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Shares surge on hope credit markets will thaw

Shares surge on hope credit markets will thaw

The World Today - Monday, 13 October , 2008 12:10:00

Reporter: Peter Ryan

ELEANOR HALL: The Australian share market surged this morning, apparently encouraged that the
overnight unity from European leaders might be enough to thaw frozen financial markets.

The All Ordinaries Index was up more than five per cent in early trade, recovering part of last
week's 16 per cent plunge.

In Europe the leaders of fifteen EU countries agreed on a plan to prevent more banks from
collapsing under the weight of the credit crisis and we'll have more detail on that in a moment.

But first this report from business editor, Peter Ryan.

PETER RYAN: After a weekend of talks about talks, photo opportunities and finally a unified
resolution from EU countries, there a signs that the global financial crisis might be nearing a
mid-point or even the beginning of the end.

The Government's move to guarantee all deposits in banks, building societies and credit unions
didn't hurt either and as a result some investors were brave enough to jump back into market.

SAVANTH SEBASTIAN: Well it certainly is a positive mood this morning and the buying has been across
the board.

PETER RYAN: CommSec equities economist Savanth Sebastian saw the All Ordinaries Index surge more
than five per cent in morning trade as investors pounced on bargains, including stocks outside the
safe and defensive variety.

SAVANTH SEBASTIAN: We've got property trusts up 10 per cent. Financials up eight per cent. The
resources sector is seeing some strength as well, up 5.5 per cent and the energy sector up 3.5.

There really hasn't been a change to fundamentals. There really hasn't been too much over the last
few days that have really given an impetus to markets; it's just a matter of glimmer of hope at the
moment.

PETER RYAN: It seems hope is the only guide after last week's losses saw the Australian share
market lose 16 per cent of its value.

But Oliver Stevens, head of dealing at IG Markets, says investors are grabbing any optimism with
both hands.

OLIVER STEVENS: People have been waiting to try and get a co-ordinated response from governments.
There is a lot of fear in the market that we've gone down so much, so quickly. People are very
worried.

We are also seeing large redemptions in a lot of funds which is forcing those funds to have to sell
equity which is why we fell quite so much last week. It does seem to be forced selling from a lot
of funds that is pushing this market down so far so fast.

PETER RYAN: The Dow Jones Industrial Average is expected to open around 260 points higher tonight
based on the latest hopes.

But all eyes will be on the key London interbank rate and whether the assurances will encourage
banks to get over their fear of lending to each other.

Oliver Stevens again:

OLIVER STEVENS: We are still at the levels that we saw on Wednesday and Thursday. So, we are not
going to get any indication until we get those levels which normally come out around about 10pm
Australian time for the London fix so that will be a key indicator and this evening to see if that
interbank lending rate has unfrozen.

PETER RYAN: And it would only have to come down slightly to show that the sentiment or the fear is
easing.

OLIVER STEVENS: Exactly. Any improvement is going to be very welcome. I mean we are at levels that
are sort of two per cent above the norm. So there is a long way to come down, but if we do start to
come down, hopefully that will provide the encouragement to the market that what these governments
are doing, is having an effect.

PETER RYAN: A big feature of the credit crisis has been the lack of unity and leadership between
the United States and Europe, and until today, within the EU states.

That's something that needs to change quickly, according to Fariborz Moshirian, Professor of
Finance at the University of New South Wales.

FARIBORZ MOSHIRIAN: We are going to see positive steps in the direction of restoring confidence,
trust and liquidity; we should welcome that. But that shouldn't stop us to look at our
international financial architecture, try to make sure that the underlying factors which led us to
the current financial crisis will not occur or at least will be very slow to occur again.

PETER RYAN: But Professor Moshirian wants more than unity - he wants to see a single central bank
governing the world.

FARIBORZ MOSHIRIAN: European experience is a wonderful witness for us. Look at 27 countries. They
have got one central bank. Look at United States where they emerge in 1913 with the Federal Reserve
and in Asia we talk about now Asian Union where we are pushing basically for more integration in
Asia.

I would say in 21st century, we are going to see regionalism and gradually the emergence of one
single global governance.

PETER RYAN: Do you think that nations around the world would be able to put borders and politics
aside enough to allow a single central bank to operate?

FARIBORZ MOSHIRIAN: Well, this is a good question because during the Civil War in the United States
that had the same debate. What we have seen in history, when we are facing with crisis, nations and
people are willing to work together, more in harmony.

PETER RYAN: But for now investors are worrying about today rather than the future although
CommSec's Savanth Sebastian warns today's rally might be short-lived.

SAVANTH SEBASTIAN: We've seen this happen before and we have seen the market continue to fall on
subsequent days; so you would have to be very careful moving into the market in what sort of time
frame you are looking at.

If it is a shorter term view, you are likely that you are going to get burnt in this sort of
environment.

So you would really need to have a focus which is a longer term perspective.

ELEANOR HALL: That is economist Savanth Sebastian from CommSec ending that report from business
editor Peter Ryan.

Govt considers spending surplus to stimulate economy

Govt considers spending surplus to stimulate economy

The World Today - Monday, 13 October , 2008 12:15:00

Reporter: Alexandra Kirk

ELEANOR HALL: The Australian Government's plans to deal with what it is calling the economic
equivalent of a "rolling national security crisis" has received backing from all federal political
parties.

But Greens leader Bob Brown says now that the taxpayers are backing the banks, the payouts for bank
executives should be trimmed.

And the pressure is also on the Federal Government to boost pensions.

The Opposition has seized on the Australia Institute's suggestion that the Commonwealth could start
injecting tens of millions of dollars into the economy immediately by increasing the pension rate.

And the Government has confirmed that it is looking at dipping into the budget surplus to stimulate
the economy.

