second home and all these

people were like my second family. Obviously when

Woolworths shut up it was

everything gone. Sorry. Getting

the crowds here today was the

easy bit but nothing has

changed out here. Times are

still very tough on the high

street. And it's tomorrow when

the hards work will really the hards work will really

begin. Now let's look at

what's making headlines around

the region. The Standard

reports on a much worse than

expected drop in profit for

developer sun sun properties.

The 'Financial Times's looks at

why finance ex ports slup

slumped by more than a quarter

last month. And the 'Wall

Street Journal' looks at the

slide in ex ports - dhnese

exports. I'm Alicia Barry, thanks for joining thanks for joining me. Enjoy

your day.

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