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Unemployment jumps to highest level in almost -

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Unemployment jumps to highest level in almost three years

The World Today - Thursday, 12 February , 2009 12:40:00

Reporter: Sue Lannin

BRENDAN TREMBATH: The number of people out of work has jumped to its highest level in nearly
two-and-a-half years.

Official figures show the unemployment rate rose to 4.8 per cent in January. That's up 0. 3 of one
per cent from December.

For more, I'm joined in the studio by finance reporter Sue Lannin. Well, these figures certainly
look bad.

SUE LANNIN: Yes Brendan, they're pretty bad. The unemployment rate of 4.8 per cent was more than
expected and it's certainly more evidence of the economic downturn. It is in line also with other
data we've seen out recently.

Now the number of people out of work rose by nearly 37,000 in January to more than 540,000 across
the country.

Now New South Wales had the biggest rate of unemployment on a state-by-state basis. Their
unemployment rate was five-and-a-half per cent.

Now the surprising thing from these figures is that the number of full-time jobs actually
increased. Employers put on 1200 more people in January but it's really unclear whether that's a
statistical blip or whether employers are holding onto people.

What we do know is unemployment is expected to get worse. The Government's official forecasts are
seven per cent during next year although some economists say 10 per cent.

Now Brendan, there is more bad news today. The debt laden plastics company Nylex has gone into
administration and receivership. The receivers say it will continue trading and there'll be talks
with workers and unions.

BRENDAN TREMBATH: As well as the jobs surprise, there is also a lot of talk in business about a
possible deal between the miner Rio Tinto and the Chinese aluminium producer, Chinalco.

SUE LANNIN: Yes, we have seen a lot in the newspapers over the past week about this.

Now Rio Tinto is in trading halt. That is ahead of an expected announcement by the company later
today when it releases its annual profit results.

Chinalco is expected to buy stakes in several Rio mining projects as well as convertible bonds. Now
that would inject about $30-billion into the company.

The big problem that Rio faces is its huge debt. It owes nearly $US40-billion. That's because of
the takeover of Canadian aluminium producer Alcan in late 2007.

A lot has happened since then. We've seen the credit crunch, the end of the commodities boom, the
failed takeover bid from rival BHP Billiton and now Rio is going cap in hand to Chinalco which has
got a nine per cent stake.

That of course has to be approved though by the Government so it has to go to the Foreign
Investment Review Board.

BRENDAN TREMBATH: Sue Lannin, if this deal is approved what sort of control will this Chinese
company have over Rio's board?

SUE LANNIN: Well the talk is that Rio will take about a 20 per cent stake in the company so
certainly it will take one or two seats on the board.

This is not without precedence. We've already seen China's Sinosteel takeover Western Australian
iron ore miner Midwest Corporation and take seats on the board. Also the Federal Government
approved Sinosteel's takeover of Murchison Metals last year.

Now this expected deal will be the biggest involving a Chinese backed firm and an Australian listed
company.

Now mining analyst Gavin Wendt from Fat Prophets says he doesn't believe Chinese interests will be
able to influence prices of key commodities like iron ore even if they've got control.

GAVIN WENDT: At the end of the day I don't think so. I mean I couldn't see it happening. They've
got a nine per cent stake at the present time so they are a minority shareholder. Even if the
Government allows them to increase their stake to in the vicinity of 18 per cent, you know, they've
got one board seat. They may well think that they can apply some pressure but they are still in a
minority position. So I wouldn't anticipate that there would be any material impact on iron ore
price negotiation.

SUE LANNIN: That's mining analyst, Gavin Wendt.

As I mentioned Rio's results are out today. Analysts are expecting an annual figure of about
$US10-billion.

BRENDAN TREMBATH: Finance reporter Sue Lannin.