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RBA reveals reasons to keep rates on hold

PETER CAVE: Europe is in dire straits. America is nearing the bottom of its recession. And China -
hopefully - is going to save us here in Australia.

That's the thinking behind the decision by the Reserve Bank not to cut interest rates this month.

The minutes of the RBA board meeting, released late this morning, show that the central bank
believes the global economy is "stabilising" after the sharpest slump since the Great Depression.

But the Reserve Bank Governor warned in a speech this morning the recovery will be slow.

Our Economics correspondent Stephen Long has joined me in the studio with more on the story.

Stephen, it seems that the Reserve Bank looks pretty positive about the outlook?

STEPHEN LONG: Very much so, Peter. This confirms that the Reserve Bank thinks that the global
economy is going to begin recovering in the second half of this year.

They see the recession globally bottoming out at the moment, and a recovery commencing at least by
2010 with a gradual pick-up over the next six months or so.

Although, it has to be said, when you actually read through the minutes, it's not looking that
good, on the Reserve Bank's own admission. The Eurozone is very weak. If you look at what it says
in America, all it really says is that the pace of contraction is slowing.

The big ticket item that they see where things are really positive is in Asia and China in
particular.

And they note that Asian economies are showing signs of recovery, while the best that could be said
for the global economy as a whole is that output is beginning to stabilise after earlier sharp
falls.

But that's enough to make them think that Australia will continue to fare better than the rest of
the world, and recover a lot better than the rest of the world too, because of our links to China.

Glenn Stevens is very positive about China. He spoke at a business breakfast this morning in
Sydney. Here's what he had to say.

GLENN STEVENS: I don't think there's any doubt that there's a genuine pick-up in economic activity
- quite a significant one - happening in China in the first four or five months of this year.

I think a wide range of data sets show that, and as we work out the quarterly growth numbers
through sort of a mystical process, out of the year ended numbers that they publish, but I think
it's pretty clear that quarterly growth pace has picked up, and the March quarter was the best
quarter for about three quarters.

So it's real; the durability of it is the open question, and that is a question to which we won't
really know the answer I don't think at this point.

PETER CAVE: RBA Governor Glenn Stevens there.

So the idea that Australia may well escape the worst of it by being China's quarry may be right
after all?

STEPHEN LONG: If they're right, and Glenn Stevens has put that qualification in about the
durability of the improvement in China.

But if they're right, essentially what the Reserve Bank is doing is resurrecting a thesis known as
"decoupling", Peter.

At the beginning of the global downturn, there was a theory that China, Asia, could escape the
recessionary conditions in the US and Europe, and that Australia, by being China's quarry, would
basically escape the worst of it too.

Now that decoupling thesis seems to be back in vogue. But the real question is whether Chinese
growth is sustainable. They've thrown in four trillion yuan - billions and billions of dollars in
economic stimulus - and they've also instructed the state-run banks to lend lots of money.

Now the question is: can they keep it going?

There are a lot of white elephants being built right now in China.

PETER CAVE: The Treasury forecast which came out with the Budget last week were attacked by many as
being too optimistic. Now we have the RBA's view. Are they singing from the same hymnbook?

STEPHEN LONG: They are. At first blush it might look like they're not, because the Reserve Bank in
its board minutes is stressing that the growth, the pick-up from growth will be slow, very, very
slow in Europe, but they still say it will be slow here and slower than past recessions.

But when you break it down, they're still looking, as the Treasury is, at above trend growth from
2011 on.

And Glenn Stevens was at pains to stress that there's not a hair's breadth between the forecasts of
the Treasury and the Reserve Bank when he spoke this morning.

GLENN STEVENS: As I read the forecasts, I think that those forecasts that are in the Budget are not
materially different to the two-year horizon that we have ourselves. The initial part of the
forecast recovery's pretty slow.

PETER CAVE: Our RBA Governor again.

How does the Reserve Bank see the outlook for inflation?

STEPHEN LONG: Well, they see inflation coming down and not being a problem. But one of the
interesting things Peter, is that they still seem to have a bit of vestigial hawkishness about
them.

They note in the minutes of the last board meeting that the supposed fall in the consumer price
index on the most recent quarterly numbers pretty much disappears if you strip out lower interest
rates, which are one component that the Bureau of Stats looks at.

And if you take that away then inflation was still growing by 0.8 per cent in a quarter. Now do the
maths and times that by four and you've still got inflation above the Reserve Bank's 2 to 3 per
cent comfort zone.

And so you know, they're still a little bit concerned but they think that as people lose their jobs
here, then it will undercut the sustainability of the price increases and inflation will disappear
as a problem.

Now overall with their outlook, in terms of the recovery that they're stressing, it will all depend
on whether these green shoots grow. And there are, even on the optimistic notes of the Reserve
Bank, Peter, questions about the durability and sustainability of that; the green shoots could
still wither on the vine.

PETER CAVE: More of those green shoots. Our economics correspondent Stephen Long live in the
studio.

Pressure builds on share scheme changes

PETER CAVE: The Government is under growing pressure from its own constituency to back down over
Budget changes to the employee share ownership scheme.

Three unions have today expressed concern about the decision that abolished the ability to defer
tax on shares until the shares are sold, and to cut the level where the available tax break on the
schemes cut in to those with an income of $60,000 or less.

