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Sceptics wary of more hot air from big polluters

Sceptics wary of more hot air from big polluters

Kim Landers reported this story on Wednesday, September 23, 2009 12:10:00

ELEANOR HALL: But we begin today in New York where the United States and China are both pledging to
take action on climate change.

The leaders of the world's two biggest greenhouse gas polluting nations told the United Nations
summit that they recognise the importance and urgency of addressing global warming.

But there is still scepticism about whether either of them moved far enough to boost the chances of
a global climate agreement at Copenhagen in December.

This report from North America correspondent Kim Landers.

KIM LANDERS: World leaders have tried to inject momentum into climate change talks. The US
President Barack Obama has issued a rallying cry for action, but he's also warned that prospects
for a global deal face tough political realities.

BARACK OBAMA: We seek sweeping but necessary change in the midst of a global recession, where every
nation's most immediate priority is reviving their economy and putting their people back to work.

And so all of us will face doubts and difficulties in our own capitals as we try to reach a lasting
solution to the climate challenge, but I'm here today to say that difficulty is no excuse for

KIM LANDERS: The US and China are the world's top polluters. China's President Hu Jintao has used
the UN summit to lay out a new plan to tackle his country's emissions.

HU JINTAO (translated): We will endeavour to cut carbon dioxide emissions per unit of GDP by a
notable margin by 2020 from the 2005 level.

Second, we will vigorously develop renewable energy and nuclear energy.

KIM LANDERS: President Barack Obama did not offer any new proposals, nor did he urge quick passage
in the US Senate for a climate change bill, which many observers believe is crucial to getting an
international agreement.

But China's pledge to curb the growth of its carbon dioxide emissions may help rally support in the
Senate for that legislation. Andrew Light is a senior fellow at the Centre for American Progress.

ANDREW LIGHT: One thing that you have to realise is that the common mantra in the United States
Senate is that China is doing nothing, and not only did President Hu remind the world and certainly
the American public that China has already embarked on a number of extremely significant energy
efficiency and energy intensity targets, as well as targets to decrease deforestation and in fact
re-forest big chunks of China but also he has committed to some carbon, to emissions reductions by

KIM LANDERS: And Australia has a role too. Michael Levi from the Council on Foreign Relations says
the Australian proposal to focus on national schedules, and on making sure that the actions in them
are measurable, reported and verified, is an important one.

MICHAEL LEVI: The Australian proposal that's out there, I think is one of the most important pieces
of the discussion right now. It's being talked about by a lot of folks and it or some variation on
it combined with other proposals could form the basis for a constructive agreement.

KIM LANDERS: There are less than 80 days to go before the pivotal Copenhagen conference which is
designed to get a global climate change agreement. Andrew Light says expectations for Copenhagen
have been too high.

ANDREW LIGHT: It's just false that at the end of the last hour of the last meeting on the last day
in Copenhagen you must absolutely have a fully finished treaty including emissions targets for 2020
and 2050 completely filled in, or you have a failure.

It's perfectly acceptable according to its process to, with Copenhagen on getting architecture for
a new treaty and then we can have successive meetings, say six months later, even a year later,
where we decide on the absolute target numbers.

KIM LANDERS: Barack Obama says the world's response to the climate change challenge will be judged
by history and if current leaders fail to meet it, they'll be consigning future generations to what
he calls an "irreversible catastrophe".

This is Kim Landers in Washington for The World Today.

China commits to cutting pollution

China commits to cutting pollution

Di Bain reported this story on Wednesday, September 23, 2009 12:14:00

ELEANOR HALL: China's commitment to reducing its emissions may be lacking in detail but analysts
say the announcement has huge implications for international consensus on dealing with global

British economist and climate change author Sir Nicholas Stern, says the Chinese President has
broken the deadlock between developed and developing countries over climate change.

And commentators in China say it is one of the most historically significant announcements that
President Hu Jintao has ever made.

Di Bain reports

DI BAIN: For those monitoring the climate change debate, China's commitment to reduce pollution
marks a historical shift. Yang Ailun, a specialist on climate change with Greenpeace China told the
BBC, while there's few details available, it's the gesture that counts.

YANG AILUN: It's the first time the Chinese Government publicly said China will have a carbon
intensity target up to 2020. So it's midterm carbon intensity target, and this is the sort of
target that clearly shows that China wants to move away from business-as-usual development past.

DI BAIN: China may be one of the biggest polluters in the world but in the past it has refused to
commit to a pollution cutting strategy. It blamed developed countries for causing global warming
because of centuries of fossil fuel use.

