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Reserve Bank still has room to move on rates, says Stevens

Reporter: Peter Ryan

ELEANOR HALL: The governor of the Reserve Bank had signalled that his board will slash official
interest rates again this year if global economic conditions worsen.

Testifying before the Federal Parliament, Glenn Stevens said that the central bank has plenty of
ammunition to take rates lower.

But he said that despite weakening local conditions he remains confident that Australia is not in
for a deep downturn.

Business editor Peter Ryan has been following the governor's testimony and he joins us now.

So Peter, first on interest rates. Did Mr Stevens shed any light on when the next rate cut may be?

PETER RYAN: Eleanor, the governor's comments in Canberra add to the view that the rates cutting
cycle may well have eased and that the cuts we've seen of a full percentage point over the last few
months may well have finished.

That 'wait and see' view now has the market factoring in a 50 basis point cut next month but that
could be revised downwards to 25 basis points.

Mr Stevens said there had already been a very big easing - four percentage points since September -
and that it would take some time for the full effects to be seen.

The out of course is another dramatic leg down in the global finance crisis and you never know when
that's going to happen. And if that scenario comes to pass, Mr Stevens says Australia is a lot
better off than say the United States, Japan or Britain to take decisive rates action.

GLENN STEVENS: Many countries as you know have found their interest rates either at zero or close
enough that it no longer matters. Our interest rate structure is very low now by our historical
standards and I think that will be quite a powerful impact on the economy as time goes by.

But we have got an overnight rate of three-and-a-quarter per cent which is, as it turns out, one of
the higher ones in the world, in the advanced world anyway and if there is a need to use more
interest rate stimulus and if that's prudent then we can, but we have scope to do more if more is
needed.

ELEANOR HALL: That's the Reserve Bank governor Glenn Stevens testifying at the Federal Parliament
today.

Peter, what about the Federal Government's $42-billion stimulus package that was announced on the
same day as the last interest rate cut? Did Mr Stevens endorse that package today?

PETER RYAN: Well that would have been one of the top questions Mr Stevens was waiting for in
addition to why did he leave interest rates so high for so long.

But he appeared to be relaxed about the expenditure and indicated that doing nothing was never an
option. And pressed on the level, he didn't think it was a matter of whether the level was too
high. He said there was really no difference between $40-billion or $42-billion which is what we
have.

But he did make the point that anyone expecting an instant solution will be disappointed. Yes, he
said, it would work to stimulate demand but not until much later in the economic cycle.

GLENN STEVENS: It can't really head off whatever is happening in the economy today because it
doesn't work that fast but later in the year we are going to be seeing more and more effects of
those measures and that's when we would have seen the impact of a different course of action and
the economy, I think, would have been considerably weaker than it will be had that course of action
been followed.

ELEANOR HALL: Glenn Stevens again. And Peter, did he answer that question about why he left
interest rates so high for so long?

PETER RYAN: Well there were a lot of questions about high interest rates and why we had 12
successive interest rate hikes; and also the situation that a lot of people found themselves in
based on projections this time last year that rates were going to be on the rise and lock
themselves into fixed rates for a long period.

He didn't really answer that question specifically but perhaps later in today's testimony he will
be pressed on that matter once again.

ELEANOR HALL: And what about the issue of bank deposit guarantees which were also quite
controversial at the time?

PETER RYAN: Yes, Mr Stevens said that given the unprecedented events of last September and October,
as we remember the collapse of Lehman Brothers which took the world to the brink of financial
catastrophe, the bank guarantee did sooth a lot of nerves.

He made the point that Australian banks are strong. They are making billions of dollars as we know
and Australia's big four are AA rated - there are only 14 of them in the world.

But he said regular people were seeing banks bailed out all around the world in the latter part of
last year and they wanted to know if their money was safe and he said the guarantee did its job
very well in putting those questions to rest.

GLENN STEVENS: There were a few murmurings. There were people ringing money programs on TV and so
on. I saw some of them saying well, you know, is my money okay in the banks? And of course the
answer they were given is yes. But I think for 999 people out of a thousand in the community, the
guarantee that just said their money is safe, it went off the agenda and it stayed off and that's
good.

ELEANOR HALL: And that's the Reserve Bank governor Glenn Stevens giving testimony to Federal
Parliament. Our business editor Peter Ryan with his analysis of that.

Liberals round out a bad week with calls for unity

Reporter: Lyndal Curtis

ELEANOR HALL: At the end of what's been a bad week for his party the Federal Liberal leader Malcolm
Turnbull is imploring his colleagues to stop the infighting.

But he has his work cut out for him in ending the rift between the conservative and moderate wings
of the party which he exacerbated yesterday by sacking a conservative junior frontbencher.

Mr Turnbull though is defending his leadership style and a senior conservative colleague is urging
the party to unite.

In Canberra, chief political correspondent Lyndal Curtis.

LYNDAL CURTIS: If Malcolm Turnbull could talk his way out of this current liberal crisis, he'd have
it resolved.

