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Secretary in the hot seat

ELEANOR HALL: But we go first to Canberra where the Treasury Secretary was in the hot seat today.

Ken Henry faced a lengthy grilling this morning before a Senate committee over his advice to the
Government on its banking package.

In a sometimes testy exchange, he deflected any suggestion that he and the Reserve Bank governor
were at odds over the package and he emphatically denied that the RBA governor expressed any
reservations to him about the unlimited guarantee on bank deposits.

His answer backs up the Prime Minister who yesterday told the Parliament that Dr Henry had advised
him that the Reserve Bank backed the package.

In Canberra, chief political correspondent, Lyndal Curtis, reports.

LYNDAL CURTIS: Dr Henry was spelling it out for the senators.

KEN HENRY: That is to say, and I'll say it again, the story on the front page of yesterday's
Australian newspaper was wrong, that's W-R-O-N-G, exclamation mark.

LYNDAL CURTIS: His appearance before the committee gained new interest following the claims about
reservations the Reserve Bank governor Glenn Stevens had about the unlimited deposits guarantee
before and since the package was announced.

But Dr Henry was having none of it.

KEN HENRY: And so whilst I would not normally entertain questions such as this one, and in my 24
years of appearances before these committees never have, I think on this occasion there probably is
a public interest in my confirming that in respect of the advice, that was tended to the Government
and supported the decision that it took on Sunday the 12th of October, Mr Stevens and I were of one
mind.

LYNDAL CURTIS: From his testimony it's clear the Treasury, regulators and the Government have been
talking for months about what may need to be done to address the unfolding global financial crisis.

In recent times Dr Henry and the Reserve Bank governor Glenn Stevens have been talking daily, but
it wasn't until the Opposition leader, Malcolm Turnbull, proposed a higher deposit guarantee than
had been contemplated that the need for action arose.

HELEN COONAN: Did you first have a conversation with any senior member of the Government about the
possibility of extending the proposal for a 20,000 capped guarantee to one that is unlimited in
amount?

KEN HENRY: Hmm, hard to say, I suspect it would have been the day the leader of the Opposition
first suggested that the $20,000 cap figure may not be adequate.

LYNDAL CURTIS: By then, Dr Henry told the committee, he and governor Stevens had already debated
many of the issues, but his explanation didn't please Liberal frontbencher Eric Abetz.

ERIC ABETZ: So the two of you were of like mind and said jinx -

KEN HENRY: I've already said that -

ERIC ABETZ: Each time you opened your mouth, exactly what I was going to recommend to the
Government, exactly what I was going to recommend to the Government. That to me doesn't sound to
have the ring of truth about it.

KEN HENRY: I'm sorry Senator what are you suggesting?

LYNDAL CURTIS: Dr Henry says the need to preserve stability was paramount in the timing of the
announcement, but the two men did acknowledge changes would need to be made subsequently. They were
not, as he told Liberal Senator Helen Coonan, reservations.

HELEN COONAN: Did the Reserve Bank governor express any reservations about the impact on the market
from establishing an unlimited (inaudible) deposit guarantee at that time?

KEN HENRY: I don't recall these issues being, umm, ah, raised before the Government's announcement
on Sunday the 12th of October.

It's not that, um, ah, it's not though as if it wasn't understood that in the implementation of the
arrangements there would be matter of detail to be settled. But were reservations expressed? No.

LYNDAL CURTIS: He says changes that would impose a fee on those with larger deposits are being
considered, but says the Reserve Bank hasn't suggested a cap on the deposits covered by the
guarantee.

KEN HENRY: The tenor of the discussions has been to this effect - is there a level of a deposit
above which the deposit should be regarded as effectively wholesale funding, and therefore whilst
benefitting from the guarantee, which as you know applies to wholesale funding as well, while
benefitting from the guarantee, should pay effectively, in colloquial language an insurance
premium.

LYNDAL CURTIS: And he's had a go at media reporting on the matter.

KEN HENRY: I accept that I might have a particular and unusual view here, in my view it would be
better had we not had any media reporting on this issue. But anyway, be that as it may, it is a bit
unfortunate I think, that some have interpreted comments that have been made about this matter to
the effect that the Government is considering a level of deposits above which there would simply be
no guarantee.

Nobody within the official family of, if I can use that somewhat antiquated phrase these days,
nobody has suggested that.

ELEANOR HALL: That's the Treasury secretary Ken Henry before the Senate committee this morning,
ending that report by Lyndal Curtis in Canberra.

Inflation grows to five pc

ELEANOR HALL: And staying with the economy, Australia's inflation rate has hit five per cent.

The price increases were broad-based, and the surging inflation rate means Australians are facing a
double hit from rising prices, and a slowing economy that brings with it of course, a rising
jobless rate.

Joining me in The World Today studio to analyse the figures is economics correspondent Stephen
Long.

Stephen, how long is it since the inflation rate has been this high?

STEPHEN LONG: You have to go back to 2001 Eleanor with the introduction of the GST, but that was a
one-off spike. If you exclude the GST introduction, you've got to go back nearly 13 years to see an
inflation rate this high or higher; back to December 1995.

