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More writedowns for NAB

ELEANOR HALL: Shares in one of Australia's biggest banks have plunged on the announcement that it
is expecting to be further hit by the global credit squeeze.

The National Australia Bank says it will increase provisions to cover what are expected to be
significant losses from investments linked to US mortgages.

Reporter Brendan Trembath has been listening to a conference call hosted by the bank's chief
executive and he joins us now.

So Brendan, it seems this announcement has taken the market by surprise?

BRENDAN TREMBATH: It certainly has Eleanor. There was no hint that this one was coming. The bank
apologised for the short notice when it invited bank analysts to join a conference call.

Journalists were allowed to listen in, but didn't have the opportunity to ask questions. The bank's
senior executive spent almost an hour explaining these increased provisions and here is how the
chief executive, John Stewart, put in on the conference call earlier.

JOHN STEWART: At times like this we do not want our strength in any doubt, so we have no appetite
to drip feed increasing losses while this portfolio to the market over the next few years as the
crisis clears out.

For that reason, we have chosen to model our portfolio on a worst case scenario and that has the
affect of requiring us to ... increasing provisions by $830-million. Unfortunately, the behaviour of
the housing market in the US leads us to believe that the worst case scenario might not be too far
away from the most likely scenario.

ELEANOR HALL: That's the National Australia Bank Chief Executive John Stewart.

Brendan Trembath, how hard have NAB shares been hit?

BRENDAN TREMBATH: Very hard indeed. In morning trading, National Australia Bank stock fell the most
in seven years.

At one point the stock was down about 13 per cent. If you look at the stock over the last couple of
years, just last year the stock was trading above $40 a share, but in morning trading it was down
around $27.22 a share so a big slump indeed for National Australia Bank.

Just yesterday, banks were in favour, mining companies were out of favour. People were buying into
the big banks including National Australia Bank. Not today, many are pulling out of them.

ELEANOR HALL: Now you said that the bank CEO John Stewart spoke for more than an hour. Did he
explain how an Australian bank managed to get involved to this extent in the US mortgage crisis?

BRENDAN TREMBATH: Well, the bank had the best of intentions when it got involved in these
investments in the United States. They're complicated investment known as "collateralised debt
obligations" and essentially it involves packaging someone else's debt.

You can package anything. It could be a taxi driver's loan or it could be a housing loan and that's
what was happening here. Financial wizards, not so bright perhaps now, but they were packaging all
sorts of US mortgages including housing mortgages and the US housing market has slumped so that has
been grim news for these investment products.

But initially when National Australia Bank got involved in these products, they did have a very
high credit rating - the highest in fact, AAA, a bit like a school report card. A is very good but
AAA is the best of all, so it has all soured since then.

ELEANOR HALL: So could we now see other major banks coming out making similar provisions?

BRENDAN TREMBATH: It's difficult to say at this stage but this is a sign that one of the biggest
banks is taking its job seriously. It has to inform the market when it has to increase its
allowances for likely losses, so this means the bank is fronting up.

It is saying what is probably going to happen. It doesn't look optimistic about what is happening
in the United States but that has also affected the whole credit market.

The situation in the States is very important. The US is the biggest economy. It's a huge housing
market but because of the housing market going into downturn, that spreads to the rest of the world
and that's really contaminated credit markets internationally.

ELEANOR HALL: Brendan Trembath, thank you.

That's Brendan Trembath updating us on that announcement from the chief executive of NAB, John
Stewart.

Turnbull falls behind Nelson on emissions scheme

ELEANOR HALL: The Federal Opposition's front bench is falling into line behind leader Brendan
Nelson's tougher stance on an emissions trading scheme.

Earlier this week, Dr Nelson said the Coalition wouldn't accept a scheme that starts before 2011.

The Coalition's Treasury spokesman, Malcolm Turnbull, who has been advocating a 2012 launch, has
now abandoned that position, telling The World Today that that date applied to a Coalition
Government emissions trading scheme.

Meanwhile the electricity industry has been warning the Government that a 20 per cent cut to
emissions by 2020 would force the closure of several power stations and push power bills up by more
than 25 per cent.

In Canberra, Alexandra Kirk reports.

ALEXANDRA KIRK: The electricity industry's new modelling on an carbon trading scheme has found that
a 20 per cent cut in emissions by 2020 could trigger the closure of four out of five power plants
in Victoria's Latrobe Valley, both coal fired power stations in South Australia and one major plant
in New South Wales and Victoria.

Brad Page, the chief executive officer of the Energy Suppliers' Association, says that medium-term
target would take the carbon price to $55 a tonne.

BRAD PAGE: A cut of that magnitude in our sector would probably see about a quarter of Australia's
current electricity generation plant being retired, probably earlier than it otherwise would have
been.

ALEXANDRA KIRK: And what would happen to power bills?

BRAD PAGE: The modelling suggests that over the 10 years to 2020, power bills would rise in that
scenario by about 28 per cent on what they otherwise would be. Those plants are going to have to
close and be replaced with much lower emission plants.

That's not in contention, and the issue around providing some support in a transition sense to
those plants is not about making sure that they can run on forever. That would not allow you to
meet your emission reductions.

What it's about is making sure that the large scale debt that sits over a number of those plants as
well as the legitimate equity holdings of shareholders are recognised and the arbitrary loss in
wealth is recompensed.