MALCOLM TURNBULL: Contrary to what some people in the media have said, I have a very consultative
leadership style.

LYNDAL CURTIS: And it will take all of his consultative powers to endeavour to heal the rifts that
have emerged over the decision to appoint moderate Christopher Pyne as chief parliamentary
tactician and to sack conservative Cory Bernardi as shadow parliamentary secretary over comments
said to be disparaging of Mr Pyne.

Added to the mix was the angst over the leaking of an offer made to former treasurer Peter Costello
to return to the frontbench as Julie Bishop decided to relinquish her shadow treasury job and doubt
cast over the Coalition's commitment to a pension increase by the families spokesman Tony Abbott.

Mr Turnbull has been talking up a storm telling Melbourne Radio 3AW he's talked to Mr Abbott.

MALCOLM TURNBULL: All I can tell you is that our position is, our policy is unequivocal.

NEIL MITCHELL: Does he understand that now?

MALCOLM TURNBULL: I am sure he does.

NEIL MITCHELL: You told him.

MALCOLM TURNBULL: I'm sure, yep.

LYNDAL CURTIS: He's talked to Christopher Pyne.

MALCOLM TURNBULL: I talk to my colleagues all the time and I talk to Christopher a lot obviously.

LYNDAL CURTIS: He's talked to leading conservative Nick Minchin.

MALCOLM TURNBULL: Of course, absolutely. I've spoken to him. I speak to Nick Minchin all the time.

LYNDAL CURTIS: And he's even talked to Peter Costello.

MALCOLM TURNBULL: Peter and I speak regularly.

LYNDAL CURTIS: In fact, he's even agreed on a form of words with Mr Costello about the former
treasurer's ambitions.

MALCOLM TURNBULL: Peter and I have discussed it and we agreed that what I would say and the
position would be literally that he has made it clear that he is not interested in a frontbench or
leadership role.

LYNDAL CURTIS: Why leader needs to come to a form of words with a backbencher is unknown,
especially when puts him in a potentially weaker position when he is the only one sticking to the
script.

PETER COSTELLO: Well, I've made my position entirely clear. I continue to represent my
constituents. I am concerned about Australia and its future and I have a lot to say about Australia
and its future.

LYNDAL CURTIS: What is clear is that Mr Turnbull's actions or those of people close to him have
played a large role in the instability.

The leaking of the offer to Mr Costello, the decision to install Mr Pyne in the parliamentary job
and the sacking of conservative Cory Bernardi have been at the heart of the problems.

But Mr Turnbull isn't backing down from his decision to sack Senator Bernardi.

MALCOLM TURNBULL: Reality is that discipline and unity is everything in politics and also by the
way, Neil, courtesy. And it's a willing contest but I can't tolerate members of the shadow
executive disparaging colleagues in, you know, such a personal or gratuitous fashion.

LYNDAL CURTIS: A leading conservative frontbencher and Senator Bernardi's South Australian
colleague Nick Minchin publicly accepts the need to sack him but believes he'll be back.

NICK MINCHIN: Senator Bernardi is one of the rising stars of the Liberal Party and has a very
strong future but not all political careers go in an upward trajectory.

LYNDAL CURTIS: On this Senator Minchin and Mr Turnbull are singing from the same songbook.

MALCOLM TURNBULL: Most political careers have ups and downs and he has done a good job in that
shadow portfolio.

LYNDAL CURTIS: The two men agree also that it was not the Opposition's finest week.

NICK MINCHIN: Every political party has good weeks and bad weeks and I guess this is one that we'd
rather forget. It's been a bit untidy.

MALCOLM TURNBULL: Yes people do get a bit scratchy from time to time. That happens in all political
parties. It happens in the Labor Party.

LYNDAL CURTIS: The tensions between the two wings of party are still simmering, if not on policy at
least on what are termed the spoils of Opposition - positions - and the feeling from conservatives
that they are on the losing side when positions are allocated.

Senator Minchin has had his say on the options for replacing Senator Bernardi.

NICK MINCHIN: Well I've discussed with Malcolm the array of talent that we have on the Senate
backbench.

LYNDAL CURTIS: Conservative Liberals point out the need for balance in the decisions over positions
and say that's something John Howard achieved even if the party's policies headed off in the
conservative direction.

The need for balance was put succinctly by the shadow minister Helen Coonan on Sky.

HELEN COONAN: You need two wings to fly.

LYNDAL CURTIS: The troubles haven't yet spilled over into an outright questioning of Mr Turnbull's
leadership and he did welcome this unprompted expression of support from Senator Minchin.

NICK MINCHIN: I strongly support Malcolm Turnbull's leadership. I accept and support the decisions
he has had to make this week.

LYNDAL CURTIS: The potential of this week has been squandered by the Opposition which had the
chance to keep up the pressure on the Government over the economy with the appointment of Joe
Hockey as shadow treasurer and exploit Government difficulties over emissions trading.

Both Senator Minchin and Mr Turnbull are hoping the show can be pulled back together next week and
they're warning the troops to fall into line.