And that's quite extraordinary really when you think about the circumstances we're in, it was
higher in the third quarter than most economists were anticipating at 1.2 per cent in the quarter,
and of course that five per cent annualised rate, the highest in a long, long time.

ELEANOR HALL: And yet with clear signs that the world economy is in a downturn, will the Reserve
Bank be worried at all about this surge in prices?

STEPHEN LONG: Well that's the strange thing, under normal circumstances you'd think this would be a
worry, but the Reserve Bank is likely to look through this, in fact yesterday when he spoke at a
business lunch in Sydney, Glenn Stevens, the Reserve Bank governor said that forces seem now to be
building up that will start to dampen pressures on prices even though we won't have the evidence
that for a good six months.

So they're looking through these figures and they were expecting at some stage this year that the
headline inflation rate would hit an annual rate of five per cent.

That said though, if inflation remains high, and bear in mind the Reserve Bank's target range is
two to three per cent, then it could potentially dampen the willingness, or ability of the Reserve
Bank to cut rates.

But that will all of course depend on how steep a downturn we face in Australia with the forces
coming from abroad with the banking crisis in Europe and the northern European, Northern Hemisphere
economies all plummeting into recession.

ELEANOR HALL: Either way the prices aren't good news for Australians who having to pay them, what
is driving the high prices?

STEPHEN LONG: Well it's broad-based, it's pretty much across the board and the real worry in a
sense is that your basic costs of life: education, food, most things, your basic utilities, your
water, your electricity, are all going up at a relatively high rate, and are outstripping the
growth in wages which has been on average four per cent on just about every measure for a long time
now.

And so you've got a situation where people's real purchasing power is falling because of this
inflation rate, and at the same time the economy is slowing so job prospects are diminishing and
that's a pretty tough combination.

You might call it stagflation-light, what we're experiencing at the moment, not the old style
stagflation where you had a stagnating economy and surging inflation in the double digits, but it's
certainly getting towards a version of that, and it's a real worry.

And one of the potential worries, really looking forward is, if Australia does manage to avoid the
most disastrous fallout of what's happening around the globe, we've got this fiscal stimulus, we've
had the rates cut, we could be looking at inflation continuing as a problem. We could even see a
stagflation problem in Australia with the economy slowing but prices remaining high for a while,
before it all comes asunder.

Or we could see the Reserve Bank having to redouble its efforts and we know that just below the
surface they remain hawks.

ELEANOR HALL: Now, just switching gears slightly Stephen, we just heard the Treasury boss Ken
Henry, being grilled in Parliament, what are the economic pros and cons of the Government
guarantees of deposits?

STEPHEN LONG: Well, as Glenn Stevens, the Reserve Bank governor made clear yesterday, in a sense
the Government had little choice, once the other major economies in the world move to guarantee
bank deposits, because it would have put Australia at something of a disadvantage, guarantees of
bank loans and bank deposits they had to be matched.

But there is a moral hazard issue, and when you hear talk in Parliament about extending the
guarantee to debentures, to cash management trusts outside of banks, it raises that issue, that if
you actually in effect insure peoples risk taking, you can encourage risk taking.

Now let's think about that term debentures, some of the debenture companies that we've seen go to
the wall in recent times included your Fincorps and Westpoints that were involved in pretty dodgy
property dealing. Do we really want to be guaranteeing that?

At the same time we've had across the world a flight to quality, a flight to less risky assets, and
given that there was a build-up of risk that led to this global financial crisis, in broader terms
it's a good thing.

So, it's not a simple issue, and I know that there's an emotional response saying people shouldn't
be allowed to lose money, and that some of these companies are also being hit as assets flee, but
there really are serious questions about how far these deposit guarantees should extend.

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

Govt under pressure to clarify deposit guarantee

ELEANOR HALL: Well despite the Treasury Secretary's comments this morning the Rudd Government
remains under pressure to clarify its policy on the deposit guarantee and to stabilise cash trusts
and funds which have been excluded.

Many of these funds say that the Government's initiative is putting them under pressure because
investors are withdrawing their money to seek the haven of the bank guarantee, as Stephen just said
that might not necessarily be a bad thing, but let's hear from our business editor Peter Ryan.

PETER RYAN: In the ten days since the Government's deposit guarantee was rushed through Parliament,
banks, non-bank lenders, credit unions and building societies have been non-stop in their praise.

But those on the perimeter of the unprecedented measures, such as mortgage funds and cash
management trusts, have been warning of unintended consequences, as investors think about moving
their cash to the newly-created haven.

Since then, the Treasurer Wayne Swan has been hosing down the fears.

WAYNE SWAN: What I say to them is that their investments are safe, but our decision to provide the
guarantee will put further liquidity in the system and make sure that the very central part of our
financial system is stable.

PETER RYAN: Wayne Swan told Radio National's Breakfast programme that even though the funds in
questions are more akin to investments, their safety shouldn't be a concern.

WAYNE SWAN: We always recognised that there would be consequences of that decision; a comprehensive
guarantee was important, but just because there are some particular investments that aren't bank
deposits, that are not covered, doesn't mean to say you don't need a comprehensive guarantee for
your banking system.

