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Good morning. Welcome to the

program. I'm Alicia Barry. In

'Business Today' - confidence

boost. New figures predict a

pick-up in investment in China.

Downward trend. Malaysia's

facing its first contraction in

a decade. And - footing the

bill. Will American taxpayers

have to fork out more to help

the banks? Those stories

shortly, but first, a quick

look at the market numbers.

For more on the market

action I'm joined by Juliette

Saly from CommSec. Good morning

to you. It looks like regional

markets will start the week

positively. What can we

expect? We've already seen the New Zealand Stock Exchange

start the week on a very

positive note, up by 44 point

ors 1.5% in early trade. The

Australian share market

expected to have similar gains

today. We will be focusing on

energy stocks with crude oil at

a 2009 high and the banking

stocks which performed well in

the US . Japan's Nikkei

expected to add about 10 points

on open that will consolidate

six-month gains seen on Friday. Any economic news out

today? In Australia we have the

NAB business survey released.

That's expected to show an

improvement in sentiment and

also operations. We will also

hear more about the takeover

between Japanese beer maker

Keiran and Australian beer maker Lion Nathan. It's

understood agreement has been

reached on that $6.5 billion

over the weekend. Incitec Pivot

has reported a significant drop

in first half profit. It's also

forecast that the second half

will be challenging. Its share

price expected to come under

pressure on the Australian

share market. Wall Street leapt

on optimism on Friday. What was

behind the rally? A smaller

than forecast drop in jobs

numbers in the month of April,

and as we started to see that

thebacks did better than

expected in the US stress

tests. 539,000 jobs were lost

in the US in April. That's

sounds like a big number but it

was below the 600 to 700,000

that was forecast, suggesting

that the deterioration in the

US jobs market is showing signs

of easing. We also heard that

most of the banks need to raise

capital, but with the exception

of of the Bank of America, most are doing better than first

thought. Let's look at the

performed against the greenback now. How has it

majors? We saw that really good

economic data out of the US on

Friday. That saw investors bail

out of the safe haven of the

greenback so it lost against

most of the majors. We saw the

euro rally from $1.32 to $1.36.

The Aussie dollar above US 77

cents. The Japanese yen also

rallied, now 98.5 yen to the

dollar. Before we go, how has

the commodities market

traded? We've seen a big run-up

in the oil price. It added 3.5%

or about $2. Ju now of the

below US $59 a barrel. That's a

six month high for the oil

price, also a 2009 high. But

the oil price could drop off

later in the week due to rising inventories. The gold price

lost 60 cents on Friday, now

below US $915 an ounce and base

London Metals Exchange on metals generally weaker on the

Friday. Thanks for that

update. Thanks Alicia. Now,

let's take a look at what's

happening with currencies and commodities.

Fresh data suggests China's

tentative recovery remains on

track. Economists believe

investment growth probably

accelerateed in the four months

to April. Urban fixed asset

investment is estimated to have

grown at just over 29% for the

period from a year earlier.

Exports are predicted to have

dropped at 15.3%, representing

the smallest decline in four

months. Last week, China's

Central Bank cautioned the

recovery in the world's third

largest economy could not yet

be described as solid but last

Friday the IMF said recent

economic data from China was

very encouraging, but more data

for the months ahead was needed

to determine whether the

rebound was sustainable. It

also forecast China's economy

will grow by 6.5% this year.

Malaysia's Central Bank has

warned it will have to

downgrade this year's growth

forecasts. The bank says a

larger than expected fall in

exports is responsible for the

rapid slowdown. GDP growth for

2009 is now predicted to be

between negative 1% and

positive 1%. The figure for

2008 was 4.6%. The governor of

the Central Bank says the domestic sector is still

growing and that he expects a

recovery in the fourth quarter

of the year. As we heard,

improvement in US job numbers

was enough to spur the Dow to

an end of week rally. Construction, finance and manufacturing continue to be

the worst-hit sectors. But

analysts say the bottom of the

unemployment cycle isn't far

away. Even with the

unemployment rate now at its

highest level in a generation,

economists say there is a

glimmer of hope. Employers

aren't laying off people as rapidly as they were and as

they do that it means we're

sort of approaching a bottom

and now we're actually no

longer freefalling. In other

words, while the numbers are still staggering, the job

losses have begun to slow down.

More than 700,000 jobs vanished

in January. More than 600,000

in February and March. And now,

more than 500,000 last

month. It underscores the point

that we're still in the midst

of a recession that was years

in the making. And will be

months or even years in the

unmaking. And we should expect further job losses in the

months to come. But across many

sectors the scope of those

losses could finally be

shrinking. Construction axed

135,000 jobs in March, down to

110,000 in April. Factories,

167,000 jobs in March, 147,000

in April. And in retail, 64,000

jobs vanished in March, 47,000

last month. We're nearing the

bottom. The bad news is we're

not there yet. It's still bad on anyone on main street

looking for a job. The number

of people in line ahead of you

is still getting longer. Which

is exactly what we found today

at job centres on both coasts.