Now exactly how much that is, is a matter of contention and something that, to be honest, companies
and to a lesser extent, associations, will need to talk to the Government about over the next
period before the White Paper.

ALEXANDRA KIRK: The Prime Minister has responded briefly.

KEVIN RUDD: We're already investing a half a billion dollars in our Clean Coal Initiative to assist
that industry.

Secondly, we have already indicated through the Carbon Pollution Reduction Scheme Green Paper that
we will also be providing some assistance through the electricity supply adjustment fund and of
course we will be in continued consultation with the industry.

ALEXANDRA KIRK: Any plan the Government had of negotiating with the Coalition to start emissions
trading in 2010 has faded further into the distance with a shift today by Shadow Treasurer Malcolm
Turnbull.

Brendan Nelson has toughened his stance, declaring this week his preference for carbon trading to
start in 2012, but declining to nominate a fixed start date and linking the scope of a scheme to
action by the world's biggest emitters: India, China and the United States.

Malcolm Turnbull supported the existing Coalition policy of Australia starting emissions trading by
2012, irrespective of what other countries do, but not any more. Today, he's fallen in behind his
leader.

MALCOLM TURNBULL: Well an emissions trading scheme shouldn't start until it is ready and until it
is in Australia's interest for it to start. Now the Government is definitely rushing this. 2010 is
far too soon.

Firstly we are quite convinced it cannot be made ready by then and secondly, we will not know what
the shape of international climate agreement is going to look like until, at the earliest, December
2009 at the Copenhagen meeting.

When we were in government, we had a start date of not later than 2012. That was our best estimate
at that time but we now have a new government, we're not talking about our emission trading scheme,
we are talking about Labor's.

ALEXANDRA KIRK: So are you in the camp in the Coalition which says that you shouldn't put up a
start date at this point?

MALCOLM TURNBULL: Well, you cannot put up a start date until you know what it is you are starting.

You see, Labor does not have a final proposal before us. They've got their Green Paper. We have got
to look at what they propose and then formulate our response to it. There are some vital inputs in
terms of international developments that we will not know about until the very end of 2009 at the
earliest.

Why would you want to be building an emissions trading scheme in the dark? We've got to know what
the US, the United States' new government is going to do, the new president. We've got to know what
the global international agreement is going to look like in Copenhagen.

ALEXANDRA KIRK: But if the other countries can't agree, should Australia still go ahead with an
emissions trading scheme?

MALCOLM TURNBULL: Well, let's wait and see what emerges next year. This is ... you see, this is why
it is important not to be rushing at this.

ALEXANDRA KIRK: Brendan Nelson has called his troops together next week to talk emissions and tax.
Dr Nelson wants to at least finalise the Opposition's climate change policy.

Some have suggested it's all tied to the leadership question and Peter Costello's plans. Mr
Costello is on holidays and will be overseas when the MPs congregate in Canberra.

ELEANOR HALL: Alexandra Kirk reporting.

Solar rebate inquiry

ELEANOR HALL: Opposition senators are furious with a decision by bureaucrats at the Federal
Environment Department not to co-operate with a hearing on solar energy.

The Senate Committee is inquiring into the Government's controversial Budget plan to means test
solar panel rebates.

Coalition and Greens senators say the withdrawal is disgraceful and contemptuous.

Jayne Margetts reports.

JAYNE MARGETTS: The Federal Government's Budget decision to means test the rebate for solar panels
has attracted criticism from the start.

Households earning more than $100,000 a year now miss out on the $8,000 rebate.

This morning the Senate Standing Committee on the Environment is holding its first hearings into
the impact of the means test.

Two officials from the Environment Department had been due to appear before the inquiry.

But Liberal Senator Simon Birmingham says they pulled out at the 11th hour.

SIMON BIRMINGHAM: Last night at 6.13pm, the Department advised the Committee that they were going
to be "no shows" and indeed an email tabled from the Department indicates that the Minister
instructed them not to appear before the Committee at this time.

JAYNE MARGETTS: Why has he done that in your opinion?

SIMON BIRMINGHAM: Well, the Minister clearly has either something to hide or the Government is
planning a backflip on this policy. Now I hope that it's the latter. The Opposition would welcome a
backflip from the Government on this policy. It's a policy that hurts both the economy and the
environment.

Small businesses around the country are feeling the pain and have seen many cancelled orders on
solar rebates to date, and of course those cancelled orders mean that offsets of carbon emissions
that could have happened are not happening because those systems aren't being installed.

So it is a double whammy for the economy and the environment, and I hope that the Minister has
pulled the pin on the Department appearing today - and contemptuous as that is of the Senate - I
hope that he has done so because he is planning a backflip or a back down.

JAYNE MARGETTS: He says the impact of the means test has been extreme.

SIMON BIRMINGHAM: We've just heard from industry operators telling us that they've seen some 72 per
cent reduction in the potential emissions that could have been saved since this means testing was
brought in.

JAYNE MARGETTS: The Treasurer has argued that it had to be means tested because the program is
full. What do you say to that?

SIMON BIRMINGHAM: Well the Government did absolutely no modelling it seems, before introducing this
means test, so it's not like they have tapered it. If you earn $101,000, you're out. If you earn
$99,000, you're in.