PETER RYAN: But amid some ferocious lobbying from the industry, the Government is now considering a
million dollar threshold on the deposit guarantee, to encourage investors to leave their money
where it is.

The Treasury Secretary Ken Henry told today's Senate hearing he was listening to the industry
concerns.

KEN HENRY: We are consulting with financial market participants about the impact of both the
Government's announcement and of setting any threshold on deposits above which a premium will be
charged for access to the guarantees.

So we're in active participation with market participants about that, and I wouldn't want to, I
don't think it would be helpful and I don't think it would be fair to those consultations for me to
indicate at this point, what our view on these issues might be.

PETER RYAN: Industry watchers like finance Professor Fariborz Moshirian of the University of New
South Wales says the funds could have a point, but the price could be tougher regulation if they
insist on being treated like banks.

FARIBORZ MOSHIRIAN: The reality is that mortgage funds and cash management funds are not supervised
by APRA (Australian Prudential Regulation Authority) and therefore they are not part of the
depository institutions where the Government came in and guaranteed their operations and
particularly their deposits.

I bet if they want to be part of the depository institutions, naturally they have to follow
regulations imposed on our banks. That means they have to be willing to pay extra cost for that
supervision and the guarantee provided by the Government.

PETER RYAN: But ultimately, Professor Moshirian says the currently excluded funds will have to be
part of the guarantee.

He argues that even the big funds, like Challenger Financial, would barely make a dent compared to
the weight of a major bank.

FARIBORZ MOSHIRIAN: Their asset is $2.9-billion, it's less than the annual profit of one of our
major banks, and so I don't see, I think that is a major issue for Government to step in and
reassure investors in this sector.

PETER RYAN: So you think that ultimately the Government will step in and make sure that any
instability is taken away?

FARIBORZ MOSHIRIAN: Absolutely, at this stage that is the only way to go. Otherwise we are going to
see more questions about the aggregated financial services industry that we have and also the issue
of competition and concentration of funds.

ELEANOR HALL: That's Professor Fariborz Moshirian from the University of New South Wales ending
that report by business editor Peter Ryan.

Pensioner lobby groups call for PBS reform

ELEANOR HALL: As the cost of living increases, pensioner lobby groups are calling on the Government
to radically rethink the Pharmaceutical Benefits Scheme so that pensioners are not forced to cut
back on life-saving medicines.

A study published in an Australian pharmacy journal has found that since the Federal Government
increased the amount that consumers have to pay for drugs, there has been a drastic drop in the
number of prescriptions being filled.

Pharmacists say there's anecdotal evidence that many elderly people, who often take several kinds
of prescription drugs, are no longer buying their usual medicines.

Jennifer Macey has our report.

JENNIFER MACEY: Seventy-one-year-old pensioner Les Elkins from near Newcastle in New South Wales
has suffered two heart attacks.

Now he takes nine different pills a day, and each month he gets an injection for osteoporosis.

LES ELKINS: I take Warfarin for a heart, damaged heart, I take a fluid tablet, I get injections for
osteoporosis, I take a tablet to correct the rhythm of my heart, I take a blood pressure tablet,
the only one that I don't take is the Viagra.

JENNIFER MACEY: His wife is a diabetic and also takes drugs for osteoporosis so between them their
bathroom cabinet is full of pill packets.

He says he and his wife are both dependent on their medication so they skimp on other things.

LES ELKINS: Fruit and vegies is a must for the both of us, so other little luxuries like going out
socially is the first to suffer. I've got a caravan on a site up at Forster for example, we don't
go up there as often as we used to.

And I just put my medication down to cost of living, you know, if I stop taking it, pointless
making plans for Christmas.

JENNIFER MACEY: But there are many other pensioners who do save money by not taking all of their
drugs.

A study published in the Journal of Pharmacoepidemiology and Drug Safety found that the number of
prescriptions being filled at the chemists dropped by up to 11 per cent after the Government
increased the amount people have to pay towards their medicines.

Dr Anna Hynd from the University of Western Australia's School of Population Health led the study.

ANNA HYND: I was surprise to see so many medicine categories impacted, I think we expected to see
that some things would be disrupted but it was really concerning to see so many essential medicines
impacted by these changes.

And it's interesting to see that concessional beneficiaries were being impacted so much more than
general beneficiaries given that their subsidy is larger.

But these tend to be older people than the general population, and they tend to use more medicines
and because they're not waged, they're more vulnerable to increases in costs.

JENNIFER MACEY: In 2005 the federal government increased the co-payment rate by 24 per cent.

In real terms pensioners and other concession holders had to pay 90 cents more or $4.60 for every
script filled. But Dr Hynd says this had a big impact on low income earners.

ANNA HYND: What might seem like a small increase to a waged person becomes much larger for someone
on a fixed income, and particularly if you consider that a lot of concessional beneficiaries and a
lot of people with chronic illnesses tend to be on multiple medications, so that cost is magnified
across the number of treatments that that person has.