NICK MINCHIN: What all Liberals should do is focus on the fact that the House of Representatives is
resuming next week.

MALCOLM TURNBULL: Disunity in politics is death. We all understand that. You have to be very
careful that you don't become disunited and end up squabbling over the spoils of Opposition. And
the spoils of Opposition, I might say, are very few and far between.

ELEANOR HALL: Federal Opposition leader Malcolm Turnbull ending that report by Lyndal Curtis.

Tax officials alerted to possible global fraud

Reporter: Simon Santow

ELEANOR HALL: The Swiss based bank UBS is fending off claims that it's fostering global tax
evasion. UBS paid more than a billion dollars to United States tax authorities to settle a case in
which it was accused of assisting its customers to commit fraud.

Now tax authorities around the world, including in Australia, are examining the possibility of
uncovering billions of dollars that they suspect are hidden in offshore accounts.

Simon Santow has our report.

SIMON SANTOW: For the giant Swiss based global bank UBS, the court action in the United States has
been both embarrassing and damaging to its business.

An employee blew the whistle when he told tax authorities that UBS bankers had helped their clients
in America avoid tax.

At the heart of the deception is what sets banks in Switzerland apart from other banks in other
Western nations - the secrecy surrounding account details or even the fact a customer holds an
account.

IAN RAMSAY: Well I would have little doubt that this major announcement of the penalty that UBS
will pay is a matter that is being following closely by taxation authorities around the world.

After all, it is an unprecedented development for UBS to pay such a large sum of money to the US
Government but also of course for UBS to agree to hand over the names of some of its clients to
regulatory authorities.

SIMON SANTOW: But according to professor Ian Ramsay from Melbourne University's Centre for
Corporate Law, it would be a mistake to assume wealthy Australian clients will also necessarily
have the cloak of anonymity lifted on their Swiss bank accounts.

IAN RAMSAY: UBS would strongly resist handing over the names of its clients. After all it has taken
some years for UBS, under significant pressure, to hand over the names of these US clients to
regulatory agencies in the United States. So I think that UBS would strongly resist doing the same
in relation to regulatory agencies in other countries.

SIMON SANTOW: So in a sense are you saying that there is a limitation to what they have admitted
they have done wrong?

IAN RAMSAY: Well what we do need to acknowledge is that although this is quite an extraordinary
development it is limited to the United States. In other words the settlement is with key US
regulatory authorities. Moreover it concerns US clients of UBS.

So what we don't know is whether of course the actions that UBS engaged in, in relation to its US
clients, there were any other clients in other countries if you like, that UBS was also providing
services to and those services might be in breach of relevant laws. We just don't know the answer
to that yet but of course that would be something that other taxation authorities would be
considering.

SIMON SANTOW: In Switzerland banking is the country's major industry and the decision to release
the names and the account details has been branded by some as a 'capitulation'.

Pierre Mirabaud is the head of the Swiss Bankers Association. He told the BBC it would be a mistake
to confuse secrecy laws with any official attempt to hide tax evaders.

PIERRE MIRABAUD: The banking secrecy law in Switzerland does not cover dodgy individuals, does not
cover crime and does not cover illegal transactions like money laundering, like drug dealing and so
on.

REPORTER: But the clear allegation is that you don't look too closely to find out whether those
individuals ...

PIERRE MIRABAUD: Completely wrong. I deny that completely and the OECD has declared that
Switzerland is not on any black list of unco-operating state.

SIMON SANTOW: Professor Ramsay says it's impossible to know how many Australians are keeping their
money offshore and out of the reaches of tax authorities.

IAN RAMSAY: The very nature of bank accounts in Switzerland and their secrecy tells us that solid
data on the extent to which citizens of any country including Australia use Swiss bank accounts is
not readily available.

After all for many, many decades one of the most powerful attractions of doing banking with Swiss
banks is the secrecy and confidentiality that comes with that. And of course that tells us
immediately how strongly UBS would have resisted handing over the names of some of its US clients.

SIMON SANTOW: So Australian clients don't put their money in Switzerland for better interest rates?

IAN RAMSAY: Oh well they may put their money in Switzerland for a number of reasons but I think
what we can say is that certainly some of them would put their money in there because of the
confidentiality that unfolds.

And of course what is quite interesting about this particular development is that arguably none of
this would have unfolded, the major settlement with regulatory authorities would never have
unfolded except for a whistle-blower, except for an employee who in a sense went to the regulatory
authorities.

ELEANOR HALL: That's Professor Ian Ramsay, the director of the Centre for Corporate Law at
Melbourne University speaking to Simon Santow.

Expert backs foreign investment in local resources companies

Reporter: Stephen Long

ELEANOR HALL: The Federal Government remains under pressure from investors and unions to block
Chinese bids for key resources companies in Australia.

The former treasurer Peter Costello has said that he would stop the Chinese state-run company
Chinalco from upping its stake in Rio Tinto.

But a leading expert on the issue says that the fears about Chinese investment are baseless and
that such investment is in Australia's national interest.