In Canberra, Alexandra Kirk reports.

ALEXANDRA KIRK: Legislation backing Kevin Rudd's guarantee of all savings deposits and securing
banks' access to credit is expected to be introduced into Parliament this week, though the
Government says the measures to boost market confidence take effect immediately.

Bipartisanship has kicked in. The Prime Minister says the latest move is in response to a "new and
dangerous phase" in the global financial crisis. Opposition leader Malcolm Turnbull agrees.

MALCOLM TURNBULL: So there are tough and challenging times ahead.

ALEXANDRA KIRK: The Opposition's pledging its support for the package, with some, such as
frontbencher Tony Abbott, taking some of the credit for the Coalition.

TONY ABBOTT: He certainly seems to have listened to Malcolm Turnbull's advice and I think that is
smart.

MALCOLM TURNBULL: We will provide support for the early passage of necessary legislation through
the Parliament.

ALEXANDRA KIRK: The Government hopes the dramatic loss of confidence by investors world-wide will
now be restored by the action of governments around the world, including Australia. MPs arriving in
Canberra for a fortnight of parliament are keen to offer assurance and engender some optimism.

CRAIG THOMSON: What we are saying is that we are a government that is going to take decisive
action.

SHARON BIRD: I was talking to my hairdresser the other day and you know, she was saying business is
down. That is what the local small businesses are saying; it is not as busy. They are not
anticipating a Christmas as good as they may have been doing, that is true.

But I think everyone is conscious that we are actually travelling quite well. They know the
international news. It is all over our news now and so I think whatever the Government can do to
instil that confidence and keep people feeling positive is important.

ALEXANDRA KIRK: Greens leader Bob Brown says there should be a quid quo pro for the guarantees
underwritten by taxpayers, when it comes to bank executives' payouts and rewards.

BOB BROWN: And the Greens will be looking at this legislation to see if we can't sensibly clip the
wings of some of those fly-out-the-door payments to the CEO's of these banks which are now being
guaranteed by the Australian taxpayer.

ALEXANDRA KIRK: The Government's indicated it will fast-track spending to stimulate the economy -
dipping into the budget surplus. Finance Minister Lindsay Tanner:

LINDSAY TANNER: The possibility that we will take action to increase spending to keep economic
activity ticking over and to ensure that growth continues and that we will do that sooner rather
than later is an option that is open to us.

We are considering all of these possibilities right now.

ALEXANDRA KIRK: There's no word yet on how much the Government's planning to spend, where, and if
it's willing to send the budget into deficit if that's what's needed to avert a recession.

An immediate boost to pensions is the best way to stimulate the economy, according to the Australia
Institute. Executive director Dr Richard Denniss says a $30 a week increase for single pensioners
would immediately inject $1.5-billion into the economy.

RICHARD DENNISS: Directly putting some money into the lowest income earners in Australia's pockets
is a great way to stimulate demand. Unlike large infrastructure projects, increasing the pension
means that we get money out into the economy quickly.

But most importantly, we don't put it all into the one area where we build a bridge or we build a
port. We are putting money into all the small shops in all the communities in and around the
country.

ALEXANDRA KIRK: Dr Denniss estimates 85 to 90 per cent of pensioners' money is spent on the
domestic economy. He says it's time to at least come up with an interim pension increase now.

RICHARD DENNISS: If they get a bigger pay rise in six months' time thanks to the enquiry, then
there will be no harm done but everyone thinks the pension should go up. Even if it only goes up
half the way at the moment, it will get the money into the economy now and we can quibble about the
exact increase over time.

ALEXANDRA KIRK: The Finance Minister won't say if that's what the Government is considering.

LINDSAY TANNER: There is a wide variety of possibilities available to the Government. All of these
things will be under consideration and already are under active consideration.

ALEXANDRA KIRK: Malcolm Turnbull is urging the Government to spend up on pensions. He says the
budget surplus is there for tough times, to be used judiciously in the national interest and a
pensions boost is just that.

MALCOLM TURNBULL: Now in addition to the arguments of compassion, of equity, of justice, of
fairness, there is also the need for an economic stimulus; and this is one economic stimulus that
could be delivered in the near term.

ALEXANDRA KIRK: While the Opposition's urging the Government to start spending the budget surplus,
it's not planning to shift on voting down some budget measures in the Senate. Nationals Senator
Barnaby Joyce says it's of minimal impact.

BARNABY JOYCE: Look, honestly that is three-fifths of five-eighths of not very much of the problem.

ALEXANDRA KIRK: And Malcolm Turnbull says it's quite a bit less than half a per cent of government
revenues.

MALCOLM TURNBULL: Well, you know at a time when you want to stimulate the economy, raising taxes is
not a very good idea.

ELEANOR HALL: That is the Federal Opposition leader Malcolm Turnbull ending that report from
Alexandra Kirk in Canberra.

European govts to guarantee inter-bank loans

European govts to guarantee inter-bank loans

The World Today - Monday, 13 October , 2008 12:20:00

Reporter: Stephanie Kennedy

ELEANOR HALL: To Europe now where as we heard earlier, 15 countries have unveiled a bailout plan
for salvaging their banking systems from potential ruin.

Under the rescue plan governments will guarantee loans between banks until the end of next year and
will inject capital by buying preference shares in banks in a scheme similar to the UK plan.

In London, Stephanie Kennedy reports.

STEPHANIE KENNEDY: European markets tumbled ten per cent in the first ten minutes of trading last
Friday in the meltdown that swept through the global markets.

So after weeks of division, the 15 countries that use the Euro currency held a crisis summit over
the weekend to stop their share market's from haemorrhaging.

The president of the European Commission Jose Manuel Barroso unveiled a raft of measures adopted by
the Eurozone.