It is a foolish policy that clearly has been ill-considered. If it had to be means tested, they
should have modelled it. They should have asked the industry who would have told them that a level
more like $200,000 or $250,000 would have possibly been acceptable and even then they should have
tapered it off so that the effect wouldn't have been so dramatic.

JAYNE MARGETTS: The Greens Senator Christine Milne has also accused the Government of treating the
Senate Committee with contempt.

CHRISTINE MILNE: If what is going on here is an attempt to not appear today so the Minister can
make an announcement before the Committee reports, which would be a cynical view of the world, but
nevertheless one which I think is likely, I want it on the record that the Senate does not
appreciate being treated with contempt by this Minister.

JAYNE MARGETTS: Speaking to journalists at a tree planting event in Sydney, the Environment
Minister Peter Garrett said he hadn't finished looking at the data.

PETER GARRETT: We'll put a submission into the Senate Enquiry in due course and I think on the
basis of accurate information, once I've got it to hand and I'm confident that it's the best
information that we can take out to the public, then we'll produce that information and we'll take
if from there.

REPORTER: Would you leave open the option for changes to that rebate if it is hurting the industry?

PETER GARRETT: Well, I don't believe that the industry will have suffered as a consequence of our
action because this Government has produced more support for solar than any other government has.

We announced a billion dollars worth of measures in the Budget for energy efficiency, for solar,
for renewable energy, for families and schools to have the opportunity of putting solar devices and
water renewable and other necessary measures in place.

So once we have a final set of figures which I want to bring forward to the public, then we will
make additional decisions at that time.

ELEANOR HALL: That's the Federal Environment Minister Peter Garrett, ending that report by Jayne
Margetts.

Oil, gas and windfall

ELEANOR HALL: ExxonMobil and BHP Billiton have today announced a new oil and gas drilling project
in Bass Strait that they say will be a key step towards meeting eastern Australia's long-term
energy needs.

The consortium says the Turrum project will be able to provide enough energy to power a city of a
million people for 20 years.

At the same time in Victoria's north, a small community-owned wind farm project has moved a step
closer to completion.

Alison Caldwell has our report.

ALISON CALDWELL: It's no secret huge reserves of oil and gas exist underneath Bass Strait; the
question is how much.

The Turrum oil and gas field is 42 kilometres from the Victorian coastline, off Gippsland, and lies
in just 60 metres of water.

According to the consortium, it contains approximately one trillion cubic feet of natural gas and
110-million barrels of oil and gas liquids.

ExxonMobil and BHP Billiton say that's enough energy to power a city of a million people for 20
years.

The Energy and Resources Minister Martin Ferguson says it an important investment in Australia's
energy security.

MARTIN FERGUSON: Together with Kipper announced earlier this year, Turrum is just the start of what
I hope will be a new generation of oil and gas developments in the Bass Strait.

ALISON CALDWELL: Construction of the project is expected to begin in 2009. The consortium says oil
production should start in 2011 with first gas sales from 2015.

The chairman of ExxonMobil Australia, Mark Nolan, says the primary driver for the projects has been
the increase in the demand for gas. The investment is now more irresistible than ever.

MARK NOLAN: We've known about these fields for quite some time but their time has come because of
the growth in the need for their energy into the growing gas market.

ALISON CALDWELL: Natural gas produces up to 70 per cent fewer emissions than coal in power
generation and uses up to 80 per cent less water.

The World Today asked Mark Nolan what the carbon footprint of the new project will be; the answer
was less than precise.

MARK NOLAN: Bringing this gas into the energy mix has a very significant environmental benefit.
It's up to 70 per cent less greenhouse gas emissions and some of the current coal projects and has
environmental benefits including very much reduced water in power generation.

So we see these projects as a very big step forward in terms of environmental benefits.

ALISON CALDWELL: Not surprisingly the Brumby Government is thrilled with the announcement. It's
been criticised for recently unveiling another brown coal fired power station for the Latrobe
Valley.

North-west of Melbourne though, a regional community is taking the issue of climate change into
their own hands with a community-owned wind farm near Daylesford.

Today Hepburn Wind launched its share offer. Chairman, Simon Holmes a Court, says state and federal
governments need to do more to encourage the growth of renewable energy sources.

SIMON HOLMES A COURT: I'm really disappointed that the Government is pushing this notion of clean
coal. I think anyone who has looked into it realises that it's a complete misnomer. There is no
such thing as clean coal.

Clean coal is only washing brown coal to end up being as clean as black coal and everyone knows
there is nothing clean about black coal, but it is encouraging to see the Government push renewable
energy and to push gas fired plants.

On the renewable energy front, the Government is giving $1-million towards our project. It's a
great start but we would like them to put a much bigger emphasis on renewable energy and start
moving away, start moving Australia towards a post-fossil fuel economy.

ALISON CALDWELL: You wouldn't say, would you, that wind power could provide baseload power for
Australia, would you?

SIMON HOLMES A COURT: Australia uses, at the moment, only one per cent of Australia's power supply
comes from wind power. In countries like Denmark and Germany, up to 16 or 17 per cent of that power
comes from wind so we've a long way to go before we can really say that wind power is making a
meaningful contribution to our grid.

At the moment wind power is the low hanging fruit. We can get a lot more out of it and we are
really looking towards the Government to give the industry support and underpin it with strong
emissions targets.