Now China says it will take steps to boost nuclear power and reduce the growth rate of its carbon
pollution as measured against economic growth.

Professor Andy Pitman from the Climate Change Research Centre in Sydney says it sounds good but
China still won't be decreasing its carbon output.

ANDY PITMAN: Given China is the world's fastest growing economy, is that they anticipate increasing
emissions. So whilst it sounds like a reduction, a good news story, it's actually a reduction per
unit of GDP, which given China's growing very aggressively, is probably a net increase.

DI BAIN: Is this a good news story or a bad news story?

ANDY PITMAN: It's both, it's China recognising that there's a problem with climate change and
they're going to act to try to make their economy more carbon efficient. It's a bad news story
because the scale of the Chinese economy means that that will still lead to a net increase in
global emissions.

DI BAIN: China's President Hu Jintao also announced goals to plant huge forests, enough to cover an
area the size of Norway. And he says China will commit to generating 15 per cent of its energy from
renewable sources within 10 years.

John Connor from Australia's Climate Change Institute says the commitments aren't solid, but
they're better than nothing.

JOHN CONNOR: Well look, I think this is momentum and hopefully trust building. It's still not
enough in terms of actual solid commitments from both developed and developing countries. But
important blockages are being moved aside, and we need now to build on that momentum.

DI BAIN: Former World Bank economist Nicholas Stern told the BBC all indications are that the
Chinese are working on some bold targets which will be unveiled down the track.

NICHOLAS STERN: We don't yet know what numbers they're going to put on that, but the discussions
that many of us have been having over the last month in China suggest that they really will be
ambitious. I think what we're seeing now is a very important move which will recast the shape of
the Chinese economy and the pattern of their growth over the coming decades.

DI BAIN: China's announcement in New York follows a similar commitment from India. Sir Nicholas
Stern believes the deadlock between emerging economies and developed nations over climate change
action could now be broken.

NICHOLAS STERN: Jairam Ramesh, the Indian Environment Minister, has also been making some quite
strong statements here about quantifying the reductions embodied in India's plans and really
raising their ambition. They have plans in India for 20 gigawatts of solar electricity by 2020 and
what's more, to try to get solar to be a directly competitive with coal for electricity by that

That would be a very significant move forward, so we are seeing strong movement around the world.

ELEANOR HALL: That's former World Bank economist Sir Nicholas Stern, ending that report from Di

Letter puts the heat on Opposition

Letter puts the heat on Opposition

David Mark reported this story on Wednesday, September 23, 2009 12:18:00

ELEANOR HALL: Australia's Prime Minister Kevin Rudd may be focusing on the global picture in New
York but domestic politics is still high on his agenda. Today his Climate Change Minister Penny
Wong took time out from her New York commitments to pen a letter designed to increase the pressure
on the Coalition leader Malcolm Turnbull over the Government's emissions trading scheme.

The letter refers to the national interest and demands that the Opposition start negotiating on the
ETS bill by the 20th of October or risk the prospect of an early election.

As David Mark reports from Canberra.

DAVID MARK: The Prime Minister is making his mark on the world stage. Overnight in New York Kevin
Rudd hosted a round table discussion of 21 nations at the UN's climate change summit.

He stressed the importance for the meeting in Copenhagen in December to come up with a new treaty
on climate change.

KEVIN RUDD: What the world needs is a grand bargain between the developed world and the developing
world in order to reach an outcome for the planet as a whole. Those remarks of mine obtained
support from all those governments represented in the room.

DAVID MARK: And he's winning plaudits from other international statesmen. Straight after the UN
Meeting, Kevin Rudd was an honoured guest at a conference held by the former US President, Bill

BILL CLINTON: The reason he's here among other things is twofold, one I've already told you - he
has a very serious commitment to reducing climate change. Secondly he is probably the world's most
forceful advocate for the proposition that the G8 should give way to the G20 as the primary
organisation for engineering a cooperative recovery from the current economic crisis and planning
future balanced, sustainable economic growth.

DAVID MARK: The topic may be global but the Prime Minister always has one eye on domestic politics.
His Climate Change Minister, Senator Penny Wong, has demanded the Opposition start negotiations
over the emissions trading bill within a month.

Senator Wong laid down the ultimatum in a letter to the Opposition Leader Malcolm Turnbull.