In Brooklyn New York, Cecelia,

who lost her advertising job

last August, is still looking.

The hardest past just getting

an interview. How many resumes

you have sent out? Hundreds.

While in Los Angeles, this

divorced mother was getting job counselling. It's not turned

around for her. When you apply

for a job, it seems like

everybody in the world is

applying. Investors were also reassured by the US

Government's assessment of

America's troubled banking system. The so-called stress

test revealed a mixed picture

of the economic solvency. With

10 of the 19 banks examined in

need of further cash

injections, toting nearly $75

billion. Among the banks that

will have to raise more capital

are Bank of America, Citigroup,

Wells Fargo and GMAC. Stress

tests determined these banks

need a stronger financial

buffer if the economy remains

in a deep slump through the end

of next year. So regulators are

telling the banks to increase

their capital base as a cushion

against potential losses. They

need to raise money by selling

stock to the public or private

investors. Or by selling

assets. The Bank of America,

for example, is already trying

to unload its subsidiary First

Republic Bank. The demand for

more capital has not spooked shareholders. It's a success

for now. I think the Treasury

got the tranquiliser they

wanted out of the stress test. But if the banks can't raise

enough capital through those

steps, they may have to turn to

an alternative to cushion them

against losses and here's where

taxpayers may suffer. In return

for bail-out money, major banks

issued secure preferred stock

to the government, and has already paid taxpayers more

than $2.5 billion in dividends.

A bank could be required to

convert that preferred stock

into far more volatile common

stock, putting taxpayers at

risk of losing the bail-out

funds they lent the bank. This is going to be another hit to

the taxpayers. It's pan ongoing

problem. These tests only cover

the 19 largest banks. On the

plus side, JP Morgan Chase,

Goldman Sachs, bank of New York

Mellon and others were found to

have enough capital. Those

banks say before long they hope

to return bail-out money to the

Treasury. To look at how

reliable the US bank stress

tests have been and what

they've achieved I'm joined by

the Macquarie Group Chair in

Financial Services, Professor

Neal Stoughton from the

Australian School of Business.

Good mornings, welcome to the

program. Good morning, good to

be here. Firstly, let's look at

why the stress tests were

needed. Well, I think that

there was a lack of information

about what different banks face

in terms of the potential

losses going forward and so I

think overall, this was a move

by the government and the

regulators to try to give more

information to the markets.

Now, how robust were the tests

really? Well, the tests involve

a single scenario, and so in

that sense, I think that

scenario was fairly robust, but

keep in mind that's only one scenario, and that scenario is

not the one that's actually

going to Tran spire. So a lot

of other scenarios weren't

looked at --

transpire. You say they've been

tested on a one scenario. That

was a worst case scenario

situation. But isn't that the

situation that we're seeing

playing out now? No, this

scenario involves a greater

degree of losses than what we

have right now. And so indeed,

it would involve an adverse

movement economically from

where we are now. However,

different banks are affected in

different ways and that's the

problem. The adverse scenario

may be different for different

banks. Here we're only looking

at a sincele scenario and

trying to apply that to all

banks. So in that sense, do

you think they were relevant

given they were using a one

size fits all approach? Well,

that I think is the main

problem. I don't think this is relevant for all banks. In

fact, I think a lot of this

scenario and the assumptions that underlay that what they

utiliseed in order to come up

with this scenario were

actually politically driven.

So let's look at now what

happens to the banks that

failed the tests. Well, first

of all, I wouldn't say that

anybody failed the test. The

test uncovered the fact that if

this particular scenario played

out eventually, and there was

not additional capital raised,

then some banks would be

insolvent. However, all banks

are Sol vent now, so nobody has

really failed. It just points

toward the needs of which banks

need to raise more capital. So

it's going to be a matter of

seeing whether that in fact

happens and most importantly

whether the capital that's

raised comes from the private

markets rather than the

government. Do you think the

release of the results publicly

may create some hysteria and

limit the banks' ability to

raise capital? Well, I think we

do run the risk because of the

fact that different banks have

been recognised to have different degrees of capital-raising requirements.

The ones that have to raise the

most capital, for example, B of

A, about face the most adverse

consequences in the market.