Our chief political correspondent Lyndal Curtis reports.

LYNDAL CURTIS: The Government's move was designed to reduce the possibilities of using the share
scheme as a way of avoiding or minimising tax.

And the Government estimated it would save $200-million over four years.

But that estimate is now in doubt because companies have decided to suspend or review their
schemes.

The Opposition is questioning whether the Government really intended for that to happen and says if
schemes end, rather than raising revenue it could end up costing the Government.

The shadow assistant treasury spokesman Tony Smith says the Government's gone too far.

TONY SMITH: If they're worried about a few termites in the house, they shouldn't bulldoze the
entire house, which is what appears to have been done.

There is chaos and confusion everywhere and for the last week the business community has been
urgently calling for clarification.

LYNDAL CURTIS: Unions too are worried about the scheme.

The national secretary of the Australian Workers Union Paul Howes says a large number of his
members have been in share schemes for decades, and have that as a core component of their
conditions of employment conditions.

PAUL HOWES: I've been receiving a number of phone calls from both employers and members alike who
are extremely concerned about what impact this will have on their employment packages with their
companies.

LYNDAL CURTIS: While he says many members earn over $60,000, he wouldn't consider them high income
earners.

PAUL HOWES: I don't think you would call steelworkers earning $80,000 or $90,000 a year the top end
of town.

Sixty-thousand-dollars doesn't get you very far these days and when you target these schemes, I
think that the threshold is one of the issues that need to be looked at.

LYNDAL CURTIS: Joe de Bruyn from the Shop Assistants Union also shares concern about the impact,
even though many of his members don't earn over the threshold.

JOE DE BRUYN: But if it means that the company is going to do away with its scheme altogether,
including for the low income workers, then that would be a bad result.

LYNDAL CURTIS: Rod Masson from the Finance Sector Union says there's widespread concern amongst his
members, many of whom earn over the threshold. But he says they could hardly be considered
high-flying executives.

He believes the Government could make changes that would better target the scheme.

ROD MASSON: We think the $60,000 figure is completely arbitrary and we are at a loss to understand
where it's been drawn from.

There has to be a better benchmark and we would think that benchmarks should be at the top marginal
tax rate level of about $180,000. That would make far more sense to us.

LYNDAL CURTIS: Mr Masson says his union has already approached the Government looking for change.

ROD MASSON: We've already made an approach to the Treasurer's office to try and better understand
what it is they are trying to achieve. But we will certainly be, on behalf of our members, asking
if the Government can take an alternative approach.

LYNDAL CURTIS: Paul Howes says he's wants to speak to the Government.

PAUL HOWES: We are in the process of drafting a submission to the Treasurer, which I hope to have
sent off within the next day or so.

We'll be seeking discussions with the Government about the potential impact on low-wage, working
class workers, who may not have been necessarily the Government's target when they were developing
this scheme.

LYNDAL CURTIS: And Joe de Bruyn says talks might become necessary.

JOE DE BRUYN: If the companies tell us that they're going to close the schemes down altogether,
then we will be making representations to the Government.

LYNDAL CURTIS: The legislation to enact the scheme isn't yet available and hasn't been presented to
Parliament.

There's some hope that before it gets to that point, the Government may change its mind or re-cast
the changes.

If that doesn't happen, Mr Masson says approaches will be made to the minor Senate parties as well.

ROD MASSON: Yes, absolutely. We'll be doing everything we can to talk to as many people as possible
about better ways forward that both close any loopholes that the Government may have concerns
about, but also continue to be able to provide these type of programs which are valued by our
members.

LYNDAL CURTIS: And the Opposition hasn't ruled out attempting to block the legislation if no change
is made.

TONY SMITH: We want to see their legislation.

And of course we are going to scrutinise very carefully what they put forward. And of course, if
there's room to do that in the Senate we'll be doing that, of course we will.

LYNDAL CURTIS: The Prime Minister says the Government will consult on the implementation of the
arrangements as is normal with any other Budget measure.

But he maintains the employee share ownership scheme has been used to minimise tax and the change
is necessary.

KEVIN RUDD: We're also advised that in the case of these particular arrangements, that they have
been particularly used at one end of the spectrum to engage in various forms of tax minimisation.

Therefore, under those circumstances, under the best advice of the Treasury, we have acted. It is a
necessary piece of action in order to deal responsibly with bringing the Budget back to surplus.

LYNDAL CURTIS: There is a way to go for those hoping to change the Government's mind.

PETER CAVE: Our chief political correspondent, Lyndal Curtis.

Coral Sea Conservation Zone announced

PETER CAVE: The Federal Government has moved to protect nearly one million square kilometres of
ocean off Australia's north-east coast while it considers whether to set up a new marine park or
several of them in the region.

The Environment Minister Peter Garrett announced the move this morning, establishing the Coral Sea
Conservation Zone in Australian territorial waters east of the Great Barrier Reef Marine Park.

The Minister says there'll be no impact on those who already use the vast areas of ocean, and that
existing fishing and cruising rights remain in place.

Environment reporter Shane McLeod has the story.

SHANE MCLEOD: The Federal Environment Minister Peter Garrett is just back from Indonesia, where at
the World Oceans Conference he's been hearing about fears for the future of the world's tropical
seas.

Back home, he's announced some of the steps Australia will take in protecting those waters.