ALISON CALDWELL: The Opposition's environment spokesman, Greg Hunt, says community wind farms are a
good idea.

GREG HUNT: I think the concept of a community-owned wind farm is a very important one. There are
two elements with wind farms. One is, firstly is it a good environmental outcome, and generally I
think it is as a way of producing energy which is acceptable and desirable.

Secondly, from a planning and community perspective, does it intrude upon the landscape and the
community and a community-owned wind farm goes a long way towards dealing with that.

You still have to make judgements on each individual farm in the context of the landscape but the
failure to date has been community exclusion. And unless you have community support, you're not
going to have an advance of this concept around Australia.

ELEANOR HALL: And that's the Federal Opposition's environment spokesman, Greg Hunt, ending Alison
Caldwell report.

US Secretary Of State in Perth

ELEANOR HALL: Now to the curious personal visit to Australia by the US Secretary of State,
Condoleezza Rice.

Dr Rice has been speaking to an assembly of girls at a Catholic school in Perth this morning as
part of her whirlwind trip to the western capital.

Secretary Rice was invited to Perth by Foreign Affairs Minister Stephen Smith.

David Weber, our reporter, is in Perth and joins us now.

So David, are we any clearer on just why Ms Rice was so keen to come to Australia right now?

DAVID WEBER: Well Eleanor, basically she is here at the invitation of Stephen Smith and she said as
much today at the Catholic school that we were at this morning.

Now it has been a bit of a family affair for Stephen Smith. This morning he had coffee with
Condoleezza Rice at a Mount Lawley cafe and introduced her to his parents and his son, Hugo.

And of course his daughter Madeline is a student at the Mercedes Catholic Girls School, the collage
that we were at this morning where Condoleezza Rice made a short speech before she answered
questions.

ELEANOR HALL: So what sort of questions was she asked by the schoolgirls?

DAVID WEBER: Well, she was asked about her job. What kind of ... what is it that does everyday, and
she sort of went through her itinerary. She was asked what her main challenges in her job and she
said that she had no particular challenges any more simply because she is black and female, but
there are still prejudices against minorities and she made the point to the girls, don't let them
underestimate you.

She was asked when do you get to go shopping. She said that she loves shopping. She has always
loved it. She almost has no time to shop now though and her friends tend to do it for her.

She was asked where does she go on vacation. She said she likes to go to music camps to play Brahms
who is her favourite composer and she prefers mountain locations where they have these chamber
music camps that you can go and ... brush up on her piano.

She was also asked about her boss, of course President George W. Bush. She said that he has the
same sense of humour as her and that's important because it's good to be able to laugh in certain
situations.

She said that he believed strongly in certain principles which is important because power can be
corrupting if you don't know what it is you're trying to do.

And she also said that George Bush has friends still from when he was in grade school and she said
that that's important because as you get older, if you find you don't have any friends from all
areas of your life, particularly the early part of your life, there's something wrong.

Stephen Smith was asked from the floor if he had any advice to women wanting to go into politics
and he said do something else first.

There were a couple of questions there for Stephen Smith and he answered and then Condoleezza Rice
tended to put something on the back of what he said.

ELEANOR HALL: And David, how long is Condoleezza Rice expected to stay in Australia?

DAVID WEBER: She is only in Perth for a few more hours and then she flies to New Zealand for some
bilateral meetings. It has been a whirlwind visit. She is cramming a lot into this visit.

At the moment we are at Kings Park in Perth. We're waiting for her to come back from Swanbourne
Barracks, the SAS barracks where she is going to. We'll find out what she has actually done down
there when she comes to Kings Park.

She will be laying a wreath at a war memorial here in Kings Park. Then there'll be a press
conference and then she basically gets on the plane.

ELEANOR HALL: David Weber in Perth, thank you.

Threat to arrest Rice in NZ

ELEANOR HALL: The next stop for Condoleezza Rice is New Zealand. The Government there opposed the
US-led war in Iraq, but Ms Rice will be welcomed by the Prime Minister Helen Clark.

Large protests are planned though with organisers labelling Ms Rice a "war criminal" for her role
in sending coalition troops into Iraq. And the student union at one university is even offering a
reward for anyone who gets close enough to make a citizen's arrest.

From Auckland, New Zealand correspondent, Kerri Ritchie, reports.

KERRI RITCHIE: Condoleezza Rice is due to fly into Auckland late tonight.

It will be her first visit to New Zealand and she'll receive a Powhiri at Government House
tomorrow, which is a traditional Maori welcome ceremony.

But some New Zealanders - fiercely opposed to the Iraq War - say she's not welcome at all.

David Do is the president of Auckland University's Student Association:

DAVID DO: Well we're seeking the arrest of Condoleezza Rice when she visits Auckland this weekend.
We're offering any Auckland university student a $5,000 reward if they are able to make a
successful citizen's arrest of the Secretary of State.

KERRI RITCHIE: So this $5,000, this is serious, David?

DAVID DO: Yes, our executive moved the motion so we are keeping to our word. Admittedly the
likelihood of a successful arrest is probably very low. Generally when US officials visit overseas,
they are quite heavily shielded from the general public.

KERRI RITCHIE: There'd be a lot of people, David saying that this is an irresponsible thing to
encourage people to do?