This raises the risk that when

will' wind up with is a couple

of these banks effectively

being nationalised. And that

will make it very difficult for

those banks to compete with the

privately owned banks like

Goldman Sachs going forward. At

the moment who are we seeing

needing to raise capital? Which

banks have said "We'll try to

raise capital in the private

markets"? They're all trying to raise capital first in the

private markets. In my opinion,

I think the bank that will have

the greatest difficulty is

probably B of A, maybe also

GMAC might have some trouble

raising this capital in the

private markets. Now, you

touched on this just a second

ago. But if they do have

trouble raising that capital in

the private markets, they will

need to rely heavily on

government money to build up

that required reserve. Well,

what they're going to have to

do, is first of all one

possibility is that some of the

preferred stock that the

government already holds may

have to be converted into

common stock. And I find this

to be a very problem mattical

situation because what it then

means is government will have a

further influence in those

particular banks and it will

make government a much bigger

player in running those banks. And that effectively is going

to weaken those banks. Just

think about all of the talent

that is mobile and the best

employees, they're not going to

want to work for a bank that is

controlled by the government

effectively and they're going

to gravitate to the private banks and I don't think in the

long run those banks are going

to survive. so you think the further nationalisation of the

US - of US banks will have a

negative impact on the

financial system there? No, I don't necessarily think it's

going to involve a negative

impact on the economic

situation. I think the banking

system is a reflection of

what's going on in the economy,

and if as a lot of people are

saying, we're pulling out of

this recession earlier than we

thought, that's going to be

good on average for the banking

system, but I think it's the effect on different banks is

going to be very different. Professor Neal Stoughton we'll

have to leave it there for

today, but thank you very much

for your time. It's nice to be

with you.

Dominant Australian telco

Telstra has unveiled its new

leadership team. David Thoady

is the new CEO with Catherine Livingstone appointed to the

chair of the board. The changes

are widely seen as be a attempt

to repair its troubled

relationship with the Australian Government. The

company also needs to pacify

its biggest shareholder the Future Fund which is Australia's sovereign wealth

fund. The new pair are saddled

with many of the same problems

as their predecessors,

including a regulatory push to

split the company in two.

If first impressions are

anything to go by, bare knuckle

t regulatory warfare doesn't

appear to be an obvious trait

of Telstra's next generation of

leadership. Incoming CEO David

Thoady and Chairman Catherine

living stone. We'll take it

forward from here and how we work with the government and find the best option for

Australia and Telstra. We're

focused on having a very

constructive engagement with

government. That's what we are

having. The market initially applauded the employment on

Friday but the novelty wore off

by lunchtime. The shares

finished a cent down on the

day. Telco analyst Ian Martin

of RBS says David Thodey's

appointment is expected to have

longer -term benefits. He is well enough known and his

success in running business in government recently is well

known to the market. That and

the fact that he is seen as

more of a conciliator, the

market will take the

appointment quite well.

They've got to strike a deal

with the government and do it

pretty quickly there is a lot

of uncertainty at the moment.

The obvious deal concerns the

network. EL and C Baillieu's

Ivor Rhys says the first big

issue for the new-look Telstra

is exactly what bedevilled the

old Telstra, what to do about

its fixed-line network as

government pursues its national

broad band network. Do they

sell the government the network

organise partner the net work?

You can't be in competition

with the government that regulates new the long

run. There is room for Telstra

to go for a tougher operational

separation. Outgoing CEO Sol

Trujillo and freshly ousted

chairman Donald McGauchie had a

famously combative relationship

with the Howard Government over

broadband, that thawed slightly

but not enough for the Rudd Government. Government

relations I think it's a fail

mark. He could've done things

quite differently there. It was

open for Telstra to put a

submission in to the ACCC on a

broadband network.

Telstra's failure to put in

an acceptable bid for the

national broadband network late

last year won broad

condemnation, and is a factor

in this year's campaign from

the telco's biggest

shareholder, the Future Fund,

to remove Donald

McGauchie. Taking the

government head-on and having a

head-butting exercise has

eroded confidence in the

company. It's wiped out the

better part of $12 billion of

value, so I guess he could see

there was no way forward in

terms of their relationship

with the government while he

was there, and he did the right

thing. Bit unfortunate in a way

because Donald was very strong

in defending shareholder value.

But I think a clean break given

the circumstances of the

national broadband network was

called for. Not that the

diplomatic David Thodey could

be drawn into talking about the

war. What do you think of your predecessors' strategy

when it came to the national

broadband net work? Did they

get it wrong? That's for you

David. That's for me? Look, I

think it's been a tremendous

period I have worked with Sol

through. We've done an enormous

amount of work on the transformation. Didn't really

say what you thought of the

strategy when it came to the

national broad band

network. It's important to look

forward. So you didn't think

much of their strategy? No, I

said we're looking forward. And looking forward to that as

well. Both sides now realise

that you can't have the

government rolling out a

broadband network that competes

with Telstra's network. It

destroys so much value.