Standing before a tank filled with circling sharks at Sydney Aquarium, he's released details of the
eastern Australia marine bioregional profile.

It's a key document in a long-running process the Government has been following to assess
protection measures in place for all of the waters that surround the Australian territory.

And as it continues that assessment, the Minister has decided that the waters of the Coral Sea need
immediate attention.

He's announced the establishment of the Coral Sea Conservation Zone.

PETER GARRETT: This will enable a period of thorough assessment of the values of this marine
environment and we will welcome very much the involvement from all stakeholders and the Government
in inputting into that assessment process.

SHANE MCLEOD: The conservation zone will cover nearly one million square kilometres, stretching
from the east of the Great Barrier Reef Marine Park out to Australia's territorial boundaries with
Solomon Islands, Papua New Guinea and Vanuatu.

Those who are already allowed to do things in the waters - like fishing, scientific research or
cruise shipping - will be allowed to maintain their rights.

Peter Garrett says the goal is to stop any expansion of activity while the assessment of the region
is underway.

PETER GARRETT: I'm confident that existing users will recognise that they have every opportunity to
continue with the activities that they've been undertaking up to this point in time, so long as
it's done in accordance with appropriate legislation.

I think on the part of the scientific community, there will be I think a recognition that we can
see how important it is that we fully understand the range of values that an area like the Coral
Sea has.

I'm very confident that the way in which we've made this decision enables us to properly and
prudently assess the values of this area, whilst at the same time enabling those who have had
activities in that area up to this point in time to continue them.

SHANE MCLEOD: The Minister's been lobbied by environmental groups to take drastic steps to protect
the waters of the Coral Sea. Some are arguing for all extractive industries, including fishing, to
be banned in the region.

The Minister says the establishment of the conservation zone is an interim step while various
proposals are considered.

The US-based Pew Environmental Group is one of the groups that's been arguing for increased
protection.

Its spokeswoman Elise Hawthorne says today's announcement by the Minister is a welcome step.

ELISE HAWTHORNE: We think it's a wonderful announcement today. We're very happy that the Minister
made this announcement.

And we're just really supportive of anything that protects the Coral Sea. It's such an amazing,
spectacular marine jewel that's part of Australia, and it's got an extremely important heritage
value as well.

So we welcome today's announcement.

SHANE MCLEOD: The Minister has also won initial approval from recreational fishers in Queensland.

They've recently expressed concerns that fishing could be banned in the region.

And while they have yet to see the full details of today's announcement, they say they're happy the
Minister has decided to maintain the status quo.

Peter Garrett believes it's the appropriate balance.

PETER GARRETT: It recognises that those who have existing activities underway in the Coral Sea area
can continue them, whilst we get a deeper and a better understanding of the values of this
incredible marine resource.

So I think that we have done absolutely the right thing in recognition of how important this region
is. In doing that we're acknowledging that there are existing uses and that those existing uses can
continue.

PETER CAVE: The Federal Environment Minister Peter Garrett ending Shane McLeod's report.

Senator wants student fees for sport only

PETER CAVE: The Labor Party's lack of numbers in the Senate may yet prove to be a headache for
universities.

The National's Senate leader Barnaby Joyce is threatening to block the plan to reintroduce student
services fees, unless universities are restricted to spending the money on sport.

Senator Joyce says the fees are open to abuse from university clubs which are a front for political
activity.

Simon Lauder reports.

SIMON LAUDER: The Federal Government says the Coalition's introduction of voluntary university
student union fees left universities $170-million worse off.

It's trying to reintroduce compulsory student fees, but the Nationals Senate leader Barnaby Joyce
says some of the money could end up in the hands of student activists.

BARNABY JOYCE: There's nothing to stop those with a political bent setting up a club or setting up
an institution and using that as a mechanism of sort of ciphering funds to themselves.

SIMON LAUDER: When it was in Government the Coalition made student fees voluntary because too much
money was going to student unions with a political bent.

Labor's Student Services and Amenities Bill would allow universities to charge up to $250 a year
for student services, including things like food, sport, clubs, child care and health care.

But it has guidelines attached to make sure the money isn't being spent on political campaigning,
and universities would have to strictly administer the funds.

But Senator Barnaby Joyce says there's only one safe way to make sure the student fees are spent on
activities which are open to anyone. He wants the bill amended so the fees can only be spent on
sport.

BARNABY JOYCE: Soccer, rugby, cricket, netball are directed at the greatest possible participation
with no exclusion to anybody else.

SIMON LAUDER: But if it's a compulsory fee, shouldn't the benefit of it be more general than sport?

BARNABY JOYCE: Well, it is general. There is no exclusion from anybody who wishes to play sport -
it's quite open to them.

SIMON LAUDER: Senator Joyce went against his Coalition colleagues to vote against the bill that
made student fees voluntary in the first place. His objection to the plan to make them compulsory
again raises the prospect of another Senate fight for the Government.

Family First Senator Steve Fielding seems unlikely to give the Government his support.

STEVE FIELDING: Family First voted for voluntary student unionism last time the decision came up.
Now all of a sudden the Rudd Government's saying, "Look, this is different to that".

And this is just a straight tax on students, now I'm not so sure that's the right thing to be doing
in a global financial crisis when students are already under financial pressure.

SIMON LAUDER: The deputy vice chancellor of the University of Western Sydney, Professor John
Ingleson, says campus services have struggled since the introduction of voluntary fees.