DAVID DO: I disagree. I don't think ... I mean the main thrust of what we are doing is symbolic in
its attempt. It's a statement of strong feelings that many students and many people have against
the action that the US has undertaken and with some of their conduct in the war in this so-called
war on terrorism.

KERRI RITCHIE: Police in Auckland aren't impressed. They're demanding that the student union
abandon the idea, before it gets out of hand.

Police say there will be serious consequences for anyone who poses a security threat.

John Minto is spokesman for the group, Global Peace and Justice. He says police should prepare for
large protests in Auckland tomorrow.

JOHN MINTO: Well Condoleezza Rice is a war criminal. She is the soft face for some appalling
policies that the US has followed over the past six or seven years that she has been in her
Secretary of State role and also her role as National Security Advisor.

KERRI RITCHIE: What will it involve tomorrow, the protest?

JOHN MINTO: Well, it will involve quite a number of people in orange boiler suits. It will be a
noisy, vocal protest. It will be aiming to get as close to Condoleezza Rice as possible. It will be
aiming to brand her as the war criminal she is and to call on New Zealand troops and US troops to
be pulled out of Iraq and Afghanistan.

KERRI RITCHIE: The political activist says he's disappointed Helen Clark is meeting with
Condoleezza Rice.

JOHN MINTO: Our government has been trying to get a free trade deal with the US for a long time,
and our government overlooks all kinds of appalling human rights situations in the hope of gaining
free trade agreements.

KERRI RITCHIE: Along with trade, Ms Rice and Miss Clark are expected to discuss Afghanistan and the
political situation in Fiji.

Condoleezza Rice will then fly to Samoa.

John Minto says given the chance, he would have no hesitation in carrying out a citizen's arrest on
Condoleezza Rice.

JOHN MINTO: If we got close enough to her, we certainly would. We'd arrest her and we would take
her to the police station and we would demand that they charge her with war crimes.

We don't want her here. We don't believe New Zealand Government should be welcoming her at all and
yeah, if we do get out hands on her, we will march her straight to the police station.

ELEANOR HALL: That's spokesman for Global Peace and Justice, John Minto, ending New Zealand
correspondent, Kerrie Ritchie's report.

Did Mladic blow the whistle on Karadzic?

ELEANOR HALL: War crimes suspect, Radovan Karadzic is awaiting extradition to The Hague but there's
still plenty of intrigue about how the former Bosnian Serb leader was captured.

There are conflicting reports about when authorities took him into custody and how long they'd
known about his secret life in Belgrade.

And now British newspapers are reporting a new twist on his arrest. They say it was the result of a
tip-off by his former military commander, and now the most wanted man in the Balkans, Ratko Mladic.

Simon Santow has our report.

SIMON SANTOW: With Radovan Karadzic now beardless and shorn of his flowing locks, attention is
turning to just how authorities uncovered his secret life in Belgrade.

German intelligence sources have reportedly unlocked the mystery of who informed on the one time
Bosnian Serb leader.

They've told journalists it was none other than Ratko Mladic, the Serb General co-accused with
Karadzic of committing war crimes and genocide in Bosnia Herzegovina in the 1990s.

Perhaps the most intriguing aspect of the information is that Mladic is still on the run.

Political analyst, Bratislav Grubacic:

BRATISLAV GRUBACIC: I do think that we are facing now a lot of rumours which are circling around
local journalists, diplomatic and political community simply because the problem is that since Mr
Karadzic was arrested, our officials didn't give us complete information on how it really happened.

We really do not know who arrested him, how it happened, who denounced him, how police or security
forces got to know where he was.

I do think that this speculation on Mladic betraying Karadzic is absolutely not true because of the
sheer fact that Mladic doesn't have any interest to do it and it is hard to believe that Mladic can
count that he will be safe if he denounce Karadzic.

SIMON SANTOW: Aleksander Pavkovic lectures in politics at Sydney's Macquarie University.

He says it sounds like a tactic by Serbian authorities to flush Mladic out of hiding.

ALEKSANDER PAVKOVIC: I think that this is news put out a variety sort of official sources in order
to provoke Mladic into defending himself and therefore revealing his whereabouts.

It is very unlikely that he would have any reason to betray Karadzic at this stage. They were
working together and they had their differences during the war, in fact they had a fall-out as
well, but it's unlikely that he would have any particular reason and any benefit from dobbing him
in at the moment.

SIMON SANTOW: Why do you say that?

ALEKSANDER PAVKOVIC: Because he can't gain anything from this kind of action. The speculation is
that he has been negotiating about the conditions for his ... giving himself over. He allegedly was
trying to prevent his extradition to The Hague tribunal.

He probably knows that he can't - if he is arrested and found out - he won't be able to stop any
extradition proceedings, that he would be the greatest prize after Karadzic and therefore would be
delivered to The Hague.

SIMON SANTOW: Bratislav Grubacic thinks General Mladic is a long way from being brought to justice.

BRATISLAV GRUBACIC: I do think that in that respect, Mr Mladic is really in a proper hiding
together with his wife, and I think it would be much more complicated to get hold of him or to get
to know where is he.

On the other hand, I think Mr Mladic is logistically supported by certain circles, probably retired
military intelligence people.