Mr Rees says the best option

would see Telstra sell its fixed-line network to the new

NBN company. 100% of the

network is probably worth 30 to

$40 billion, but the government

may not want to buy the whole

network. They may want only

half of it and have a 50/50

joint venture or something like

that. But it's a very large

number and would leave Telstra

debt free. There is a good

overlap of interest between

what works for Telstra

shareholders and what works for

the government. That does

involve Telstra committing to a

substantial roll-out in

metropolitan areas and then

using cross-subsidy arrangements to extend that

roll-out into regional areas.

David Thodey, who's yet to

officially take over as

Telstra's chief, doesn't have

much time to usher in his new

era. There's less than a month before submissions on the

government's regulatory review

are due. He's also expected to

keep up the pace on what's

likely to be the major legacy

of the Trujillo era - the

massive five-year

transformation plan which is

supposed to be completed next year.

A college diploma has long

been the ticket to a good job.

But the deepest economic slump

in decades has dampened the

dreams of many US college

seniors. They face a hard

reality upon graduation - stiff

competition from the growing

ranks of the unemployed, and

from graduates of past years

who are still searching for

jobs in their chosen field.

At sir cues university,

commencement had all the usual

pomp. The circumstances have

definitely change. President

Vice-President Biden

acknowledged as much. You are

graduateing into a world of

anxieties and uncertainty.

You're walking across this

stage without knowing exactly

what's going to be on the other

side. This man majored in

journalism only to graduate in

a year when one newspaper after

another is going bust. It gets

annoying after a while hearing

it from family members or

friends. I just want to say, I

guess t I know I'm graduating

at a bad time. This woman has

a job, but it wasn't her first

choice. Like many in the class

of 2009, she will do community

service, in part because the

company she had hoped to work

for aren't hiring. It's it

wasn't so much rejection

letters as really regretful

people saying "We have a hiring

freeze." Or "At this point, we

can't do it." College

graduations are always a

celebration, but there's always

that vague sense that the

party's over and for the class

of 2009, that's particularly

true. These students are

graduating into one of the

worst job markets in a

generation. Two years ago, half

the graduate ing class had a

full-time job lined up by now.

This year, less than 20% do.

Looking forward to

graduating? Um ... I'm ...

Sounds like not so much. No,

not so much. Jodie has had a

full-time job for four years,

working as much as 60 hours a

week to pay her way through

school. And she's majored in

three subjects. All that comes

to an end today. What I will do

now is anything. Absolutely

anything. Any crap job that I

can get I'm gonna take. Baby

sitting. Working on cars. Four

years ago, these young men and

women enrolled with high hopes. Now, they're setting their

sights a little lower. First

there was Facebook, then

Twitter. Now social networking

is moving beyond the realm of

the young and text-savvy to the

boardroom. Specialist Internet

sites are providing a whole

range of tools to help

businesses and even find new

workers. It's computer network

for grown-ups. Instead of

swapping photos and gossip,

sites like Linked In help

business people stay in touch.

Users put in their company

details, add a CV and

employment history and share

contacts with other members for

job openings and business

deals. Linked In has

transformed how I do business

by allowing me to quickly put

together all the people I need

for a deal. It gives me

personal introductions rather

than making me have to

cold-call people. Linked In

says it has 35 million users.

The drinks giant Coca-Cola

Amatil uses it to find new

recruits. Using something like

Linked In has enabled us to see

the best people in the world,

rather than just the local

market. For some of the roles

particularly technical and

professional roles we struggle

to find the ex per fees in

Australia. So we've used the

site to look overseas to

attract the calibre we're

looking for. There are many social networking sites with professional applications. Even

the Prime Minister has a

Twitter, Facebook and MySpace

account. But this modern

multitasking is raising serious

questions about how much

information is too much. Recruitment experiments say

it's possible to link your work

and education details with

other personal information,

even if it's stored on separate

web sites. They might

participate in on-line forum,

on an on-line forum where an

innocuous question such as what

do you bank with, suddenly then

pieces everything together, and

opens the door for identity

theft or worse. There's's

nothing to stop someone setting

themselves up using your name

for example but if you can work through some of the security preferences and profiles then

it's not an issue. So while

the worldwide web is broadening

business horizons, you never

know who's watching. And now

let's look at what's making

headlines around the region.

The 'Standard' reports on an

optimistic mood in Hong Kong,

thanks in part to a new

agreement with the Chinese

mainland known as the CEPA. The

'Financial Times' focuses on

Burma and a critical IMF report

on the military regime's

handling of the economy. And the 'Wall Street Journal'

examines the US bank stress

test, saying the Federal

Reserve reduced the reported

shortfalls in bank capital

ahead of publication. That's

all for this edition of

'Business Today'. But if you

would like to look back over

any of our interviews, please

visit our web site. We do look

forward to your feedback. I'm

Alicia Barry. Thanks for

joining me. Enjoy your day.

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