JOSE MANUEL BAROSSO (translated): We will take measures to ensure there is sufficient liquidity and
we will restart the interbank lending market. We'll re-capitalise financial institutions under
conditions compatible with our rules, and also, as it's already been stated, we will protect
savers. In other words, we will defend European citizens, European families.

STEPHANIE KENNEDY: The French President, Nicolas Sarkozy insists this is not a gift to the banks
and there are strings attached.

NICOLAS SARKOZY (translated): The banks and the market operators must realise the scale of the
challenge. We expect them to show a sense of responsibility commencement to that shown by the
leaders of the Euro group who have made an unprecedented effort to throttle the crisis. Our unity,
our determination is complete and I would say to our fellow citizens throughout Europe, that they
can indeed, they must have trust in us.

STEPHANIE KENNEDY: The European bailout is much like the trillion dollar rescue plan the British
Government announced last week. Europe has struggled to come up with a united front to tackle the
financial crisis.

It was almost impossible to reach a Europe-wide agreement particularly as no one country wanted its
funds used to bailout another nations banking system. And until now they've taken a go-it-alone
approach, but that clearly failed.

Under this plan, each country is only responsible for its own banks.

JOSE MANUEL BAROSSO (translated): Since the beginning of this crisis we have worked actively to
provide a European response which is closely co-ordinated in an unprecedented way to face up to an
unprecedented crisis.

We think it's very important to ensure coherence. That is why we see ourselves acting as a bridge
between the different initiatives and between all the different players, including of course those
of the Eurozone and to the other member states such as the United Kingdom.

STEPHANIE KENNEDY: Nicolas Veron is an economist with the Bruegel Institute in Paris.

NICOLAS VERON: The principles are sound. You need recapitalisation, you need liquidity provision.
The difficultly in a European context is the recapitalisation is much more complicated when you
have cross-border banks - banks which have operations in different European countries at once. That
involves negotiation among different governments and it is getting more complicated but it is
possible.

STEPHANIE KENNEDY: The cost of the package is yet to be decided, but it will run into hundreds of
billions of dollars if not trillions.

In London this is Stephanie Kennedy reporting for The World Today.

Latest bailout measures under the microscope

Latest bailout measures under the microscope

The World Today - Monday, 13 October , 2008 12:24:00

Reporter: Stephen Long

ELEANOR HALL: With his analysis of the measures being taken to try to ease the financial crisis,
I'm joined now in The World Today studio by economics correspondent Stephen Long.

So Stephen, are investors right to be optimistic about the plan that European nations have come up
with?

STEPHEN LONG: Well, if this doesn't do the job of restoring some confidence, you have got to wonder
what would?

When you look at what's happened, Eleanor, in effect what you have is the state in Europe
effectively comprehensively insuring the European banking system. You have got a guarantee of new
bank debt issuance for up to five years. In effect, a guarantee of the tier one capital of all
banks and that is the core measure of a bank's viability for regulators and they'll put equity in
if necessary to maintain that. A promise to recapitalise any distressed banks and guarantees of
bank deposits.

Well, that basically says that the European governments are vowing that the banks cannot fail and
this is a major turnaround. What a difference a week makes. If you go back to the meeting eight
days ago, Europe was bickering, France and Germany were pooh-poohing this idea.

But what they've effectively done is adopted the plan of Gordon Brown, the British Prime Minister
and the British Chancellor Alistair Darling.

ELEANOR HALL: Now you were saying on Friday, Stephen, that if the G7 and G20 meetings didn't come
up with a plausible plan to restore confidence, we were looking at a deep global recession. Now
while there has been this plan from Europe, those meetings didn't actually deliver anything
concrete did they?

STEPHEN LONG: We got the usual platitudes from those meetings but the point is, the fact that 15
countries acting in concert in Europe have moved so swiftly, has made a big difference and of
course we are seeing the initiatives here in Australia.

And really what you've seen is the locus of leadership on this, move from the United States to
Europe. You've got a lame duck President in the States, a lot of doubts. Effectively you've got the
Paulson administration in America. You have got an unelected official running it who is very close
to Wall Street.

Well, he has been having to back down a lot and really it is the British Prime Minister and his
Chancellor who are really leading the initiative on this and the fact that Europe which was utterly
divided has now moved to being, being in concert will make a difference.

You have already seen some easing, a slight easing in some of the key rates but we won't know until
we see what happens with the key London rate, the interbank lending rate tonight. But I put this
note of caution - even if this restores lending which it looks like it will, you've got huge
pent-up demand for wholesale funding and short-term funding from banks and companies.

And so we shouldn't expect the money market rates to go down to normal levels. You are still going
to have a credit crunch and it will still hit the real economy.

ELEANOR HALL: And isn't there still a major problem in the US because the $700-billion Paulson plan
still doesn't have any cash flowing for some weeks, does it?

STEPHEN LONG: Well, that's right and he said that they are now going to buy equity stakes in banks
but on my reading of it, I can't see how the plan allows that - they seem to be fudging that. So
there is a lot still to do in the States and there are also potentially other serious problems yet
to emerge.

ELEANOR HALL: Are there major banks looking dangerously close and needing a bailout right now?

STEPHEN LONG: Well, Morgan Stanley one of the remaining solvent banks, it had its capital, its
equity put at $US8-billion on Friday which was more than the amount of money that a Japanese
financial institution, Mitsubishi Financial, was looking to put in. So it is looking precarious.

ELEANOR HALL: What is the status of that deal?

STEPHEN LONG: Well, it is being renegotiated at the moment; so there could be the possibility of
more state intervention being needed in Europe and so this is far from over. There is still a lot
of shoes to fall and as, as we heard from Donald Rumsfeld in relation to the Iraq War, you've got
your known knowns, your known unknowns and your unknown unknowns.