So far all the attempts to locate Mr Mladic failed, so I do think that it's not really quite clear
and I'm not sure that many people know where Mladic is. It is possible, it's not excluded, maybe he
live 100 metres away from Mr Karadzic.

ELEANOR HALL: That is political analyst, Bratislav Grubacic, ending that report from Simon Santow.

Impacts of Asian inflation

ELEANOR HALL: This week's inflation figures confirmed that the cost of living is rising for
Australians.

But buried in the detail was an indicator that things may be about to get a lot worse.

That was the news that prices are rising in categories where they're traditionally stable or even
falling - those categories like clothing and furniture, where many products are imported from
China.

So is Australia about to be hit by imported inflation from Asia?

I put that to economist Richard Martin, from IMA Asia, who said that the world economy has
benefited from cheap Chinese imports for the last decade and that that era is ending.

RICHARD MARTIN: China had a fairly strong upward push on the cost of manufactured goods going on
for well over a year now and what they're doing is passing through the much higher prices they're
paying for commodities, for coal, for oil, for copper and all of that, and it has been a big
discussions between the manufacturers in China and the buyers from China.

ELEANOR HALL: So will we see a trend now to increasing rather than decreasing prices for goods
imported from China?

RICHARD MARTIN: Where you'll really see it in Australia is when our currency starts to move in
opposite directions. We have been shielded from it a bit over the last 18 months when the China
price has been going up because the $A has been going up and that means that consumers here in
Australia really haven't seen the impact of it.

By contrast, in America, they really have seen the impact and there the prices have gone up
significantly and people are noticing it.

When the $A no longer rises with China's currency, you will start to see the prices move up quite
quickly.

Now we don't think that is about to happen this year but it could be a big factor in 2009.

ELEANOR HALL: But does that essentially mean that Australia will be importing inflation from Asia?

RICHARD MARTIN: Everyone is importing inflation from everywhere right now. You're importing
inflation the moment you buy fuel from the refineries in Singapore or you buy pick up trucks from
Thailand.

There is inflation pretty much everywhere in the world. It is hard to pin it down to one country
though you might well say if you walked around the average supermarket or department store in
Australia, a significant portion of those goods, of their textiles, clothing, footwear,
electronics, so they're coming back to the buyers who come from Australia and the States and Europe
and saying guys, we've kept the price as low as we could for the last three or four years but it
has to move up now.

Will that have an impact on inflation here? As you said, we'll see a bit of it coming through on
the CPI but I wouldn't want to overplay it. It's not going to be such a big factor this year.

ELEANOR HALL: How much of a problem is inflation in Asia?

RICHARD MARTIN: In Asia, if we move outside of China, it is a problem. Right across Asia central
banks have kept their interest rates as low as possible but by doing that, and they've done it too
long in Asia, the central banks have done it too long.

They are now running negative real interest rates. That is, the inflation rate has gone up above
the policy rate for the central bank and that's a stimulant to inflation in the economy which they
don't need.

So right across Asia in the third quarter, we're expecting central banks to be edging up their
interest rates and the big question is, will that, will we see Asia just run into a brick wall in
the third quarter if that goes on.

ELEANOR HALL: How much has the Australian economy benefited from the downward pressure on inflation
from Asian imports and how much of a shock would it be if that goes?

RICHARD MARTIN: Well, you're right to say we've benefited from it and that has been a story
worldwide. That economists, central bankers and even Government people have talked about.

In the last decade, in the West, we have had pretty low inflation. A large part of that is due to
some very astute management by the central banks and the absence of second round inflation in wage
breakouts.

But one of the factors in there has undoubtably been this just flow of goods out of Asia with flat
prices year after year after year, more features and in some cases, decreasing prices and that has
been a great benefit to the global economy.

Asia will be moving its production price up now. China will lead. The others will follow and it
means that the benefits that we got from that wonderful dynamic over the last decade, fades a
little bit.

Central bankers will watch this very keenly because they don't want to see this lead to another
upward push in inflation and it might mean that they keep their interest rates a bit higher going
through the next year as this process unfolds.

The thing that everyone watches for now apart from this price push from China is will we get a
second round outbreak of inflation where it feeds through into wage demand.

And again here, you know, Australia is pretty sophisticated on this. We have been working with
keeping wage increases in line with the capacity of the economy now for about a decade.

I don't think you'll see the union movement nor a Federal Labor Government break that down so we
should go through ok.

You wouldn't want to overplay it. As I said a few moments ago though, the key on this imported
inflation is when the $A stops rising. You know, we might go through parity with the US dollar but
when we fall back, that's when we will really notice the higher cost from China.

ELEANOR HALL: And that's Richard Martin, the managing director of IMA Asia.

Open warfare between Queensland Liberals

ELEANOR HALL: Queensland conservatives are at war with each other today, with senior Liberals
threatening to walk away from the Party, and even take legal action.

The brawl was ignited by a decision to delay tomorrow's planned vote on the merger with the
Nationals.

Federal and state Liberal powerbrokers, including Mal Brough, argue the merged entity would be
abandoned by the national Liberal Party. But others say opponents of the plan are acting purely out
of self-interest.

In Brisbane, Annie Guest reports.

ANNIE GUEST: It is a spectacular meltdown, even by the standards of the often troubled Queensland
Liberals.

PARTY MEMBER: He is an absolute disgrace.