JENNIFER MACEY: The report says the biggest drop in medicines have often been the life-saving ones,
such as those to treat heart disease, diabetes, cholesterol, osteoporosis and Parkinson's.

Pharmacists have already noticed that many of their older customers aren't coming back to have
repeat prescriptions filled.

Si Banks is the New South Wales President of the Pharmacy Guild of Australia.

SI BANKS: People think they can get away with, for example, a cholesterol lowering agent, they
think they can do it without it for a month or they take the medication less frequently, maybe
every second day, and that's becoming more commonplace and it's a great worry and concern.

JENNIFER MACEY: Michael O'Neill is the CEO of National Seniors Australia.

He says the current pension rate has not kept up with inflation let alone the increases in pharmacy
co-payments.

MICHAEL O'NEILL: That's something really sad part about the choices that they've been making,
without wanting to harp on the point, at $271 a week sometimes it was medicines and sometimes it
might have been food. So there was really harsh choices having to be made and people have chosen,
unfortunately, in some instances obviously, to go without necessary medicines.

JENNIFER MACEY: At the start of this year, the co-payment rate increased again. Now pensioners pay
$5 for every prescription medicine.

But there's a limit, after a pensioner has had 58 prescriptions filled they are entitled to free
medicine. But Michael O'Neill says even this system disadvantages single pensioners.

MICHAEL O'NEILL: So there's no difference in the threshold level, whether you're a single or a
couple, so at $1,050 couples will get to that quicker than singles will, so singles are
disadvantaged and that reinforces the disadvantage that they experience with the pension where
they're only on 60 per cent of couples.

JENNIFER MACEY: He says the Government's recent $1,400 bonus for pensioners will probably be spent
on medicines and other bills.

But he's calling on the Government to radically rethink the co-payment system as part of the
current review into the aged pension.

ELEANOR HALL: Jennifer Macey reporting.

Study predicts mass nurse exodus over next two decades

ELEANOR HALL: A national report predicts that Australia will face a critical shortage of nurses in
the next two decades.

The study by the Australian health workers' institute warns that there will be a mass exodus of
Australian-trained nurses by 2026, partly because of our ageing population.

The Institute says that more attention has been paid to the doctor shortage than to the nursing
problem and that the health system needs to be treated as a single entity.

Rachael Brown has our report.

RACHAEL BROWN: The Health Workforce Institute report suggests nurses could be the next addition to
Australia's endangered species list.

PETER BROOKS: About 15 per cent of nurses are retiring every five years; so if you look at the
total number of new nurses that you need in the system between now and 2026, it's about 90,000.

RACHAEL BROWN: The Institute's director, Professor Peter Brooks, says while Australia has one of
the highest ratios of nurses, at one nurse for every hundred people in the population, they're
under pressure from all directions.

PETER BROOKS: First of all we've got an ageing workforce, and that's true of medicine just as it is
with nursing, or physiotherapy. We've got more need for nurses as hospitals grow, beds increase and
as we get nurses out into the community which is where I think many of them should be, being
involved in disease prevention and health promotion agenda.

RACHAEL BROWN: And it sounds like it could take a lot to turn around that projected exodus; have
warning signs been ignored to date?

PETER BROOKS: I think it's been on the radar screen for quite a long time, and people have been
saying that we've got a problem with health workforce.

I think there's been a relatively recent appreciation of ageing population and chronic disease.

RACHAEL BROWN: And I understand you believe there's been too much attention focused on the doctors
shortage rather than on nurses?

PETER BROOKS: Certainly there are doctor shortages, but we have very rarely looked at the health
system in its entirety.

We talk about medical problems, they're health problems, we still provide in this country about 95
per cent of our health budget goes on acute care.

We do very little about stopping people actually getting sick, we're starting to do things now
about the obesity epidemic, encouraging kids in particular to exercise properly, to eat properly,
and therefore prevent things like diabetes and subsequent contact with the health system which is
what we all should be doing.

RACHAEL BROWN: And what if Australia fails to plan for the retirement of these 90,000 nurses in the
next two decades?

PETER BROOKS: Well (laughs) I think we've got a bit of an issue, haven't we? Certainly you won't
have anybody to look after you, I probably won't, in 2026 I'm not sure whether I'm planning to be
here, but certainly you sound much younger than me so...

RACHAEL BROWN: Thank you.

PETER BROOKS: You'll probably need to do some course in nursing, so that you can look after
yourself.

RACHAEL BROWN: Is that a real... how dire is the situation?

PETER BROOKS: Well it's serious, we have to get realistic about, not just about numbers, we've
actually got to get realistic about prevention as well.

RACHAEL BROWN: The Australian Nursing Federation says the states and territories have devised ways
to help nurses cope with their increasing workloads.

RACHAEL BROWN: But the Federation's assistant secretary, Lee Thomas, says its biggest concern is
the ageing workforce.

LEE THOMAS: The average age of a nurse in Australia is about 46 years, for midwives it's 48 and for
mental health nurses, you know, average 50 or a little bit older. Now that has been increasing
significantly, obviously, over the last few years.