Well, we know what some of the known knowns are and the known unknowns but it is the unknown
unknowns that we are waiting to see what impact they'll have.

ELEANOR HALL: And very briefly Stephen, what of the Australian Government's plan?

STEPHEN LONG: Well, really that is in a similar vein to what has happened in Europe and again, it
should go a long way towards restoring confidence; not just in financial markets, Eleanor, but
amongst the public. Because essentially a lot of this has been driven by fear and you can get a
vicious cycle where pessimism feeds into the real economy.

But whatever happens, you are still looking at a major global downturn. What we are avoiding now is
systemic financial system meltdown and the possibility of a depression. That is really where we
have come from. We have eased the squeeze. It is not over yet.

ELEANOR HALL: Stephen Long, our economics correspondent, thank you.

US presidential contest enters final weeks

US presidential contest enters final weeks

The World Today - Monday, 13 October , 2008 12:28:00

Reporter: Eleanor Hall

ELEANOR HALL: In the United States the economic crisis has been overshadowing one of the most
tightly contested presidential election races in many years.

Several analysts are already calling the election for Democrat candidate Barack Obama who has
surged ahead in opinion polls as the US economy plunged further into chaos.

Now the Republican candidate John McCain is defending himself against claims he has resorted to
playing the race card.

Joining us now with his analysis is Brendan O'Connor from the US Studies Centre at Sydney
University. He is also currently the Australia scholar for 2008 at the Woodrow Wilson Centre in
Washington.

Dr O'Connor, first fill us in on these latest race allegations. Just how inflammatory is it for a
respected former civil rights leader to be drawing parallels between John McCain and the 1960s
segregationist George Wallace*(see editor's note)?

BRENDAN O'CONNOR: I think it is probably a bit different. I mean I think one of the things that you
see that maybe Sarah Palin has been leading on at some of these rallies and John McCain also
echoing to some extent is.

Barack Obama is different; he is not as patriotic as maybe he should be. He is not a real American
in the sense that they see themselves; and in some ways he is too cosmopolitan. So it is a sense of
rather than he is an African-American as George Wallace would have portrayed his opponents in the
1960s, it is as though he is a bit of an outsider. He is a little bit too exotic and I think that
is a different way of kind of portraying someone.

ELEANOR HALL: John McCain was pretty annoyed about that comparison though with George Wallace
wasn't he?

BRENDAN O'CONNOR: Yeah, yeah, I mean McCain is of the generation who has accepted the civil rights
legislation and very much a politician who would see that as part of the Republican Party tradition
which goes back to Lincoln. I mean Lincoln was obviously a Republican himself.

So I think it is of a different nature. I mean some of the people in the crowds at these Republican
Party gatherings have probably had a fairly crude understanding of race but I think the way the
campaign is trying to use it, is I think it goes in a different direction and I suppose we are not
used to African-Americans being sort of referred to as exotic or cosmopolitan.

I mean in some ways, these are people who often have links back to the United States as long as
anyone. I mean their heritage is incredibly American in some ways. So this is of a different nature
I would suggest.

ELEANOR HALL: Now, the latest opinion polls show that Barack Obama has surged ahead but some
analysts warn that you have to discount these numbers because there may still be some reluctance in
the US community to vote for a black president. What does your analysis tell you about that?

BRENDAN O'CONNOR: A lot of people refer to this thing called the Bradley effect. There was this guy
called Bradley who was leading in polls in 1982 for the mayoral race in Los Angeles and it seemed
like he was going to be the next mayor of Los Angeles going into the day of the polls; but he in
fact lost the race by a slim margin where he had about a five per cent lead going into the
election.

And it was suggested a lot of white people said they were going to vote for him but when they got
in the voting booth by themselves, they couldn't bring themselves to it and that cost them the
election.

And now there is a lot of conjecture about, well whether that was a long time ago and things have
changed and whether other candidates who were African-Americans have suffered that fate and I tend
to suggest that the polls, as far as we can kind of trust them for some extent because it depends
who asks the questions sometimes, whether it is a white or a black person asking the questions,
would suggest that has probably dissipated that Bradley effect.

But you know, still something to talk about and think about and I'm sure if Barack Obama does lose
the election, we will hear a lot about it.

ELEANOR HALL: Let's assume that the Bradley effect has dissipated, if that is the case, has the
economic chaos ended Senator McCain's chances of winning the White House?

BRENDAN O'CONNOR: Well, it has made it incredibly difficult. I mean it has made this connection
with George W. Bush and John McCain stronger than ever. I mean McCain has been trying to distance
himself from George W. Bush.

I mean the party system certainly isn't as strong as it is in Australia here in the US but McCain
with this, you know, this full on sort of economic meltdown, in many regards, is very much
associated with that Republican strategy of deregulation and the rest of it.

So it has made his job just a lot, lot tougher and he hasn't been, I think, very sure-footed on the
economy, it is not his strong suit. So he hasn't had, I think, anywhere to run from that kind of
record of the Republican Party.

ELEANOR HALL: And what about these findings against John McCain's running mate Sarah Palin on the
weekend. I mean how damaging could they be?

BRENDAN O'CONNOR: I think they are sort of minor league to some extent. I mean they are
embarrassing. It is an unfortunate sort of family feud basically. Her brother-in-law was a
policeman, a state trooper in Alaska and she has tried to get rid of him from the police force for
quite some time after a very acrimonious divorce with Sarah Palin's sister - occurred a few years
ago.

So it shows that she has not followed due process. I think if people really wanted to get into the
details of the case, they might suggest that this state trooper probably didn't behave very well
towards his wife and his children.