James Laurenceson is with the East Asia Economic Research Group at the University of Queensland and
he spoke to our economics correspondent Stephen Long.

JAMES LAURENCESON: This growing investment in the mining industry is really the forefront of a
developing investment relationship that follows quite naturally on the back of the trade
relationship.

The bottom line is Australia has a small population, a low savings rate and a lot of natural
resources that need development. So if we are going to develop these resources we need foreign
capital. We don't have any choices about that. In the past we have got foreign capital from the
likes of Europe and Japan and now the people who are most keen on investing in the resources sector
is the Chinese.

STEPHEN LONG: Why the concern then about China?

JAMES LAURENCESON: Oh I think it's connected to the fears that, you know, China has a communist
government and there is fears that China is somehow trying to extract pricing concessions when it
comes to negotiations for setting the prices for the goods that are traded.

STEPHEN LONG: Isn't that a fair critique though - that China is the major customer? They want the
resources so if they've got investments in mining companies they won't be operating on commercial
terms. They're conflicted. They will want to get the lowest price for the mining exports rather
than developing the highest price for the other shareholders of the company.

JAMES LAURENCESON: Yes, well but ...

STEPHEN LONG: Or Australia in terms of national income.

JAMES LAURENCESON: There are protections already in place to manage those sorts of concerns. The
board of directors of any company is required to act in the best interests of the shareholders.

And also if you look at the other Chinese investments abroad, for example Chinese have invested in
Australia since the 1980s in the mining sector and there haven't been any of these such concerns
that have come to the surface.

I really do think it's more fear than any real worries.

STEPHEN LONG: In fact they have a coal mine that's Chinese-state owned in the Hunter Valley in New
South Wales. People say it's not the only communist coal mine in the Hunter Valley given the
politics of the mining union.

JAMES LAURENCESON: (Laughs) Okay, well I'm probably not very well placed to comment on that.

But the Chinese need the resources as much as want to sell it to them. They are operating in a
global market with a lot of competition. They are not the only ones seeking access to stable supply
- the rise of India, Japan, Korea. So they are in a competitive market place. I wouldn't call them
the only players in the game.

STEPHEN LONG: In a sense is this emblematic of the changing power balance between East and West?
You've got the low savings, high consumption countries of the West that are increasingly relying on
China to bail out companies in trouble with too much debt but also bail out their domestic
economies.

JAMES LAURENCESON: Yeah, look that's certainly true. I mean there is a massive flow of funds from
China's financial sector abroad to countries like the US and Australia but it is a two-way street.
I mean when it comes to this securing a stable supply of resources, this is something that the
Chinese economy desperately needs.

STEPHEN LONG: The fact that the West needs China to fund its consumption and China's foreign
currency reserves to fund the debt that Western governments are having to take on to bail out their
economies - does that give China increased leverage to convince Western governments it's a good
thing to accept these foreign investments such as the ones we are seeing in the Australian mining
companies?

JAMES LAURENCESON: Oh look absolutely. I mean there is no doubt that the Chinese have more leverage
now over say Rio Tinto compared with what they did six months ago.

But let's not forget, I mean that's just business. That's not politics, that's business. I mean six
months ago or one year ago there was an uproar in the Chinese media regarding the fact the likes of
Rio Tinto and BHP had extracted huge increases in the price of iron ore to China. And now over the
last six to 12 months the balance of leverage has changed and that's business.

STEPHEN LONG: So what do you think that Wayne Swan, the Treasurer will do?

JAMES LAURENCESON: Well I mean I think if we are acting in the national interest and certainly in
terms of the long term national interest, I don't think he has much choice other than to go along
with these investments.

There is no doubt in my mind that Australia and China have huge complementarities when it comes to
the investment relationship - low savings rate in Australia, China has a lot of capital, and they
need resources, we need foreign capital to develop our resources sector. So there's a perfect match
there and I think if you were acting in the national interest that's what you would be looking at.

You wouldn't want to send conflicting signals in the short run and put that long term relationship
in jeopardy.

ELEANOR HALL: Dr James Laurenceson from the University of Queensland speaking to Stephen Long.

Victorian fire-fighters trade allegations in turf war

Reporter: Rachael Brown

ELEANOR HALL: In Victoria fire-fighters have been publicly airing allegations of a turf war.

The fire-fighters union has accused the Country Fire Authority of stopping metropolitan
fire-fighters from helping to control the blazes that claimed 208 lives.

The United Firefighters Union says it will tell the Royal Commission that the State's fire-fighting
resources were not properly deployed and it's calling for the issue to be investigated immediately,
saying the fire season is far from over.

In Melbourne, Rachael Brown reports.

RACHAEL BROWN: The United Firefighters Union says parochialism hindered the State's bushfire
response.

PETER MARSHALL: The resources that were on duty that day, some of the stations in particular in
region 14 CFA and region 8 sat in those fire stations all day while large sections of the community
within their area burned.

RACHAEL BROWN: The Union's national secretary Peter Marshall is quick to point out he doesn't think
the CFA bungled the fire fight, but says it could have thrown more resources at it.