Professor Ingleson says he doesn't believe the new system would be open to abuse.

JOHN INGLESON: So we'll be in a position to ensure that the expenditure is on the broad range of
student services.

SIMON LAUDER: Would it be acceptable to have Barnaby Joyce's compromise, which is that the money
could only be spent on sporting facilities?

JOHN INGLESON: No, I don't think it is. I think that is a ridiculous compromise, because sporting
facilities is fine - we do need sporting facilities, and students do need sport - but there's a
whole range of facilities students need, of which sport is just one part of it. And most of which
universities can't currently afford.

SIMON LAUDER: The chief executive of the group Universities Australia Glen Withers says
universities need to be able to spend student fees on much more than just sport, but he's concerned
it could come down to a game of political football.

GLEN WITHERS: The situation of the Senate, of course, is so finely balanced so it depends crucially
on several independents and the possibility of some senators such as Senator Joyce playing a role
in the Government's legislation.

We'd be very keen that he did support this legislation as well as those independents. But the
balance of the Senate is such that yes, things can become political footballs, rather independently
of the merits of what's going forward. There's all sorts of other agendas for which what is being
debated can then be sidetracked and pursued apart from their intrinsic benefits to the country.

PETER CAVE: The chief executive of Universities Australia, Dr Glen Withers; he was speaking to
Simon Lauder.

Sex-ed failing to teach girls how to say

PETER CAVE: After a week of public outrage over the latest NRL sex scandal, a paediatrician has
criticised sex education classes for failing to give teenage girls the skills to say "No".

Dr Rachel Skinner interviewed a group of girls aged 14 to 19 about their first sexual experience.

She says that sex education classes were too pre-occupied with sexually transmitted diseases or
unwanted pregnancies and neglected to discuss negotiation skills.

Jennifer Macey spoke to Dr Skinner.

RACHEL SKINNER: There was a significant proportion who regretted the experience and that tended to
be the younger ones, who were not ready for the experience...

JENNIFER MACEY: And are they getting younger?

RACHEL SKINNER: Yeah, they are getting younger and that was one of the reasons why we wished to
conduct this research, because we're concerned about the decreasing age of first sexual experience,
the increasing number of partners that young people have, and the risk that's associated with that
to their emotional and to their physical wellbeing.

So we found that those teenagers who had sex for the first time at a younger age were often not
ready for it and reflected back with regret.

So, many teenagers described being in a peer group where they perceived that all of their friends
had been sexually active and that they needed to do it to fit in, to have something to talk about.

JENNIFER MACEY: So what are they being taught in sex education classes? Are they being taught
anything about the ability to say "No"?

RACHEL SKINNER: There are certainly some sexual education programs that do incorporate the teaching
of skills, negotiation skills in relationships, and the resisting of peer pressure. But it's
certainly not the case for all sex education programs.

And you know, schools don't often allocate enough time, nor do they necessarily take the best
programs. And I mean it was clear that these young people knew about the risks of unprotected sex;
that was not the issue.

The issue's more about the pressures within their peer group, the pressures from their partner,
their male partner. There's a big pressure for those teenagers who want to keep their partner, that
they may have to have sex to do that.

And also in the context of going to parties and being drunk or getting high, their, any sort of
personal control that they may have over the situation is you know, significantly reduced.

JENNIFER MACEY: So, in the sex education classes, they're still being taught more about sexual
transmitted diseases and unwanted pregnancies, rather than...

RACHEL SKINNER: How to negotiate with a partner about having sex at the time that they feel ready
for it, and also just understanding that becoming sexually active is not necessarily all that it's
cracked up to be.

There's a lot of hype that teenagers describe; there's a lot of hype around sex that they get from,
you know, all sources. And many of those that reflected back with regret said, you know, "It wasn't
such a great experience, it was a real disappointment. It wasn't what I thought it was going to
be".

JENNIFER MACEY: The recent NRL sex scandal has again highlighted the issue of consent and power
imbalances. Is this a topic that's being tackled adequately in your mind by sex education classes?

RACHEL SKINNER: It's clear that there are parallels. I mean, this is a much younger group - we're
talking about teenagers from the age of 14 up to 19, so some of the older ones are similar age.

But it's obvious that, you know, many of the teenagers - girls - were not able to make their own
decision. They weren't actively making, following what they wanted to do. They were being
influenced from outside and they regretted their decisions afterwards.

So we really need to work out what we can do to help improve the assertiveness and self-efficacy of
young people so that they can continue the situation - of young girls in particular. Many of the
teenagers said how sex education was something that was too little and too late in their, you know,
in their schooling years.

PETER CAVE: Dr Rachel Skinner from Sydney University speaking to our reporter Jennifer Macey.

The world warns Sri Lanka to build a just peace after end to civil war

PETER CAVE: The Sri Lankan Government and its supporters have been celebrating the crushing of
Tamil Tiger resistance in their country after 30 years of bloody civil war

But the United Nations is warning that no time should be wasted in helping the hundreds of
thousands of people displaced by the final assault.

And Western powers have publicly told Sri Lanka they expect the minority Tamils to be part of a
reborn democracy where there is tolerance and respect for human rights.

Simon Santow reports.

SIMON SANTOW: Led by Velupillai Pirapaharan, the man many say invented the suicide bomber, the
Tamil Tigers were once a formidable force.