PARTY MEMBER 2: He is a megalomaniac his ego ... he thinks his ego is bigger than anything. This is a
disgrace and all of his minions can go to hell because we're going to move on without them.

PARTY MEMBER 3: Cut the heart and the soul out of the people of Queensland that want us to be an
alternative government.

ANNIE GUEST: Emerging from a fiery Liberal state council meeting, Party members vented their anger
at their president, Mal Brough.

The Council voted 26-21 to delay tomorrow's convention, where the Party's future with the Nationals
was to be decided.

Even the Federal Liberal leader Brendan Nelson is embroiled in the dispute.

He helped sway the vote for a delay by changing his proxy from a supporter to an opponent of the
current plan, Senator George Brandis.

The State Parliamentary Liberal leader, Mark McArdle, says it could go to court.

MARK MCARDLE: Legal action is being instituted this morning in relation to last night's
determination.

ANNIE GUEST: He says Liberals have been denied their right to vote on the proposed merger.

And Mark McArdle is suggesting he'll make good on his threat to walk away from the parliamentary
Liberal leadership and the Party to join the new conservative force.

MARK MCARDLE: We are having a party room meeting. I'm talking to my family and seeking counsel of
my friends.

ANNIE GUEST: Regardless, Queensland's Parliamentary Liberal leader says he will attend tomorrow's
convention, in open defiance of his state and federal party presidents.

And Australia's most senior Liberal office holder, the Brisbane Lord Mayor Campbell Newman is
urging fellow Liberals join Mark McArdle.

CAMPBELL NEWMAN: I'm saying to people, if you want to make this happen, either show up and at least
have your say.

ANNIE GUEST: So what's the problem?

After a tumultuous journey to the altar, it seemed the Queensland Liberals and Nationals were ready
to marry.

The Queensland Liberal Party President and former Indigenous Affairs Minister Mal Brough ruled
himself out as a presidential candidate for the new party two days ago.

Political analysts then believed the sticking point of having a Liberal president had been removed.
But as The World Today reported yesterday, there could yet be another twist.

And Mal Brough, along with some other state and federal powerbrokers, have pulled it off.

MAL BROUGH: In the event that Queensland Liberals on Saturday had voted to merge on the basis that
it had been put to them previously, then we would never have become a division of the Federal
Liberal Party. We would have been a pineapple party.

That is totally unacceptable to me and it's unacceptable to the major of the Queensland members.

ANNIE GUEST: Can I ask you Mal Brough, beyond the actual presidency, in terms of the Constitution,
can you briefly outline some of those sticking points?

MAL BROUGH: This new Constitution invests a lot of power which we are not used to having in the
Liberal Party in the president and that made people very uncomfortable.

The president's committee made people uncomfortable. It is not something that we have now. The
zonal system and the way in fact it was slanted to support the National Party was also a sticking
point. There was a range of other issues.

ANNIE GUEST: But others, including the former Federal Liberal President and Queensland
Vice-President, Professor Ashley Goldsworthy, believe it's all about self-interest.

ASHLEY GOLDSWORTHY: The wishes of the members are being subordinated to the wishes of a few
so-called leaders who are pursuing an agenda.

ANNIE GUEST: Another senior Liberal has told The World Today, it's primarily about pre-selection,
with Mal Brough wanting another Federal seat and people like Senator George Brandis concerned, he
would eventually slip down the Senate ticket.

The planned merger would give current sitting members first dibs on their seat, known as
"grandfathering". Mal Brough rejects the accusations.

MAL BROUGH: It is unmitigated rubbish. I have no self-interest. I don't get paid for what I do. I
am doing 12, 14, 16 hours a day to try and get a merged party which is actually going to be viable
in Queensland.

The reason I took on the position of a Queensland Liberal President is because I wanted to try and
help us to be more viable, more relevant and more electable.

ANNIE GUEST: Mal Brough will address a party room meeting of the eight state Liberal MPs this
afternoon.

ELEANOR HALL: Annie Guest in Brisbane with that report.

IOC bans Iraq from Beijing Games

ELEANOR HALL: Iraq's Olympic dream has been dashed even before the summer games in Beijing have
begun.

The International Olympics Committee has banned the Iraq's Olympic team from competing because of
what it calls political interference by the Iraqi Government.

In May, the Government in Baghdad sacked Iraq's Olympic Committee and replaced it with its own
officials. Under the IOC charter, all committees must be free of political interference.

But as Jennifer Macey reports, it's a bitter blow to Iraq's seven athletes.

JENNIFER MACEY: Iraq's Olympic team is small - consisting of a mere seven athletes in rowing,
weightlifting, athletics, judo and archery. But now they won't be allowed to compete in Beijing
under a new ruling by the International Olympic Committee.

The IOC's Director of Communications, Giselle Davis, says the team has been banned due to political
interference by the Iraqi Government.

GISELLE DAVIS: It's not the IOC who's banned the athletes. It's the actions of the Iraqi government
that very tragically have ill-served the athletes of their country.

JENNIFER MACEY: In May, the Iraqi government sacked the National Olympic Committee and the National
Sport Federation. Iraq was told to reinstate the committees or face an Olympic ban.

The IOC's Giselle Davis says Iraq had now missed its deadline.