Mr Marshall says a decision by the CFA not to deploy up to 1200 professional fire-fighters to the
blazes may have cost lives.

He says for example a CFA incident controller at Alexandra told an MFB crew (Metropolitan Fire and
Emergency Services Board) it wouldn't be used.

PETER MARSHALL: The statement was made 'not over my dead body' and indeed the MFB commander
reported to his crew that he was made very clear that they were not wanted.

RACHAEL BROWN: What was the sentiment among the crew when they were told that?

PETER MARSHALL: Well look, I mean people want to help. They are paid by the community. They have
trained all their life. They are not interested whether it's CFA territory or MFB territory. They
just want to help the community.

RACHAEL BROWN: And you say there was a similar incident at Wandong? An MFB taskforce was held back
and when it was finally deployed, CFA fire-fighters on the ground said where have you been, we've
been waiting ages for you? We needed you?

PETER MARSHALL: There was an incident along those lines as we were instructed in Wandong but the
specific details will be submitted to the Royal Commission.

RACHAEL BROWN: Mr Marshall says residents don't care which service stops a wildfire burning their
house down and he says he can't wait for a royal commission's findings because Victoria could find
itself in a similar precarious position this summer.

He admits the union has since 1956 been pushing for a merger of the State's fire services, but he
denies he's using the current climate for political point scoring.

PETER MARSHALL: You'll have another fire next week and the same things happen that happened
recently. It is, I'm not going to sit back and remain silent on that - that is wrong.

RACHAEL BROWN: Callers to talkback radio this morning however thought the union's claims were
inappropriate.

TALKBACK CALLER: The professionals and the volunteers worked incredibly well together until you get
an incident like this and people like Mr Marshall come up because they want to raise their profile
and it sets one against the other.

TALKBACK CALLER 2: They are not matters that should be aired now. I've still got friends and
neighbours to be buried. There is still an awful lot of hurt in the community.

RACHAEL BROWN: The CFA's deputy chief officer Steve Warrington says he understands the frustration
of some fire-fighters but he says crews were deployed appropriately.

STEVE WARRINGTON: I understand the frustrations I've got to say. If you're sitting back at, you
know, Dandenong fire station or Sunshine fire station and you're watching the news and you're
seeing houses burnt down, well the reality is that Dandenong and Sunshine fire stations, we are
still required to provide a service.

RACHAEL BROWN: He says crews without the right trucks or expertise in fighting wildfires were used
for asset protection or on standby in other communities across the State.

STEVE WARRINGTON: There's two distinct types of fire-fighting required here and at times the fires
hit towns and indeed we've used and will continue to use both CFA career staff and MFB career staff
in fighting those fires.

RACHAEL BROWN: Mr Warrington found himself in a heated debate on local radio this morning when he
told the union's Peter Marshall he'd be doing the same thing next time.

STEVE WARRINGTON: For instance in your Greenvale example we'd probably deploy Greenvale to a town
to do asset protection and we would ask the MFB would help CFA by putting an MFB truck in their
base station...

PETER MARSHALL: Why didn't that happen on the day?

STEVE WARRINGTON: And they've done that in the past...

PETER MARSHALL: Why didn't that happen on the day?

STEVE WARRINGTON: And I am sure they are happy to do that in the future.

RACHAEL BROWN: The Victorian Premier John Brumby says he's not aware of any issues with crew
deployment but says there is a time and a place for its investigation .

JOHN BRUMBY: I guess all of these claims can be made and tested before the Royal Commission, so I'm
not going to comment and get into a debate about that with the union.

ELEANOR HALL: That's Victoria's Premier John Brumby ending that report by Rachael Brown in
Melbourne.

Governments wants to speed up introduction of self-extinguishing cigarette

Reporter: Michael Edwards

ELEANOR HALL: The Federal Government is moving to reduce the risk of cigarettes sparking bushfires
by speeding up the introduction of self-extinguishing cigarettes.

Some of the fires in Victoria are suspected to have been started by people throwing cigarettes out
of cars and public health experts say it's outrageous that the tobacco companies haven't begun
production of less hazardous cigarettes already.

Michael Edwards has our report.

MICHAEL EDWARDS: According to anti-tobacco campaigners each year a number of Australians die in
house fires started by lit cigarettes and recently it has become apparent that at least one of the
Victorian bushfires was started by someone tossing an unextinguished cigarette out of a car.

Professor Simon Chapman is a public health expert from the University of Sydney.

SIMON CHAPMAN: I think a lot of smokers feel the world is their ashtray and they just throw them
around. Everyone has seen butts and packs all over the ground. And I guess unfortunately these days
smoking is concentrated around people who often have low levels of education, are pretty
thoughtless.

Just saying, hey do the right thing, don't litter I'm afraid just doesn't work on a lot of people
so you need to engineer the product so that the thoughtless, mindless individuals who do throw them
out, do discard them in settings like that, it's less likely to cause a problem.

MICHAEL EDWARDS: And to help achieve this from March next year cigarette manufacturers have to
introduce self-extinguishing cigarettes.