Fighting for their own autonomy, they clung to areas in the north and the east of Sri Lanka.

But many of their battles were waged in the island nation's capital of Colombo, where militants
targeted the Government as well as civilians in a quest to convince political leaders the Tigers
meant business.

(Sound of traffic chaos)

So it's probably not surprising that the mainly Sinhalese residents of Colombo took to the streets
overnight in celebration at the news their military had finally defeated the Tigers.

(Sound of traffic chaos)

SIMON SANTOW: But there's little cheering in the civilian population of the north-east.

There, the guns have been sounding for months and reporters have been banned from covering the
military offensive.

The UN estimates that the final push before victory has displaced up to 80,000 people.

There's a desperate need for shelter, food and fresh water - all of which are in short supply.

JOHN HOLMES: Obviously we're relieved that the fighting is finished and hope that all the civilians
are indeed out of that so, and indeed, are heading towards safety. But it's hard for us to
absolutely sure.

SIMON SANTOW: John Holmes is the United Nation's emergency relief coordinator.

JOHN HOLMES: There are around 220,000 people altogether who have already reached the camps - that
includes an extra 20,000 in the last two or three days. We think that there are another 40,000 to
60,000 on their way to the camps through the crossing point in Omanthai and on the way to the camps
near Vavuniya in particular, the major camp at Manik Farm.

The conditions in these camps are not, are certainly not ideal and not up to international
standards yet, but everybody's working very hard to try to make sure that they are. One of our
concerns is that the Manik Farm site - the main site near Vavuniya - is now very large indeed in
terms of a camp and there are issue of overcrowding there.

SIMON SANTOW: No-one has an accurate picture of how many people have died in the last few days or
even in the fighting before that.

But the UN says now is the time to give hope that the peace can be a lasting and a just one.

JOHN HOLMES: A key question obviously which will arise more and more now that the fighting seems to
be over, is the question of resettlement, how fast that can happen, and how fast any kind of
reconciliation process can start, with a view to the kind of political settlement we all want to
see, which would enable some of these wounds to continue to be healed.

SIMON SANTOW: The Sri Lankan military is still speaking in the language of "triumph".

Its spokesman is Keheliya Rambukwella.

KEHELIYA RAMBUKWELLA: Today we have come out with victory. It's not victory against LTTE
(Liberation Tigers of Tamil Eelam)- no particular nation or a particular race or a particular
community. It is a victory against humanity. It is a victory - it is a defeat for terrorism,
victory for humanity.

SIMON SANTOW: And the Foreign Minister Rohitha Bogollagama wants the world to thank his country
rather than chide it for its treatment of minority Tamils.

ROHITHA BOGOLLAGAMA: I think these are times for the efforts of terrorism been defeated to be
acknowledged. I think the international community will come soon to acknowledge that development.

SIMON SANTOW: The West is much more circumspect.

US Government spokesman Ian Kelly has called for an emphasis on reconciliation and inclusiveness.

IAN KELLY: We are relieved that the immense loss of life and killing of civilians appears to be
over.

This is an opportunity for Sri Lanka to turn the page on its past and build a Sri Lanka rooted in
democracy, tolerance and respect for human rights.

Now is the time for the Government to engage Tamils, Sinhalese and other Sri Lankans, to create a
political arrangement that promotes and protects the rights of all Sri Lankans.

SIMON SANTOW: A call echoed by British Foreign Minister David Miliband.

DAVID MILIBAND: Nothing would become the leadership of Sri Lanka better than to show that at this
moment, when it seems they have indeed defeated their mortal enemy, they are ready to reach out to
innocent civilians, whether they be Tamils or other minorities, who have suffered in the 26-year
civil war.

And I very much hope that the Government of Sri Lanka will realise this is the moment to show that
it governs in the interest of all the people of Sri Lanka, not just some of them.

SIMON SANTOW: And David Miliband wants greater scrutiny placed on Sri Lanka's military and its
conduct of the war.

DAVID MILIBAND: The position of the UK is always that serious and credible reports of war crimes
should be investigated. Serious and credible allegations have been made against both sides and they
should indeed by investigated.

SIMON SANTOW: It's a sentiment sure to go down badly in Colombo, where the people there are
thinking about an end to a war which has consumed the island nation for almost 30 years.

PETER CAVE: Simon Santow reporting.

Barack and Bibi shadow box in first meeting

PETER CAVE: The US President Barack Obama has begun his foray into the Middle East peace quagmire.

He's told Israeli Prime Minister Benjamin Netanyahu he should grasp what he's termed an "historic
opportunity" to make peace with the Palestinians.

But the Israeli leader has failed to explicitly endorse the creation of a Palestinian state.

Washington correspondent Kim Landers reports.

KIM LANDERS: Today's Oval Office meeting with Israel's Prime Minister Benjamin Netanyahu was
President Barack Obama's first chance to revive the stalled Middle East peace talks.

BARACK OBAMA: It is, I believe in the interests not only of the Palestinians, but also the Israelis
and the United States and the international community to achieve a two-state solution in which
Israelis and Palestinians are living side by side in peace and security.

KIM LANDERS: Prime Minister Netanyahu deliberately avoided saying that Israel accepts a two-state
solution.