RACHAEL BROWN: What strategies would you like to see adopted to try to tackle this increasing
dropout rate and the ageing workforce?

LEE THOMAS: Make sure that the numbers of people that are interested in commencing nursing, through
the university sector for example are all taken in, you know every year we turn away young women
and men who are interested in commencing a profession in nursing. So we really need to address
those issues.

And there are some very simple things in work places like access to safe secure car parking, access
to readily accessible child care, really work on the wages and conditions, there are a range of
things we can do to retain the nurses that we are training.

ELEANOR HALL: That was Lee Thomas from the Nursing Federation speaking to Rachael Brown.

Voting begins ahead of US presidential election

ELEANOR HALL: To the United States now, and election day may still be a fortnight away but, in some
states the voting has already begun.

Thirty one of the US states allow people to vote before election day.

And both Democrats and Republicans have poured millions of dollars into campaigns to register new
voters.

But as the residents of eligible states prepare to cast their ballots in a variety of typically
American ways, the allegations of fraud are not far behind.

Washington correspondent Kim Landers has our report.

KIM LANDERS: Where else but America would you be able to vote from the comfort of your car?

In Santa Ana, southeast of Los Angeles, a drive-thru voting system has been set up.

It's a one-off, but election officials in Orange County say it's designed to encourage people to
vote ahead of the November the 4th presidential election.

In fact, it's estimated about one third of American voters could cast their ballot, either in
person or by absentee vote, before election day.

An estimated nine-million new voters have registered for this hotly contested presidential
election.

And already there are plenty of allegations of fraud.

Republicans have been crying foul over the actions of ACORN (Association of Community Organizations
for Reform Now), a grassroots activist group.

So-called rogue workers have submitted phoney registration, including signing up the Dallas Cowboys
football stars to vote in Nevada.

Republican John McCain has been hammering the issue on the campaign trail.

JOHN MCCAIN: There are serious allegations of voter fraud in the battleground states across
America, they must be investigated and no-one should corrupt the most precious right we have and
that is the right to vote.

KIM LANDERS: It's an allegation Democratic nominee Barack Obama has been trying to distance himself
from.

BARACK OBAMA: Apparently some of the people who were out there, didn't really register people, they
just filled out a bunch of names, had nothing to do with us, we were not involved.

KIM LANDERS: Doug Chapin is an election expert at the Pew Center on the States in Washington.

He says up to 130-million people could vote in this election, and that election officials are
embracing early voting as a way to manage the long lines on election day.

DOUG CHAPIN: I think it's just nerves about whether or not the system can handle the load
generally, you know, you're listeners who are familiar with American elections know that typically
we don't get much higher than 65 and 70 per cent, and this year we're looking at some states,
talking about 80 and even 90 per cent participation.

And so the system is about to be tested at a level it never has been before, and as a way to manage
that stress, lots of jurisdictions are openly encouraging people to cast their votes before
election day.

KIM LANDERS: There's also been lot's of allegations of voter registration fraud flying around and
raising the spectre of possible voter fraud. What do you say to that?

DOUG CHAPIN: There are lots of allegations, here in the United States there are two basic camps,
one which worries a lot about the spectre of ineligible voters casting ballots or so-called voter
fraud.

The other side which worries about eligible voters being kept from voting because of efforts to
screen out ineligible voters, and that's called voter suppression.

Those two camps, tend to dominate the rhetoric, we don't really have a lot in the way of empirical
data as to how many actual names we're talking about. So it's a big issue politically, we're still
trying to figure out what it means empirically.

KIM LANDERS: Rock the Vote is another non-partisan, non-profit organisation which is encouraging
young people to register and vote.

Spokeswoman Stephanie Young says 2.5-million people have done that via their website and several
hundred thousand more have been signed up to vote in person.

STEPHANIE YOUNG: We want young people to have the best chance of casting their ballot and having a
positive experience.

We know that it's going to be huge and the lines are going to be long, so we've been pushing early
voting.

KIM LANDERS: There are five different ways of voting in the US, and methods can even differ within
the one state.

Eight years ago in Florida all eyes were on the hanging chads.

The chads are gone and so the ATM style voting machines there.

But both campaigns still have an army of lawyers ready across the country in case election day
doesn't settle the contest for the White House.

This is Kim Landers in Washington for The World Today.

Thaksin guilty of corruption, Thai court rules

ELEANOR HALL: Thailand's former prime minister and now fugitive, Thaksin Shinawatra, has added to
his list of firsts by being the first Thai prime minister to be convicted of corruption.

While the decision by the Kingdom's Supreme Court was anticipated, it will do nothing to lower the
political temperature in Thailand.

As South East Asia correspondent Karen Percy reports from the streets of Bangkok.

KAREN PERCY: Well aware of the volatility of the Kingdom's current political climate, the Supreme
Court judges took more than an hour and a half to lay out their findings.

They determined that Mr Thaksin had a clear conflict of interest when his wife Pojaman Shinawatra
bid on a parcel of land in Bangkok in 2003.

In a telephone interview over a poor phone line with the Reuters news agency, Mr Thaksin said he
had expected the verdict.