But this, you know, this doesn't look good to some extent; I don't think most people will get into
the details and it will make her seem as though maybe not as great a Governor as someone suggested.

ELEANOR HALL: Brendan O'Connor from Sydney University's US Studies Centre, thank you.

BRENDAN O'CONNOR: No problem.

*Editor's note: This transcript has been amended to correctly identify the 1960s segregationist,
George Wallace.

More troops requested, amid increased attacks

More troops requested, amid increased attacks

The World Today - Monday, 13 October , 2008 12:33:00

Reporter: Michael Edwards

ELEANOR HALL: Now to Afghanistan, where NATO troops say they've killed more than 60 insurgents in a
surprise attack in the country's south.

The NATO force struck as hundreds of Taliban fighters gathered for an assault on a strategic centre
in the Helmand region.

At the same time Pakistan security forces say they have killed more than two dozen Taliban
militants near the Afghan border.

But while NATO's commander of international troops used the opportunity to counter suggestions that
the war against the Taliban could not be won, he was insistent that more troops were needed.

Michael Edwards has this report.

MICHAEL EDWARDS: Hundreds of Taliban fighters using rocket launchers and other heavy weaponry
attacked Lashkar Gah, the capital of Helmand Province from three directions.

NATO responded with airstrikes. It says the counter-attack killed at least 60 Taliban fighters. It
is another indication of the Taliban's change of strategy towards larger scale attacks.

General David McKiernan is the head of NATO-led forces in Afghanistan.

DAVID MCKIERNAN: A large number of insurgents, in the hundreds, were detected, were acted upon by a
combined operation, a partnered operation between Task Force Helmand and the Afghan national army.

MICHAEL EDWARDS: It's believed a key Taliban commander was among those killed.

Almost 5,000 people have been killed in insurgency related violence in Afghanistan this year. Most
of those are believed to be Taliban fighters but there are many who say the insurgents are gaining
strength.

Last week, the commander of Britain's troops in Afghanistan said NATO was not going to beat the
Taliban.

Those comments were described by the US Defence Secretary, Robert Gates as defeatist.

And Australia's commander in Afghanistan says his force is winning the battle for hearts and minds
against the Taliban.

And General David McKiernan is also among the optimists. He says the war isn't being lost.

DAVID MCKIERNAN: We don't have progress as evenly or as fast as any of us would like; but we are
not losing in Afghanistan.

MICHAEL EDWARDS: But General McKiernan does say he needs more troops to bring security to
Afghanistan.

Last month General McKiernan called for three more brigades to be deployed and he says not even
this would make victory a certainty.

DAVID MCKIERNAN: And we certainly need more military forces here. But I will be the first to tell
you that additional military forces by themselves will not guarantee victory for the Afghan people.
It must come along all three of those lines of operation again. Better governance at all levels;
economic, socio-economic progress and security of the people.

MICHAEL EDWARDS: And fighting continues across Afghanistan's border in Pakistan.

Security officials there say helicopter gunships have attacked a meeting of Islamic militants
leaving 35 fighters dead.

The attack came two days after a suicide bomber killed at least 40 anti-Taliban tribesmen at a
tribal gathering in the same district.

Among the dead are believed to be two Taliban commanders and about 12 potential suicide bombers.

And a suspected US missile strike has killed five people in north-west Pakistan. Pakistani
officials say none of the people were known to be linked to either al-Qaeda or the Taliban.

ELEANOR HALL: Michael Edwards reporting.

Tsvangirai threatens withdrawal from power-sharing deal

Tsvangirai threatens withdrawal from power-sharing deal

The World Today - Monday, 13 October , 2008 12:37:00

Reporter: Jennifer Macey

ELEANOR HALL: Zimbabwe's power sharing deal is teetering on the brink of collapse with opposition
leader Morgan Tsvangirai threatening to pull out.

Mr Tsvangirai says he'll walk away from the deal unless his party - the Movement for Democratic
Change - secures more key ministries in the government.

Former South African President Thabo Mbeki is now on his way to Zimbabwe to try to break the
impasse.

But the political deadlock is having a disastrous impact on the economy and the people of Zimbabwe.

As Jennifer Macey reports.

(Sound of chanting)

JENNIFER MACEY: Morgan Tsvangirai was addressing a rally of 15,000 supporters in the Zimbabwean
capital Harare yesterday when he threatened to walk away from the National Unity Government.

He's accusing President Robert Mugabe's Zanu-PF party of taking all the key ministries and he says
there are some posts that aren't negotiable.

MORGAN TSVANGIRAI: I'll give you one example. If Zanu takes Defence we take Home Affairs; not
negotiable.

JENNIFER MACEY: An official government list published on the weekend gave Zanu-PF the Defence, Home
and Foreign Affairs, Justice and Mining and Land ministries.

The lesser ministries were left to Morgan Tsvangarai's MDC party.

This violates the power-sharing deal signed last month that gave Mr Tsvangirai the post of Prime
Minister and Robert Mugabe, the Presidency.

Mr Tsvangirai described the distribution of posts by President Mugabe as a grab for power.

MORGAN TSVANGIRAI: This struggle is about change, if we are not given the instruments of effecting
change in your lives, then this arrangement is stillborn.

JENNIFER MACEY: The Zanu-PF says it will take 14 ministries - 13 will be allocated to the MDC and
another three posts would go to splinter faction of the opposition.

Zanu-PF's Information Minister Dr Sikhanyiso Ndlovu says the ministries were divided after long
negotiations.

SIKHANYISO NDLOVU: This has been a long journey; if President Mugabe appoints a cabinet, yes it is
his provocative as head of state and president of Zimbabwe.

JENNIFER MACEY: Now the former President of South Africa Thabo Mbeki is heading to Zimbabwe to try
and break the political impasse.