BENJAMIN NETANYAHU: And I think we can envision an arrangement where Palestinians and Israelis live
side by side in dignity and security and in peace.

KIM LANDERS: But the Israeli leader has promised he wants to restart talks with the Palestinians as
soon as possible.

The differences in tone and terminology didn't come solely on the question of a two-state solution.

President Obama said Israeli settlements have to be stopped.

Prime Minister Netanyahu didn't mention them.

Daniel Levy is a former Israeli peace negotiator who's now the director of the Middle East Task
Force at the New America Foundation.

He's played down the Israeli leader's offer to restart negotiations with the Palestinians.

DANIEL LEVY: It's almost totally meaningless. You have two sides that, of their own volition, will
continue to negotiate indefinitely. On the Palestinian side, they are too discredited and weak and
dependent on Israel the US to actually make decisions.

On the Israeli side they probably don't want to, from Bibi's perspective, take the steps in terms
of rolling back the occupation that would be necessary to get a deal.

The only way to take these parties out of the comfort zone is to come up with a new way of going
about doing things. Going back to bilateral negotiations isn't that.

KIM LANDERS: Aaron David Miller is a public policy scholar at the Woodrow Wilson Centre for
International Scholars in Washington.

He's been an advisor to six US secretaries of state on Arab-Israeli negotiations.

He says the US can only get by for so long on speeches and meetings and soon the Obama
Administration has to have a strategy to reach an agreement.

AARON DAVID MILLER: In the end that is the standard by which you need to judge what will come and
what will work. And I don't think it's any clearer to me today that we're any closer to that point.

So we shouldn't read too much into the fact that President Obama told the Israelis that settlements
are a problem and they've got to stop, and that Benjamin Netanyahu refused to say "two-state
solution"?

I participated in I can't tell you how many meetings with secretaries of state and Israeli leaders
over the years in which secretaries of state said, "You know, you have to stop or restrict
settlement activity."

Well, guess what? Nothing ever happens.

So the question is not just to say something, the question is... I get back to the issue of
strategy. What is the administration going to do?

KIM LANDERS: How long has the Obama administration got to set out that plan?

AARON DAVID MILLER: Oh, I think it's got a long time, depending on whether or not the President has
identified this issue to be one of his signature issues.

I mean, I think what's significant in part out of the meeting today is that the image was that
here's President Yes-we-can, who is sitting down with Prime Minister No-you-won't.

And there was going to be a big explosion, or some tension in the US-Israeli relationship. Well, in
effect that's not what I saw today.

Differences of opinion expressed within the broader perimeters of two guys trying to figure out,
"Can I work with this guy? Is he out to undermine me? Is he out to con me? Is he out to pressure
me?"

Did these two guys leave this meeting thinking, "Uh-huh. This guy I can work with. We've got
differences - I can work with him."

Or, "Is this guy out to screw me?"

That is the core question. And how Obama and Netanyahu now answer that question today, at the end
of the day - and we don't know - is really important; really important.

This is Kim Landers in Washington for The World Today.

MPs turn on Speaker over expenses scandal

PETER CAVE: There's been a stormy session in Britain's House of Commons as some MPs tried to oust
the Speaker - an unprecedented move in modern day UK politics.

The angry MPs blame the Speaker for the embarrassing expenses scandal that's consumed British
politics for the past week.

They argue it was the Speaker who stopped attempts to make the system more accountable.

Stephanie Kennedy reports from London.

STEPHANIE KENNEDY: Not since 1695 has a speaker of the House of Commons lost his job.

Three-hundred-and-fourteen years later and the current Speaker Michael Martin is facing a similar
fate as he fights for his political life.

As Speaker he's responsible for MP's expenses - and for 10 days, details of those claims have been
plastered across the media.

Taxpayers have discovered they've footed the bill for moats, renovations, mortgages - even horse
manure.

MPs blame the Speaker for blocking reform on expenses and for attacking those that pressed for more
transparency.

In Parliament, the speaker tried to diffuse the situation with this mea culpa.

MICHAEL MARTIN: Please allow me to say to the men and women of the United Kingdom that we have let
you down very badly indeed. We must all accept blame. And to that extent that I have contributed to
this situation, I am profoundly sorry.

STEPHANIE KENNEDY: But that was not enough for some MPs, who challenged the Speaker to stand down.

The Conservatives' Douglas Carswell.

DOUGLAS CARSWELL: When will members be allowed to choose a new Speaker, with the moral authority to
clean up Westminster and the legitimacy to lift this house out of the mire?

(Sound of booing)

STEPHANIE KENNEDY: Labour's David Winnick.

DAVID WINNICK: If you gave some indication of your own intention to retire. Your early retirement,
sir, would help the reputation of the House.

STEPHANIE KENNEDY: The Liberal Democrats' David Heath.

DAVID HEATH: I have very grave doubts, given the appalling situation we find ourselves in, this
midden of the House's own making, that any action taken by members of this House will actually
restore the trust that we need.

STEPHANIE KENNEDY: In an unprecedented move, a party leader - the Liberal Democrat's Nick Clegg -
undermined the Speaker's authority by calling for him to step down.

NICK CLEGG: The Speaker must go. He has proved himself over some time now to be a dogged defender
of the way things are, of the status quo. When what we need very urgently is someone at the heart
of Westminster who will lead a wholesale radical process of reform.