Mr Thaksin is currently living in England.

He's been there since August, when he and Mrs Pojaman fled a guilty finding against her.

She was sentenced to three years' jail for tax fraud; arrest warrants are out for both of them.

With this guilty verdict Thai prosecutors are pushing ahead with plans to extradite Mr Thaksin, he
faces at least four other criminal trials relating to government and private deals during his time
as prime minister.

From the outset, he has said the cases against him are politically motivated, that's because the
charges were brought about by the Assets Scrutiny Committee, an investigating body set up by the
military leaders who pushed him out in 2006.

But Professor Panitan Wattanayagorn from Chulalongkorn University says the court's decision has
credibility.

PANITAN WATTANAYAGORN: As the cases are being transferred, or have been transferred to the normal
court, I think people have more confidence in the system now as the courts are now working, using
the principles and standards that the courts are using here and elsewhere.

KAREN PERCY: This decision will make life more difficult for the current Prime Minister, Somchai
Wongsawat who is Mr Thaksin's brother-in-law.

He's been in office barely a month, but has been under immense pressure.

There is the tense situation on the border with Cambodia, where last week the two countries briefly
fired guns and rockets at each other.

And he's facing an unyielding anti-government movement which blames him for the deaths of two
protestors in a police offensive two weeks ago.

It's clear that the military wants him gone.

In a broadcast last week that the local media is calling the television coup, the army chief,
General Anupong Paochinda, pushed for Mr Somchai to resign and for the Government to take the blame
for the bloodshed.

Mr Somchai is holding steady for now.

It's hard to tell if the court verdict against Mr Thaksin will do enough to placate the
anti-government camp or if his supporters will take out their anger and frustration on the streets.

Political observers worry if there is another outbreak of violence, then the rumours of another
real coup, might just pan out, despite the military's repeated denials.

This is Karen Percy in Bangkok reporting for The World Today.

ADF to reduce East Timor troop commitment

ELEANOR HALL: Australia's Defence Minister announced today that Australia will reduce its troop
commitment to East Timor.

Until now, about 750 Australian soldiers have formed part of an international stabilisation force
assisting the East Timorese Government and the United Nations.

But Minister says that the security situation is improving and the Australian Defence Force is now
planning to bring home about 100 soldiers early next year.

The Minister Joel Fitzgibbon, spoke to Kirrin McKechnie in Canberra.

JOEL FITZGIBBON: Well as you know we've been in East Timor since 1999, we're satisfied now that the
security situation in East Timor provides an opportunity now to start to slowly but surely reduce
our troop commitment in East Timor.

We are there of course, there at the invitation of the sovereign government of East Timor, I've had
these discussions with the Prime Minister of East Timor, and the Government there is quite
comfortable now about us starting to reduce our presence there.

KIRRIN MCKECHNIE: So how many troops will that leave in the country?

JOEL FITZGIBBON: Well we'll still have about 650 troops there, which of course, is a substantial
contribution. Our main role now is to be ready to support the UN police operation if violence gets
out of control.

I have to say that stability there remains fragile, you will recall that in February of this year
we had an assassination attempt on the President and potentially the Prime Minister. So I think
it's important that we remain there for some time to come at a substantial level, but there's
general agreement that it's time now to start reducing our commitment there.

We're satisfied that the security forces of the East Timorese Government are now well placed to
maintain peace and stability in the fledgling nation.

KIRRIN MCKECHNIE: Well yeah, as you say stability in the region is indeed fragile; could this be
seen as a bit premature?

JOEL FITZGIBBON: No, not indeed, we're very conscious of that issue, you'll recall of course that
the Howard government prematurely brought troops home back in about 2005, and in 2006 following an
uprising was forced to again redeploy about a thousand troops. We're determined that those mistakes
aren't repeated.

But at some point we need to start drawing down, the local East Timorese security forces have to be
given an opportunity to show that they are ready and able to maintain their own peace and
stability.

KIRRIN MCKECHNIE: Will more troops be on standby if tensions flare again?

JOEL FITZGIBBON: Well that's not our expectation, we don't anticipate the need to do that but of
course we always have troops on, in a level of readiness to move at short notice. We demonstrated
that in February when we increased our elements in East Timor by about 120 in response to the
assassination attempt on President Horta.

So we certainly have that capacity and of course we would use it if necessary, but we wouldn't be
bringing home 100 troops if we thought there is likely to be a need to do so.

KIRRIN MCKECHNIE: And the remaining 650 personnel, how long can they expect to remain in East
Timor?

JOEL FITZGIBBON: Well that's an unanswered question, we will continue to monitor the security
situation there, we will continue with our dialogue both with the East Timorese Government and the
United Nations and our partners including New Zealand.

We will draw down more people when we are satisfied there is an opportunity to do so.

KIRRIN MCKECHNIE: Well these 100 troops could well be needed in Afghanistan; the Defence Force
Chief has again today painted a fairly bleak picture of military success there. Would you consider
bolstering troop numbers in Afghanistan?