But since Mbeki lost his position - he's also lost some political clout - yet residents of Harare
remain hopeful.

HARARE RESIDENT: Definitely we have to give him the hope since he is the one who negotiated this
thing. The only mistake that he did, he was supposed to leave this country after all this ministry
allocation has been sorted out.

HARARE RESIDENT 2: I think when Mbeki comes here he must settle this thing once and for all. Look
at this nation: we are starving. Imagine if you can't even get mealie meal, the shops are empty.

JENNIFER MACEY: But the longer this political stalemate drags on - the harder it gets for ordinary
Zimbabweans.

The country is still battling an economic crisis with inflation now as high as 231-million per cent
and the UN World Food Program predicts that almost half the population will face famine shortly and
will need food aid by early next year.

Charles Matope is the chairman for the Australian branch of the Movement for Democratic Change.

CHARLES MATOPE: You see with the continuation of Mugabe's arrogance there is, the life of people is
deteriorating. You know according to the Zimbabwean governments, all calculations of inflation is
now about 200-million per cent.

These estimate that the country needs about $US5-million to feed its own people maybe in a month
through aid then that money is not available. So for the ordinary Zimbabwean, that is a life of
dire poverty, you know.

JENNIFER MACEY: And he's worried that the current financial crisis will make donor nations less
willing to give aid to Zimbabwe.

CHARLES MATOPE: About half the population of the country is expected to starve if there's no
foreign aid, if there's no donations coming from external government and donor agencies. So it is
really a bleak situation that the ordinary person is facing now.

ELEANOR HALL: That is Charles Matope from the Australian branch of the MDC ending that report by
Jennifer Macey.

Locals say Backpacker's death was a tragic accident

Locals say Backpacker's death was a tragic accident

The World Today - Monday, 13 October , 2008 12:41:00

Reporter: Jennifer Macey

ELEANOR HALL: The results from the post mortem on Britt Lapthorne's body will be released tonight
in Croatia.

But even before the official announcement, many locals are making it clear they're convinced the
Melbourne tourist's death was nothing more than a tragic accident.

A fisherman found her body in the Adriatic Sea under a series of 100 metre high cliffs and her
family has raised questions about the injuries.

As Europe correspondent Emma Alberici reports from Dubrovnik.

EMMA ALBERICI: This never happens in Dubrovnik - it's become this medieval town's most popular
refrain repeated to anyone who deigns to mention Britt Lapthorne - first missing person, first dead
tourist, first blight on this perfect post-war landscape.

From the street vendors to the people in the souvenir shops and the restaurants that rely on the
booming tourist trade, all have convinced themselves that this was a tragic accident.

They literally can't afford to imagine that there might be a monster among them.

DUBROVNIK RESIDENT: I cannot believe it happens in Dubrovnik. That is the first thing. I don't know
who can do this from Dubrovnik.

DUBROVNIK RESIDENT 2: I hope it's accident. I hope its accident. Lot of people think it is
accident. That she fell down or the wrong step somewhere close to the water. That's what locals
think and hope in the same time.

DUBROVNIK RESIDENT 3: Lot of people think maybe she's drunk. Maybe she ....

EMMA ALBERICI: She fell down?

DUBROVNIK RESIDENT 3: Yeah. It is no good for Dubrovnik.

EMMA ALBERICI: Not good for Dubrovnik?

DUBROVNIK RESIDENT 3: No.

EMMA ALBERICI: Because it's tourism?

DUBROVNIK RESIDENT 3: Yes.

EMMA ALBERICI: Yes.

DUBROVNIK RESIDENT 3: But it is first time.

EMMA ALBERICI: First time in Dubrovnik?

DUBROVNIK RESIDENT 3: Yes.

DUBROVNIK RESIDENT 4: Tragedy. No, no, not killed. Gone.

EMMA ALBERICI: Not killed?

DUBROVNIK RESIDENT 4: No.

EMMA ALBERICI: What do you think?

DUBROVNIK RESIDENT 4: Drink, romantic.

EMMA ALBERICI: And she fell down?

DUBROVNIK RESIDENT 4: Yes.

DUBROVNIK RESIDENT 5: For us here is very, very sad story. It is coming many, many tourist time
from outside Croatia and every summer I coming here playing guitar and I never see story like this
story. It's very, very sad story.

DUBROVNIK RESIDENT 6: That things don't happen in Dubrovnik. This is first time what has happened
to and I see this year many Australian people coming to Dubrovnik. I hope it will be to the next
year also.

EMMA ALBERICI: You hope that they don't be worried about coming after this?

DUBROVNIK RESIDENT 6: Yes, yes, yes because it is terrible what has happened in our town.

EMMA ALBERICI: And it's terrible what's happened to Britt Lapthorne's family.

It took the Australian Government five days to tell them that their daughter was missing in Croatia
and then they were warned to be careful not to upset the relationship between Canberra and Zagreb.
When they got here, the embassy threatened to take their translator away from them until the media
intervened.

An Australian Federal Police officer was dubbed 'the phantom' after he spent six days in the town
before introducing himself to the family.

In Croatia, authorities posed for pictures with the Lapthornes but stood by while police failed to
speak to crucial witnesses. And worst of all, it was left up to the media to tell the family a body
was found in the water off the coast of Dubrvonik.

When police decided it was probably not Britt Lapthorne, they didn't bother telling her father and
brother that either.

Dale Lapthorne will leave Dubrovnik with his daughter this week.

He suspects there's been foul play involved in her death and he hopes today's autopsy results will
finally give him some straight answers.

In Dubrovnik, this is Emma Alberici for The World Today.