STEPHANIE KENNEDY: And significantly, the Prime Minister Gordon Brown declined to give Mr Martin
his backing, declaring the Speaker's fate was now in the hands of MPs.

The Conservative position also hardened, with leader David Cameron demanding the immediate
dissolution of Parliament to clear the way for a general election.

Some observers believe the Speaker signed his own political death warrant with his inability to
acknowledge his part in the expenses scandal.

In London this is Stephanie Kennedy reporting for AM.

Pandemic still possible as swine flu rate soars in Japan

PETER CAVE: The rapid spread of the H1N1 virus in Japan has fuelled speculation that it won't be
too long before an influenza pandemic is officially declared.

The number of confirmed swine flu cases in Japan has soared to more than 120, forcing the closure
of thousands of schools.

Worldwide there have now been close to 9,000 confirmed cases of swine flu infection and 74 people
have died, including the Assistant Principal of a New York school.

Barbara Miller reports.

BARBARA MILLER: School's out for thousands of students in Japan as authorities try to contain the
spread of the H1N1 virus.

JAPANESE STUDENT (translated): We received an emergency notification telling us that the school
would be closed for a week.

BARBARA MILLER: The number of confirmed cases of H1N1 infection in Japan has soared over the past
day.

According to the latest figures from the World Health Organization, from seven to 125.

The jump has fuelled speculation that it won't be long before the WHO declares a pandemic.

That would happen if there was evidence of community-level transmission in more than one world
region.

Professor Anne Kelso is the director of the WHO Collaborating Centre in Melbourne.

ANNE KELSO: There's a lot of attention today on Japan because there's been quite an explosive
increase in the number of cases confirmed over the last 24 hours, and therefore clearly some
concern that there may be some transmission happening, or about to happen in the community.

But as I understand it, the sudden rise in the number of cases in Japan is related to several
schools, rather than the general community at this stage.

So I believe that it will be when there's transmission generally in the community, rather than in a
single institution.

BARBARA MILLER: Worldwide there are now close to 9,000 cases of swine flu infection, with Greece
the latest country to report its first confirmed case.

Giorgos Papageorgiou is the Greek Deputy Health Minister.

GIORGOS PAPAGEORGIOU (translated): Unfortunately, the estimates of epidemiologists and infectious
disease experts that a case of the novel flu virus was likely to appear in Greece have been
confirmed.

It's a 19-year-old male student who had been in the United States since the beginning of the year
and returned to Greece on Saturday.

BARBARA MILLER: The US has the most confirmed cases of H1N1 - more than 4,700.

And there have been several deaths, including the Assistant Principal of a New York school,
Mitchell Wiener.

New York City Mayor Michael Bloomberg,

MICHAEL BLOOMBERG: His death really is a tragedy for our city and a terrible loss for the school
community at IS 238, and of course especially for his wife Bonnie and their sons Jordan, Farrell
and Adam.

But I think the important thing for most people to understand here is that our experience so far
has been when kids and most adults get the flu - this strain of flu - the symptoms have been mild
and people recover from it within a few days,

BARBARA MILLER: This year's WHO assembly looks set to be dominated by discussion of H1N1.

At its opening in Geneva, the organisation's director General Margaret Chan said knowledge of the
virus was still limited.

MARGARET CHAN: We are all under pressure to make urgent and far-reaching decisions in an atmosphere
of considerable scientific uncertainty.

BARBARA MILLER: Anne Kelso from the WHO Collaborating Centre in Melbourne said attention needs to
focus on helping vulnerable populations.

ANNE KELSO: We're fortunate in Australia that we have a generally healthy community, we have an
excellent healthcare system. And so, with the virus as it is at the moment, if and when it does
enter Australia we wouldn't expect to have massive disease.

But in some countries of the world, the conditions of course are not nearly so good. And I think we
have to be concerned about the impact of that virus on those countries when it starts to spread
there.

BARBARA MILLER: The Federal Government has today announced $3-million of funding to the WHO to help
fight H1N1.

Half of that sum will go towards helping Asia Pacific countries strengthen their capacity to
respond to pandemic outbreaks.

PETER CAVE: Barbara Miller reporting.

Australian tourist jailed in Thailand over souvenir beer mat

PETER CAVE: A Melbourne woman has spent two nights in a Thai jail after being accused of stealing a
bar mat from a Phuket hotel.

She has now been granted bail but can't leave the country because authorities still have her
passport.

Rachael Brown reports.

RACHAEL BROWN: A fortnight ago, 36-year-old Annice Smoel from Melbourne was celebrating her
mother's 60th birthday at Phuket's Aussie Hotel, when she says an innocent prank landed her in a
jail cell.

It centres around a beer mat: a rubber-backed, pictured bar towel that she's heard could earn her
up to five years in the tiny cell where she spent a weekend.

ANNICE SMOEL: Four metres by four metres concrete slab, big bars, a toilet that makes you feel ill
just to look at, that probably has never been cleaned, no toilet paper. They would bring food twice
a day and it was food from the street that my Mum and I had joked about in the week leading up to
this.

It sort of looks like it's served in a plastic bag, like we would buy a goldfish.

RACHAEL BROWN: Ms Smoel has told Fairfax Radio she was released after two nights but says
authorities have kept her passport, and she faces a long frustrating wait in Thailand away from her
four young daughters.