JOEL FITZGIBBON: I certainly, concurrency pressure have been an issue for us, it's one of the
important reasons we decided to bring our combat troops home from Iraq, but that certainly hasn't,
nor will East Timor provide us with, what I would describe as surplus capacity.

The ADF remains in high operational tempo, we remain busy and potentially over-stretched, and the
Prime Minister and I have made it very, very clear on a number of occasions that we believe that we
are punching above our weight in Afghanistan, we are the largest non-NATO (North Atlantic Treaty
Organization) contributor.

We're disappointed that some European nations, in particular, seem to be under-committed, and we
wouldn't consider sending additional troops to Afghanistan while ever so many other countries do
seem under-committed.

ELEANOR HALL: That's the Defence Minister Joel Fitzgibbon speaking to Kirrin McKechnie.

NZ Govt approves clinical trial of pig-based diabetes treatment

ELEANOR HALL: To New Zealand now, where concerns are being raised about the risks involved in
injecting pig cells into people suffering from diabetes.

After years of fierce debate, the New Zealand Government has given the green-light to a clinical
trial by an Auckland based bio-tech company.

Eight people with type 1 diabetes are to be injected with the pig cells.

Scientists say they hope these cells will then produce insulin.

But critics warn that the experiment could backfire and unleash a deadly pig disease on humans, as
New Zealand correspondent Kerri Ritchie reports.

KERRI RITCHIE: New Zealander Hayden Vink has to give himself five injections of insulin a day to
stay alive. He says he's sick of being sick.

HAYDEN VINK: I've had diabetes for eight years I can't really remember what life was like without
diabetes.

KERRI RITCHIE: Ex-patriot Australian paediatrician Bob Elliot has been leading the fight to get
approval for pig cells to be transplanted into humans to treat diabetes.

Professor Elliot founded the company Living Cell Technologies, which has just had its application
for a clinical trial approved.

BOB ELLIOT: Huge excitement and relief, it's been a long time coming.

KERRI RITCHIE: This is how the transplants work. Cells taken from the pig's pancreas are coated
with a seaweed gel to protect them from the human immune system.

Then they're implanted into a human patient's abdomen, the pig cells manufacture insulin, which
will then help the patient control their blood sugar levels.

BOB ELLIOT: This has world standing, and it's a world first. It will bring to diabetics, I think,
something that they've all been wanting, which is a self-regulating cell which will produce insulin
on demand and stop producing when it's not needed.

KERRI RITCHIE: Professor Elliott carried out a trial on six patients in the late 1990s but it was
stopped by the New Zealand government when fears were raised about a pig retrovirus spreading.

New Zealand's Health Minister David Cunliffe says the Government is now satisfied the advantages
outweigh the risks.

DAVID CUNLIFFE: Yes we've consulted with the company concerned, Living Cells Technology, they've
indicated that they're happy to meet any and all reasonable conditions. They can see that by
meeting these very strict conditions, which are designed to bring New Zealand to the forefront of
international best practice, that the results of the trial will have that much more credibility. So
I think that they see the win-win in that.

KERRI RITCHIE: But some aren't convinced. The Society for the Study of Diabetes believes there is a
chance a virus from the pigs could be passed on to humans. It says the company involved, Living
Cell Technologies, has carried out studies but it hasn't made the findings public.

Spokesman for GE Free New Zealand John Carapiet is also worried.

JOHN CARAPIET: I think the major concern boils down to who is taking the risk and who is going to
be liable if something goes wrong. And at the moment, the regime is that the public pays.

But when it comes to risks for private research, like this is, I believe most New Zealanders would
expect the companies would be liable for the risk, not the public.

KERRI RITCHIE: He says there are too many unanswered questions for the trial to go ahead.

JOHN CARAPIET: Both of the issues, around animal welfare, around what's happening next in this step
towards transplantation and what's the long-term effect on New Zealand and New Zealand's values.

KERRI RITCHIE: The piglets which will be used in the trial are being kept in strict quarantine.
David Cunliffe believes everything has been done to ensure the pigs are free from retroviruses, but
he says he's not going to pretend there are no risks.

DAVID CUNLIFFE: I can give a guarantee to New Zealanders that no stone has been left unturned in
preparing for this; that this is as strict a process as would be possible anywhere in the world;
that the risk is not zero, but the risk is negligible and such risk that there is will be extremely
carefully managed.

KERRI RITCHIE: The trial is set to begin at Auckland's Middlemore Hospital in February.

This is Kerri Ritchie in Auckland reporting for The World Today.

Qld MPs under fire for company involvement

ELEANOR HALL: There's more bad news for the Queensland Labor Government today, with revelations
that some politicians have failed to comply with the former premier's ban on MPs holding company
directorships.

The Labor Party is defending its MPs saying they are still trying to comply with the ruling made 15
months ago by then premier, Peter Beattie.

But it is hardly a welcome distraction for a government already facing voter dissatisfaction.

In Brisbane, Annie Guest reports.

ANNIE GUEST: In May last year Queenslanders were told their Labor politicians would have to adhere
to the tightest standards in the country.

The Premier Anna Bligh restated the policy today.