GISELLE DAVIS: We've extended a hand to the Iraqi officials to try and find a solution to this.
We've invited them to come to the table and discuss with us and sadly there's been no constructive
signal from their side.

JENNIFER MACEY: Iraqi sports officials have described this as a black day.

The general secretary of Iraq's Olympic Committee Hussein al-Amidi says the athletes are bitterly
disappointed.

HUSSEIN AL-AMIDI (translated): The rowers are in Baghdad now. They are scheduled to leave in a week
to join a training camp in Turkey and from there they are scheduled to travel to Beijing.

They are now in a desperate condition because as you know this decision has put an end to their
hopes.

JENNIFER MACEY: Iraq only managed to qualify for rowing with help from the International Rowing
Federation and support from countries such as Australia.

The High Performance Director for Rowing Australia, Noel Donaldson, says it's a shame that the
Iraqi crews won't be able to compete on the world stage.

NOEL DONALDSON: Following the trials of the Australian team in many years when there's been an
Olympic boycotts and the like. It's always disappointing when the athletes in the end may not be
able to choose to go and compete so I'm sure that they'll be absolutely shattered.

JENNIFER MACEY: But the Iraqi government says it did the right thing in sacking its Olympic
Committee, calling it illegitimate.

It argues that the committee held meetings without quorums, failed to hold timely elections and
says most of its members live overseas.

Ali Al-Hilli, the secretary of the Australian Iraqi Forum, says he's sad he now won't be able to
cheer for an Iraqi team, but he believes the government was right to sack the committee.

ALI AL-HILLI: The committee is the same old committee from the Saddam era. They have distanced
themselves from the change, the new government. They have based themselves in neighbouring
countries. They have no allegiance to the country.

JENNIFER MACEY: And he accuses the IOC of double standards.

ALI AL-HILLI: Why didn't this happen when Saddam was actually in power?

He had some torture chambers in Iraq where sportsmen were actually mistreated. They were beaten up.
If they lose for example a soccer match, then I don't see anyone interfering in their decisions.
Why is this happening now?

JENNIFER MACEY: Iraq isn't the first country to be banned from the Olympics. Afghanistan missed the
2000 Games in Sydney because the Taliban would not allow female athletes to compete.

And South Africa was suspended for 28 years due to the apartheid regime.

Former Olympic swimmer Lisa Forrest defied the Australian Government's boycott of the 1980 Moscow
Games. She says the IOC is very strict about the National Olympic Committee's being free from
political interference.

LISA FORREST: Now South Africa was not banned from Olympic competition because the government had a
policy of apartheid. South Africa was banned because the National Olympic Committee of South Africa
went along with the policies of apartheid that the government set up and didn't act independently.

So the National Olympic Committee didn't allow mixed races to play games or play sport and that's
why they were banned.

JENNIFER MACEY: But she says it is always the athletes who suffer from these type of political
decisions.

LISA FORREST: The recent talks of a boycott of Beijing, everything that's been going on in Tibet,
all of that sort of stuff affects an athlete.

But, you know, this is also an organisation, the International Olympic Committee who is running
finals for the swimming at nine am to fit in with international broadcast rights so sometimes you
do question whether the IOC is actually looking after the athletes. (laughs)

JENNIFER MACEY: The IOC has left one door open to Iraq; suggesting that if the Government is
willing to restart talks with the international body within a week, the athletes may recover their
places before the Games start in August.

ELEANOR HALL: Jennifer Macey with that report.

Rare art from Vanuatu

ELEANOR HALL: A rare art collection from a remote island in Vanuatu is creating a buzz in the art
world.

The pieces which include wooden figures, masks and a four metre wooden drum, have never before been
seen outside the Pacific nation and already the Australian Museum and the National Gallery are
prepared to pay big money for them.

Annandale Galleries' curator, David Baker, has been speaking to Jesse Leary about the collection.

DAVID BAKER: It is stunning art and it is from a culturally sound area but when you look at it, it
is contemporary art and so it is unique in that respect.

And I would say up to 40 pieces are examples of an art called temar (phonetic) that really has
never been seen outside of that area at all and we've studied the books from the museums and art
galleries of the world and we can only see one example of a piece that looks a little bit like it
in the British Museum, but nothing in major European museums or American museums.

It's the first time it has come out for an exhibition which is an international exhibition here in
Sydney.

JESSE LEARY: These works are traditionally hidden from the outside world. Why is that and why have
they become available now?

DAVID BAKER: The art has been hidden because it has been a secret and sacred society but, you know,
with the development of Western culture in Vanuatu, the high chief recognised that unless they
involve the younger people in the custom and culture, it will die in one or two generations from
now and the way of doing that is involving the younger people and then showing the world what the
people do believe and have created.

JESSE LEARY: What do you think will happen to the art after the exhibition finishes? Have there
been offers from other galleries?

DAVID BAKER: A number of pieces have been secured by the National Gallery in Canberra. The National
Gallery of Victoria there is, I believe, 10 pieces there. 10 pieces have gone to the Queensland Art
Gallery. The museum here in Sydney, the Australian Museum has plans to acquire a number of pieces
so there'll be on an exhibition around Australia.

They are major international pieces, so they will have an important part in their collections.

ELEANOR HALL: David Baker is from Sydney's Annandale Galleries and he was speaking to Jesse Leary
about that unusual art collection from Vanuatu.