Nerida White is the director of communications for the Philip Morris company, one of Australia's
largest cigarette producers. She says Philip Morris is ready to implement the changes.

NERIDA WHITE: It will be using a paper, a special paper that has what we call speed bumps that has
the effect of slowing down the rate of burn on the paper and therefore the rate of the burn of the
cigarette.

MICHAEL WHITE: But in light of the Victorian bushfires the Federal Government is considering
bringing that start date forward.

The Consumer Affairs Minister Chris Bowen is seeking advice from the Australian Competition and
Consumer Commission about fast-tracking the new cigarette regulations.

Professor Simon Chapman says it's outrageous it hasn't already happened.

SIMON CHAPMAN: They have been introduced in Canada and several states of the United States for a
number of years. Australian, the Australian Government has agreed to introduce them from March next
year. Really they ought to bring that forward.

Everyone else is doing their bit to try and reduce the probability of horrendous fires again next
year. The tobacco industry ought to be made to do its role as well.

MICHAEL WHITE: Arson investigators believe two of the deaths in the Victorian bushfires were as a
result of fires started from a lit cigarette.

Professor Chapman says he's been warning the government about the problem for years. He says once
again the tobacco companies have put commercial concerns ahead of public safety.

SIMON CHAPMAN: The reason why it's been resisted is that the tobacco companies know that smokers
don't like these cigarettes as much as the regular ones because they tend to go out when left
undrawn on for example in ashtrays or you know, holding them by the side of your body or something
like that.

MICHAEL WHITE: Another of Australia's largest cigarette producers British American Tobacco says it
has yet to be consulted about bringing forward the implementation date.

Philip Morris says it's not sure whether it could introduce the changes before March next year and
its spokeswoman Nerida White says no matter how cigarettes are manufactured, it's smokers who have
to be careful where they butt out.

NERIDA WHITE: Consumers and smokers need to remain aware that all lit end cigarettes pose fire
risks and they need to be handled and disposed of very carefully. That applies to cigarettes today
and it will continue to apply to cigarettes that comply with the reduced fire risk standard and the
regulation.

ELEANOR HALL: Nerida White, the director of communications at Philip Morris ending that report by
Michael Edwards.

Former ambassador looking for more US leadership in Middle East

Reporter: Eleanor Hall

ELEANOR HALL: A former Australian ambassador to Israel has warned that the Middle East is likely to
face a series of significant strategic shifts in the near future which will lead to more violence
and conflict.

Peter Rodgers says a solution to the Israeli Palestinian conflict is still the key to stability in
the region but that the United States needs to take a decisive leadership role to drive this and he
says he is not encouraged by the signs coming from the Obama administration.

Peter Rodgers has just written a book about the region and he spoke to me from Canberra earlier
today.

ELEANOR HALL: Peter Rodgers in your book you paint two scenarios about the shape of the Middle East
in 2020. Do the Israeli election results this month make the optimistic or the pessimistic one more
likely?

PETER RODGERS: It depends. The Israeli election process is pretty complicated. We don't know who or
won't know who the new Israeli Government is for perhaps a month or so and even then it is likely
to be a rather sort of fragile construct via the right wing parties or left wing parties.

If it's a left wing construct then there is change that it will give a bit of a lift around the
region but I wouldn't read too much into it.

ELEANOR HALL: Well it looks like Benjamin Netanyahu from Likud is strengthening his bid to lead a
coalition that could include both Kadima and Mr Lieberman's extremist party. You know the players
here well. What is your view of a government, a coalition of that sort?

PETER RODGERS: Well it will take a very tough line with the Palestinians. It will not do anything
useful to restrain Israeli settlement in the West Bank. It will not countenance the idea of dealing
with Hamas or those outside the Palestinian authority and without those things gradually happening,
uncomfortable as they may be, there can be no progress.

ELEANOR HALL: You state categorically in your book that the Middle East will be the scene of more
wars in the near future and you say that the Israeli-Palestinian conflict will not be resolved
peacefully. It's unusual for a diplomat to publicly express such unequivocally negative views. Why
are you so categorical?

PETER RODGERS: Well I need to say I haven't been a diplomat since 1998 and now I can speak freely.

I think there are a number of elements in this. One is that the Israelis and the Palestinians are
absolutely adept at giving each other excuses for bad behaviour and I think, like many others, I
went through a period where I thought they have created the problem, it's up to them to solve it.

They are incapable of solving their problem. They need constructive and imaginative outside help.
That can only come from America. It won't come from Europe. It can only come from America. The ball
is very much in the Obama court.

I am not particularly optimistic because I think we are going to see a replay of what's gone on for
the last 10 or 20 years and in terms of that broader issue of conflict. I mean it's not just the
Israeli Palestinians who are likely to continue to do nasty things to each other.

Iran is a player in the Middle East. It's shifting some of the strategic dimensions in both a
religious sense - the Sunni and Shi'ite divide - Iran has imperial ambitions in the Middle East. It
may well have nuclear weapons ambitions.