ANNA BLIGH: The policy that was put in place under Peter Beattie was that all ministers should
divest themselves of shareholdings and directorships of companies, with the exception of
investments in blind trusts, that is, where the individual has no investment decisions on the money
that they put into that mechanism.

ANNIE GUEST: Sixteen months ago, the then premier, Peter Beattie used the 20th anniversary of the
Fitzgerald Inquiry to announce his MPs would have to sever ties with any profit making company.
Errr, maybe.

The current Register of Members' Interests reportedly shows seven MPs hold directorships and or
shareholdings. The record goes to the Attorney-General Kerry Shine. He clocks up five
directorships.

But Anna Bligh says Cabinet ministers are not at fault.

ANNA BLIGH: I am advised by my department that every one of my ministers has complied with that
policy which does provide that they should divest themselves of shares, but they can put those
shares into a blind trust, that is where they make no investment decisions and don't know where
they're invested, or they can retain directorships of family trusts.

ANNIE GUEST: So, the question mark remains over two other members of Anna Bligh's team. But it's
important to acknowledge that it is not clear whether they are involved with profit-making
companies.

One of those facing criticism is Chris Bombalas, a former Queensland media personality. Bomber, as
he's known, was a sports commentator on television and radio. These days he's a parliamentary
secretary. And he's reported as continuing to be associated with a sports public relations outfit,
Bomber's Media Enterprises.

So how long does it take a politician to change their personal affairs?

ANNA BLIGH: In the case of a couple of parliamentary secretaries they are still seeking legal
advice about the appropriate mechanisms by which to divest their shares and to form an appropriate
blind trust; and are in the process of complying with the policy.

ANNIE GUEST: The Opposition leader is Lawrence Springborg.

LAWRENCE SPRINGBORG: Some of those things might be innocuous what we're hearing today and there
mightn't be a real conflict of interest in other areas there probably is but the simple reality is
the Government raised the high bar and they haven't achieved it. But that's typical of the way this
Government operates, it says it's going to do something and it never does.

ANNIE GUEST: The other parliamentary secretary being asked questions today is Michael Choi.

He's a former engineer and continues to register an association with five companies, including a
construction group.

He's previously been in strife for having a lead foot, he was dumped from a transport portfolio for
speeding, and promised to take driving lessons.

Neither Michael Choi nor Chris Bombalas returned The World Today's phone calls.

ELEANOR HALL: And that's Annie Guest reporting from Brisbane.

India launches unnamed satellite into space

ELEANOR HALL: Earlier today, India joined the space race with the successful launch of its first
rocket mission to the moon.

INDIAN SCIENTIST: One, zero, plus one, plus two.

INDIAN SCIENTIST 2: Ignition sequence normal, and liftoff normal.

ELEANOR HALL: The unmanned satellite will orbit the moon for two years studying its mineral
composition, and searching for ice and a new energy source called helium-3.

Professor Robin Jeffrey is an India analyst at the Australian National University, and he's been
speaking to Karen Barlow about the launch.

ROBIN JEFFREY: I think it's really important for the way India, the Indian elite, views itself and
the way it wants to be viewed by the rest of the world.

The message is India is a great modern power and has to be reckoned with in every sphere, including
space travel and space exploration.

KAREN BARLOW: Is this a big message for the outside world as well as its own elite?

ROBIN JEFFREY: I think so, and it's also a message for Indians of all classes as India prepares for
a whole lot of elections. There's six state elections coming up in the next six or seven weeks and
then there's a big national election that all Indian politicians are gearing up for next year.

So it also can be construed as a statement by a government seeking re-election nationally, that
it's taking India to the forefront of global activities.

KAREN BARLOW: The India Government wouldn't be the first government to do something like that?

ROBIN JEFFREY: No, that's true, and I mean Indian governments have done it in the past, nuclear
tests have often been timed to be useful in domestic politics and that's part of the political
process. You like what appear to be good news stories going out when you most need them.
Australian's are not estranged to that.

KAREN BARLOW: Could this money have been spent feeding India's poor?

ROBIN JEFFREY: The Government of India puts a great deal of energy and money into trying to feed
the poor, there's a huge national rural income guarantee scheme which is being financed at the
moment, the kind of funds here would probably have found it difficult to disperse in a way that
would do the poor a great deal more good than the current expenditure.

It's not so much money, it's a question of getting the money and the goods into the hands of the
people who need them.

So I think a government of India can defend this as something that goes with being a great modern
state, just as trying to feed your people well goes with trying to be a great modern state.

KAREN BARLOW: One of the aims of this particular mission is to find a new energy source, helium-3
isotopes; so I suppose that may come back as a benefit for India and the rest of the world?

ROBIN JEFFREY: Well certainly India needs energy as anyone who is dealt with Indian load shedding
and loss of Indian power in the cities both in summer and winter, knows India, I mean, India is
energy hungry and energy poor at the moment and for, to make that great modern India that the
leaders are aspiring to, energy is going to be one of the key things. So if they find something in
space I'm sure it will be very welcome.

ELEANOR HALL: That's the Dean of Asian Studies at the ANU, Professor Robin Jeffrey, speaking to
Karen Barlow.