Vic health system struggling under doctor exodus

Vic health system struggling under doctor exodus

The World Today - Monday, 13 October , 2008 12:46:00

Reporter: Rachael Brown

ELEANOR HALL: Victoria's health system is struggling to deal with an exodus of doctors who are
flocking to warmer and more profitable locations.

The latest figures from the Queensland Medical Board show that there has been a 20 per cent
increase in the number of Victorian-trained doctors leaving their state for better pay and
conditions in Queensland hospitals.

In Melbourne, Rachael Brown reports.

(Excerpt from advertisement for Queensland Health)

ANNOUNCER: Queensland's health action plan is delivering.

ANNOUNCER 2: Record pay increases and better facilities are being provided in all hospitals.

ANNOUNCER 3: Staff really, really want to come and work here.

(End of excerpt)

RACHAEL BROWN: This recruiting campaign by Queensland Health has enticed many Victorian doctors,
like Warrnambool paediatrician Dr Chris Ward*(see editor's note), who's heading to Mackay Base
Hospital.

CHRIS WARD: We have a young family with two children and the third on the way in the next couple of
weeks and so we have been attracted to the regional and rural lifestyle.

RACHAEL BROWN: Figures from the Medical Board of Queensland reveal in the last financial year 217
Victorian-educated doctors registered for the first time in Queensland - a 20 per cent increase on
the previous year.

Dr Ward says for those doctors lured interstate, it's not just about the bottom line.

CHRIS WARD: Attractive conditions including the ability for doctors to continue with their further
education. I will be entering a group of about six paediatricians and so there is a critical mass
of paediatricians in Mackay which enables everybody to have a good work-life balance.

RACHAEL BROWN: Dr Ward's story isn't unique.

The Australian Medical Association's website has attracted a raft of comments from young doctors
threatening to move interstate.

EXCERPT FROM WEBSITE: I've been bullied, abused, deliberately underpaid and mismanaged by your
hospital administrators for the sole purpose of meeting unachievable KPIs.

EXCERPT FROM WEBSITE 2: I am yet another doctor who was at the end their tether but now happily
resigned from Victoria's appalling conditions.

EXCERPT FROM WEBSITE 3: I'm a specialist in training in a major metropolitan inner-city hospital
and I'm seriously considering going back to WA. I love Melbourne, but I've had it up to here with
the conditions.

RACHAEL BROWN: The AMA's Victorian president, Dr Doug Travis, says Victoria is already a thousand
doctors short, and unless it follows Queensland's lead, it will lose more.

DOUG TRAVIS: Queensland have had a chequered history in the past of what's going on in their
hospitals, particularly their regional hospitals, and they've realised they have to work
particularly hard to make it attractive for doctors to come and work there.

So they offer packages which involve housing, which involve substantive wage increases over what's
available here.

RACHAEL BROWN: Queensland's chequered history includes the criminal charges levelled at the
Bundaberg Hospital's Dr Jayant Patel, including three of manslaughter.

Other problems included waiting lists and workforce shortages.

Since then, the Government's 2005 Forster Report led to an overhaul of the system, including safer
doctor working hours and greater transparency.

Dr Travis would like to see Victoria reflect some of those initiatives.

DOUG TRAVIS: What we would like to see is for the Minister of Health to read the ministerial review
paper that he asked for and he received in January which sets out 71 recommendations that will go a
long way towards solving this problem.

RACHAEL BROWN: Now, the Victorian Health Department has already come out this morning saying it
suspects doctors have seized on isolated figures, suggesting an interstate exodus, as a ploy to
bolster their current EBA(enterprise bargaining agreement) negotiations.

DOUG TRAVIS: The problems that we have in our emergency departments every day of the week, the
problems we have in our hospitals with every bed being full, has got nothing to do with an EBA and
everything to do with a hospital system that does not have enough resources. Victoria is growing at
1,500 people a week. We are not growing our health services at a pace to match that.

RACHAEL BROWN: Victorian doctors want pay parity with their interstate colleagues and are asking
for an extra nine per cent for the next two years. The Victorian Health Minister declined to be
interviewed today. His office didn't dispute the exodus figures, but pointed out the number of
medical practitioners has grown by 20 per cent over the past four years.

ELEANOR HALL: Rachael Brown reporting.

*Editor's note: This transcript has been amended to correctly identify the Warrnambool
paediatrician, Dr Chris Ward.

Air not so free

Air not so free

The World Today - Monday, 13 October , 2008 12:50:00

Reporter: Lisa Millar

ELEANOR HALL: Now to a radical plan to try to reduce the huge strain that air-conditioners put on
the nation's power grid.

Once a luxury item air conditioners are now being installed in more Australian homes than ever.

Eighty two per cent of homes in Western Australia are already air-conditioned.

Now rather than relying on consumers to decrease their use of the devices, the power companies are
switching them off themselves, as Lisa Millar reports.

LISA MILLAR: John Anderson's been installing air conditioners in homes in south-east Queensland for
decades.

JOHN ANDERSON: I am the busiest I've ever been; I'm busier now than I was last summer and I'm
busier now than I was the summer before. I am installing between six and seven a week now at the
moment.

LISA MILLAR: It seems Australians just can't get enough of them.

JOHN ANDERSON: Basically the demand is for two air conditioners. One for the master bedroom and one
for the lounge, dining room, family room, rumpus room, whatever.

LISA MILLAR: The electricity suppliers used to know exactly when demand would peak - somewhere
around 6pm when people came home from work, televisions were switched on and meals were cooked.

Not anymore.

JIM CHISHOLM: Our maximum demand in summer now occurs at three o'clock in the afternoon; especially
when children get home from school, they turn the air conditioners on so it is the hottest part of
the day, it's the worst part of the day for our network and all our equipment is at a high stress
level.