I mean the prospects for significant dramatic strategic shifts over the next generation or so are
really profound and they are mostly negative.

ELEANOR HALL: You say that you are not particularly optimistic about Barack Obama. What role should
the US be playing in this?

PETER RODGERS: It seems to me we are in a watershed period. The Obama administration needs to do a
few things. It needs to lay the law down to Israel over Israeli settlements in the West Bank. It
needs to both put pressure on Egypt and to help Egypt dry up the flow of weapons to Hamas in Gaza.

Without the Palestinians being assured that they will have a two state that consists of most of the
West Bank and Gaza, there is no reason why Palestinians should have any faith in a peace process.
Without Israelis believing that they can go about their daily lives free of Hamas rocket attacks or
other terrorist attacks from the Palestinian side, Israelis won't sign onto a peace deal.

The player in this is the US.

ELEANOR HALL: Well a senior Democrat, Senator John Kerry visited Israel and Gaza overnight. He
stressed that the US is not changing its position on Hamas but this is a senior US official
visiting the region. Is that a positive side?

PETER RODGERS: I think that's completely dumb. I mean Hamas, Israel cannot destroy Hamas any more
than Hamas despite its charter can destroy Israel. Hamas is a player on the ground. No amount of
wishing will make it go away.

He may be visiting Gaza but it has to lead somewhere and if it doesn't lead to a serious rethink in
how Israel deals with the region including, and all the players on the ground including Hamas then
it was a quick tour to the beach and nothing more.

There cannot be a peace process without significant dramatic and energetic US leadership that needs
to put pressure on all parties.

ELEANOR HALL: Peter Rodgers, thanks very much for joining us.

PETER RODGERS: Thanks Eleanor.

ELEANOR HALL: That's the former Australian ambassador to Israel, Peter Rodgers. His new book is
called 'Arabian Plights: The Future of the Middle East'.

Acquittal for three accused over murdered journalist

Reporter: Scott Bevan

ELEANOR HALL: To Moscow now where the acquittal of three men over the murder of a prominent Russian
journalist has sparked anger among her supporters.

Anna Politkovskaya was shot dead outside her home in Moscow in 2006.

Human rights groups say the case was mishandled and they've called for greater protection for
journalists in Russia.

Moscow correspondent Scott Bevan reports.

SCOTT BEVAN: After months of detention the three men accused of being involved in Anna
Politkovskaya's murder were delighted to head out of the Moscow courtroom and into the cold, fresh
air as soon as they heard the jury return not guilty verdicts because of insufficient evidence.

(Sounds of people outside courtroom)

'What did you feel first?' a reporter asks. 'We felt freedom,' one of the acquitted men replied.

Yet many have felt bitter disappointment about the way the investigation into the murder of Anna
Politkovskaya has been handled.

Defence lawyers including Valery Chernikov may have been delighted with the verdicts in this trial,
but they had nothing kind to say about the case that put their clients in court.

VALERY CHERNIKOV (translated): It's been such a fiasco, that the country, the Government and the
prosecutor-general can't let it go without giving it their attention.

SCOTT BEVAN: Another defence lawyer Murad Musaev said there'd be no medals for the investigators.

MURAD MUSAEV: He's going to be asked to find the real criminals because the nation is beginning to
ask questions.

SCOTT BEVAN: Actually many around the world have been asking questions about the Politkovskaya case
ever since the acclaimed author and journalist was shot dead outside her Moscow apartment in
October 2006.

She had been renowned for her reporting on human rights abuses in conflict-torn Chechnya and for
her criticism of the Putin presidency and some of its policies. Her journalism had won her praise
and produced high-powered enemies.

None of the three at the centre of this trial had been accused of being the killer of Anna
Politkovskaya. Investigators say a brother of two of the former defendants was the gunman, but he
hasn't been found.

What's more, whoever is the mastermind of the journalist's murder hasn't been revealed.

Outside the court the Politkovskaya family's lawyer Karina Moskalenko slammed the investigation as
inefficient and demanded investigators do more to solve this case.

KARINA MOSKALENKO (translated): We want the real murderer and we will achieve that.

SCOTT BEVAN: The slain journalist's children and former colleagues have told a media conference
they're not surprised by the verdict but they're angry about the investigation and trial.

Sergei Sokolov is chief editor of Novaya Gazeta, where Anna Politkovskaya worked.

(Sergei Sokolov speaking)

'This is a verdict against the entire legal system that has been ineffective from beginning to
end,' he said.

Elsa Vidal is from the press freedom group Reporters Without Borders. She says the Politkovskaya
murder is the highest profile case in a country where being a journalist can be highly dangerous.

ELSA VIDAL: They were expecting independent and impartial justice and that has not been the case so
it's casting a very bad shadow on Russian justice.

SCOTT BEVAN: The organisation says in the past nine years, 21 journalists have been killed in
Russia because of their job.

ELSA VIDAL: The question is the question of impunity. So we think there is a need for the law to
effectively protect journalists. But moreover there is a real need for the authorities to get on
this case and to give clear instruction to the judges and to the policemen in charge of
investigations concerning journalists.