ANNICE SMOEL: The process here apparently is the police have 48 days to investigate the crime. They
then hand it to the prosecutor, who decides whether it's prosecutable, who hands it to the
Governor, who decides whether he agrees, then it either goes before a judge or gets thrown out.

RACHAEL BROWN: Ms Smoel says Thai police know she wasn't responsible for the prank but she says
they don't care.

ANNICE SMOEL: There's video evidence in the bar. I was nowhere near the handbag and one of the
girls that was involved went down to the police station on the Sunday morning and confessed to the
crime and apologised, and they told her to go away. They didn't care.

RACHAEL BROWN: Bernard Murphy, from law firm Morris Blackburn, is representing Ms Smoel and says
initial dealings with Thai authorities have been frustrating

BERNARD MURPHY: It's ridiculous on so many levels. On the worst view, if there had been a crime
committed here, it is drunken souveniring of a bar towel.

But on the best view, they're holding a statutory declaration, a sworn declaration from two other
people saying, "This woman didn't do it." The put it in her handbag when she wasn't even there as a
joke.

RACHAEL BROWN: Are you worried this may turn into an incident of Thai authorities trying to save
face perhaps?

BERNARD MURPHY: We've tried to do this in the way that they want to do it.

Which is, we've presented them with material, we've made representations to the embassy, we have
made representations to the authorities, we've engaged a Thai lawyer.

We've done all the things to try and get this dealt with in some sensible timeframe. Almost three
weeks later, we're still languishing in Thailand.

RACHAEL BROWN: What response have you had from the Federal Government?

BERNARD MURPHY: This morning we had a pleasing response from the Prime Minister.

It's a very unhappy situation that the Prime Minister of this country should have to intervene in a
matter like this but he indicated some resolve in getting the problem fixed.

RACHAEL BROWN: The Victorian Premier John Brumby says the Government will do everything it can to
get her back.

JOHN BRUMBY: The Attorney General Rob Hulls has been in contact with Department of Foreign Affairs
and the Minister for Foreign Affairs Stephen Smith this morning. She's a Victorian, we want to get
her back.

RACHAEL BROWN: Mr Brumby says the drama won't help the country's tourism market.

JOHN BRUMBY: I would have thought for the Thai Government and the Thai authorities, at a time of
the global financial crisis when everybody wants tourism, this isn't going to help them. Who'd go
to Thailand for a holiday if you can get arrested for having fun in a bar?

PETER CAVE: The Victorian Premier John Brumby ending that report by Rachael Brown.

Great Southern investors look to the law

PETER CAVE: Investors in the failed company Great Southern Ltd are considering launching a class
action law suit.

Six-hundred investors paid an average of $50,000 for shares in cattle schemes between 2006 and
2007.

Great Southern is the country's largest managed investment scheme. It was set up to give tax breaks
to its clients and collapsed on the weekend owing $700-million.

The investors claim that Great Southern didn't inform them when it knew that the company was in
trouble.

Bruce Dennis from law firm Dennis and Company spoke to Brigid Glanville.

BRUCE DENNIS: Their main concern is that it became apparent once Operation Transform was announced
by Great Southern, when one looked carefully at the paperwork, it seemed inevitable that Great
Southern was going to be in severe financial difficulty by about May this year because of the
difficulties they were having cash-flow wise, reading between the lines from the documents in the
Great Southern's own website concerning Project Transform.

BRIGID GLANVILLE: And what sort of investors are these 600 people?

BRUCE DENNIS: Some of them are very substantial investors who have hundreds of thousands of dollars
invested, and some are very small investors, who only have tens of thousands of dollars invested.
They all are private individuals or they're superannuation schemes.

Most of these clients were put into these schemes by their accountants or financial advisors.

BRIGID GLANVILLE: Isn't with any of these schemes, when your clients go into it, isn't there an
element of "buyer beware"?

BRUCE DENNIS: Yes, but one has to be able to trust the financial information being given to you and
the representations made by the person you're dealing with. Many of my clients that I've surveyed
have said they were promised not only an up-front tax deduction but also that they'd get three
times their money back over the life of the project.

BRIGID GLANVILLE: And what were they getting back before it collapsed?

BRUCE DENNIS: Well, I haven't seen anyone get anything back yet.

BRIGID GLANVILLE: And so if you go ahead with this class action, what will that be worth? And is
that your preferred action that you'd like to take?

BRUCE DENNIS: Well, preferred action would be to sit down and talk to the administrators and try
and mediate a result.

Many of my clients have borrowed 100 per cent of the monies that they've put in through Great
Southern Finance Ltd, and they've, of course, been under pressure from Great Southern Finance Ltd
to repay their loans, especially the beef cattle projects that were terminated in Operation
Transform. And there's been a lot of pressure on them to refinance those loans.

Our preferred approach would be to sit down and try and negotiate with the administrators.

BRIGID GLANVILLE: Who needs to take responsibility the most, do you see Bruce Dennis? Is it the
person pushing the Great Southern scheme, or is it the broker, or is it the financial planner?

BRUCE DENNIS: I see it's the Great Southern Ltd itself. It was in a position to know the truth
about what was happening and we believe that once this is fully investigated that there'll be a
number of matters coming forward where there was serious misrepresentations as to the viability of
these projects.

PETER CAVE: Lawyer Bruce Dennis speaking to Brigid Glanville.