LISA MILLAR: Jim Chisholm is the executive general manager of corporate sustainability and
innovation at Ergon, an electricity supplier to regional Queensland.

Ergon is facing the same problem as other electricity companies around Australia - a huge increase
in power use - much of it blamed on the popularity of air conditioners.

JIM CHISHOLM: They're very easy to purchase. You can walk into any retail appliance store and buy
an air conditioner and have it put in overnight. And the thing about is, these get put in and we
only find out the growth in certain areas when it gets a very hot humid day and people turn them
on.

LISA MILLAR: Graham Metcalf from Energex, the company that supplies electricity to south-east
Queensland says the increase in demand is huge.

GRAHAM METCALF: The average home is using between about 50 to 70 per cent more power than they were
just ten years ago. The comfort level and the equipment that people are using in the home, all the
new technologies, but of course, the air conditioning is one of the growth market tools in our area
as well.

LISA MILLAR: This summer Energex will trial a system where it can remotely shut down the power for
a home's air conditioners. The fan will continue operating, but the compressor will be switched
off.

GRAHAM METCALF: And it might be ten minutes in an hour or it could be 15 mins an hour. We are just
looking to see and it will be in parts. It might be a minute here and then four minutes working or
two minutes here and then not working and so on and that is just to see whether this process works.

LISA MILLAR: And the idea is that the people in the home don't even know when that is occurring?

GRAHAM METCALF: Absolutely. If people know that it is occurring, the trial is a failure. The whole
point is that you don't actually notice that this is actually on and if people are noticing it,
then it is not actually what we are after.

What we are after is that the seamless process that people can actually not even notice that this
system is operating.

LISA MILLAR: Nine hundred people took part in the trial last year across half a dozen suburbs; but
the summer was too mild. So Energex will try again this year.

Western Power in WA has also trialled the system and managed to reduce power consumption by 27 per
cent during the days when demand peaked.

It's also been a success in South Australia; but it hasn't been trialled under the hot and humid
conditions normally found in Queensland.

It's been referred to as the power companies playing big brother; but Graham Metcalf says
homeowners have heard the grim warnings on climate change and they are happy to do what they can.

ELEANOR HALL: Lisa Millar reporting.

Grim warning for antarctic marine life

Grim warning for antarctic marine life

The World Today - Monday, 13 October , 2008 12:55:00

Reporter: Felicity Ogilvie

ELEANOR HALL: It's a grim prediction but scientists from the Australian Antarctic Division say the
organisms that are the basis of life in the southern ocean could be wiped out within 20 years.

The scientists warn that the ocean is becoming so acidic that it will soon dissolve the shells of
small organisms, including krill.

As Felicity Ogilvie reports the Antarctic specialists are now on their way to Antarctica to map the
loss of marine life.

FELICITY OGILVIE: The ocean that surrounds Antarctica has always been a cold place - but it's
becoming too acidic for some of the creatures that usually thrive in its icy depths.

The water's becoming more acidic because of increasing levels of carbon dioxide.

When the ocean absorbs carbon dioxide from the atmosphere it produces a weak acid called carbonic
acid.

The Australian Antarctic Division's, Dr Andrew Davidson, says soon species that are the basis of
life in the ocean, will be killed.

ANDREW DAVIDSON: These changes are going to happen first in Antarctic waters. The reason for that
is the seawater is very cold so carbon dioxide dissolves into it and it can hold more carbon
dioxide.

So it going to be only some 20 to 50 years before we find ourselves in a position where a lot of
the organisms that makes calcium carbonate shells, just like the shells you see on the beach, are
going to be unable to make those shells; they are going to go back into solution.

FELICITY OGILVIE: Dr Davidson says acidity in the Southern Ocean has already increased by 30 per
cent.

He's travelling south to see if any creatures have been killed by the acidification.

Dr Davidson blames global warming for ocean acidification and says it could kill small organisms
called terrapods.

ANDREW DAVIDSON: They're beautiful - they are called sea butterflies. They have got this little
shell and these like little mutalagenous(phonetic) wings out the side and they float and swim
around. They are only about 2mm long but they can get quite large.

Now what will happen to those organisms that make calcium carbonate and use that around the
outside, when it gets to the point where that is constantly going back into solution, it's
anybody's guess.

FELICITY OGILVIE: Another study at the Antarctic Divison has found increasing carbon dioxide levels
will cause abnormalities in krill.

The experiment - to see what effect carbon dioxide will have on krill - is a world first.

It's being co-ordinated by So Kawaguchi.

SO KAWAGUCHI: Krill is the main diet of most of the higher predators like the whales or penguins or
seals; so the chain without krill abundance will directly be affecting the food conditions of the
higher predators.

FELICITY OGILVIE: The scientists experimented on krill larvae.

When the krill were subjected to carbon dioxide at levels predicted by the end of the century the
larvae hatched with an irregular shape and decreased activity.

When the carbon dioxide was increased to levels predicted 300 years from now, the fertilised eggs
didn't even hatch.

But Dr Kawaguchi stresses it's only a pilot study and the final results should be known next year.

SO KAWAGUCHI: There might be something, some effect on krill by the rising CO2 but we still don't
really know the kinds of effect and also the magnitude of the effect.

FELICITY OGILVIE: Dr Davidson is expecting the worse.

ANDREW DAVIDSON: I think you'll find what will happen is that it will work all the way up the food
chain; so all the organisms, the fish, the whales, the penguins, the seals, all those things that
you think about as being typically Antarctic are the sort of things that if you change what is
happening at the bottom of the food web, all these things are actually going to suffer further up
the food web.

FELICITY OGILVIE: He says the only way to protect organisms from ocean acidification is to reduce
the amount of carbon dioxide that's going into the atmosphere.

ELEANOR HALL: Felicity Ogilvie with that report.