ELEANOR HALL: That's Elsa Vidal from Reporters Without Borders, ending that report from the ABC's
Moscow correspondent Scott Bevan.

New Guantanamo Bay challenge for President Obama

Reporter: Oscar McLaren

ELEANOR HALL: In the United States the Obama administration has been reminded of just how difficult
its plan to shut down the Guantanamo bay detention centre will be.

17 people from the Uighur minority in north-west China have been held at the centre since 2002. Now
a United States court has ruled that while their indefinite detention is grossly unfair, it has no
power to order their release.

Oscar McLaren reports.

OSCAR MCLAREN: The latest decision by an appeals court in the United States is being read as a
further blow to hopes of the 17 Chinese Uighurs who've been languishing in Guantanamo Bay for more
than seven years.

Emi MacLean from the Centre for Constitutional Rights in New York who's been involved in the case,
says it's a bitter disappointment.

EMI MACLEAN: These individuals have been told now several times that they have won essentially in
the Supreme Court. They have won the right to be able to litigate their cases. They have won the
right to be able to challenge their detention. They have heard that the US Government has conceded
that they were wrongly detained. They've heard that a court has ordered them released.

All of these things have happened in the courts in the United States and right now what we need for
them, more than anything, is for them to be released.

OSCAR MCLAREN: The Uighurs are a Muslim minority from north-west China. Seventeen of them were
arrested in Afghanistan in late 2001 and taken to Guantanamo Bay.

The United States said the men had been training with a terrorist organisation called the East
Turkistan Islamic Movement.

The Uighurs said they'd simply gone to Afghanistan to escape human rights violations at the hands
of the Chinese Government which has cracked down on separatist activity in its far western reaches.

In 2003 authorities at Guantanamo decided they wouldn't pursue legal action against any of the 17
men but the men couldn't be returned to China and the US Government refused to allow them into the
United States either.

Emi MacLean says the new legal precedent allowing government to indefinitely detain people without
charge is disturbing but she says hopes are now resting with the Obama administration which has the
power to either release the Uighurs into the United States or negotiate their relocation to other
countries.

EMI MACLEAN: You know we've not ended with the litigation but as important as the litigation or
perhaps more important is what President Obama is now going to do and what the international
community is now going to do.

If we in the United States and internationally genuinely believe that people should not be
indefinitely detained without charge, the United States should take in some of these individuals
who need protection and can't be sent to their home countries and other countries should also
contribute to the closure of Guantanamo.

OSCAR MCLAREN: And she says President Obama's promise to close Guantanamo Bay simply won't be
possible unless a solution is found for as many as 60 inmates in a similar position.

EMI MACLEAN: So now there is 250 people who are there and 60 of them are effectively there because
they would be tortured or persecuted if they were returned to their home countries.

OSCAR MCLAREN: Donald Rothwell is professor of law at the Australian National University and says
negotiations with third party states are progressing slowly.

DONALD ROTHWELL: The only one that has definitely been successful at the moment is with Albania who
has agreed to accept a small number of the Uighurs. Apparently Munich, the city of Munich has
agreed to take some of the Uighurs but that still depends upon the position of the German
Government.

OSCAR MCLAREN: Australia has been approached by the United States, but professor Rothwell says
accepting the Uighurs brings diplomatic complications.

DONALD ROTHWELL: Absolutely. One of the issues that exists with accepting the Uighurs is the
reaction of the Chinese Government and clearly there is practice by the part of the Chinese in
which they have expressed serious concern as to whether various other countries would accept the
Uighurs. China as I understand it maintains the position these people are terrorists and in fact
has expressed some interest in prosecuting the Uighurs if they were returned to China.

OSCAR MCLAREN: Nicola McGarrity of the Terrorism and Law Project at the University of New South
Wales says there's a strong case for them to be resettled in the United States.

NICOLA MCGARRITY: The original United States court recognised that there was very little evidence
on which the United States could refuse to release them, that being that the United States relied
solely on the fact that they had received firearms training in Afghanistan. And if that's the basis
on which someone is not going to be allowed into the United States, that they've received firearms
training, I imagine that there is quite a few current residents of the United States who would fail
that test as well.

OSCAR MCLAREN: And she says there are difficult decisions ahead for the Obama administration.

NICOLA MCGARRITY: I think there's going to have to be a decision made in the next six months or the
next year at the most as to what's going to happen to those people who they simply can't find third
countries to take. Unless there is a large amount of money or aid in kind that is offered to third
countries, I don't imagine that these 60 men are going to be able to find homes in countries other
than the United States.

So I think a decision is going to have to be made. A very pragmatic decision is going to have to be
made about what is more important to the Obama administration - the closure of Guantanamo Bay or
the release of these men into the United States.

ELEANOR HALL: That's Nicola McGarrity, the director of the Terrorism and Law Project at the
University of New South Wales, ending that report from Oscar McLaren.

NY Post defends chimp cartoon despite racism claims