PENNY WONG: What we've said to Mr Turnbull is what I've been saying for some time - put your
amendments forward, put amendments forward that have the support of your party room and the
Government will be prepared to consider them.

And what I would say is this, if Mr Turnbull fails to do that, if he fails on October 19 to get the
agreement of his party room to put forward amendments for discussion with the Government, I think
then Australians are entitled to question whether or not he really is intending to negotiate on
this issue in good faith.

DAVID MARK: But Malcolm Turnbull, who's in London, says the letter is just a political stunt.

MALCOLM TURNBULL: Her letter is, it's really just a bit of bluster because she seems to be
proposing that we adopt a process we've already said publicly we're going to adopt.

DAVID MARK: The Opposition's climate change spokesman, Ian Macfarlane, says the Coalition will be
able to meet Senator Wong's timetable - indeed the two have already discussed the matter.

IAN MCFARLANE: No it won't be a problem. I mean, we have a commitment to have a negotiation in good
faith, I hope the Government has the same because this letter really looks like just raw politics.

I've already given Penny that commitment, so, happy to proceed and set this to one side as a bit of

DAVID MARK: Even so the letter does publicly ratchet up the pressure on the Coalition. The
Government wants to exploit a split in the Opposition over whether to negotiate.

The unwritten threat is the prospect of a double dissolution election if the Senate blocks the bill
when it's presented in November.

The Prime Minister has consistently stated he wants the bill passed by then so it can go to the
Copenhagen meeting with the legislation in place.

KEVIN RUDD: The bottom line is this - time is running out. Therefore it's entirely reasonable of us
through the Minister to say to the Opposition, who are blocking this in the Senate, tell us what
your agreed amendments are to this legislation in sufficient time for this to work when this goes
through the Senate the next time.

That's why the Minister has done what she's done and I fully support her action.

DAVID MARK: But Malcolm Turnbull says he won't be pressured.

MALCOLM TURNBULL: I mean, as you can see this is a rapidly moving situation with new developments
every day about what is likely to happen at Copenhagen. It makes absolutely no sense at all to be
forcing a vote on this in November when you could do it in February when you're fully informed. So,
but the Government, I mean Kevin Rudd is more interested in playing politics than he is in saving
the polar bears or the Great Barrier Reef or the Murray-Darling Basin. His whole agenda is

DAVID MARK: It may be all about politics, but as Malcolm Turnbull is finding out it's much easier
playing that game as a global statesman with friends in high places, even if they do get your name

BILL CLINTON: I want Prime Minister Rude...

DAVID MARK: But a Prime Minister can wear the odd name slip-up when ex-presidents are offering
praise like this.

BILL CLINTON: In my opinion he is one of the most well informed, well read, intelligent leaders in
the world today. He was, his formal education was in East Asian affairs, he's an expert in China,
so in other words, this guy's pretty smart.

ELEANOR HALL: That's the former US President Bill Clinton, ending that report from David Mark in

Dust storms shroud NSW and Queensland

Dust storms shroud NSW and Queensland

Timothy McDonald reported this story on Wednesday, September 23, 2009 12:22:00

ELEANOR HALL: Now to the huge orange dust storm that's been rolling through eastern Australia this
morning. The storm has swept up enough dust every hour to fill thousands of semi-trailers and has
blanketed Sydney in a grainy haze that's disrupted air traffic and port operations.

It is a major health hazard for people with lung problems and is stripping valuable topsoil from
farmers. As Timothy McDonald reports.

TIMOTHY MCDONALD: Sydneysiders were greeted with a few unusual sights when they woke up this

FEMALE SYDNEYSIDER: Well the first time I woke up was about five o'clock, and it was red, it was
red and I could hardly see anything.

FEMALE SYDNEYSIDER 2: Ah just orange light.

FEMALE SYDNEYSIDER 3: It was like glowing red from under my curtains.

MALE SYDNEYSIDER: After I went out to put the garbage out I noticed how the cars, you couldn't see
into them. Yeah it was that dusty and people had been writing names along on different cars.

TIMOTHY MCDONALD: One or two frustrated people had made the mistake of washing the car.

FEMALE SYDNEYSIDER 4: Actually my husband washed it on the weekend, so he's not very happy.

TIMOTHY MCDONALD: Some weren't quite sure what they were looking at.

FEMALE SYDNEYSIDER 5: I live in the sort of Kuringai sort of area so I thought it might have been
something to do with bushfires or whatever, but at that time of the day it would be a bit weird.

MALE SYDNEYSIDER 2: I was asleep, red, it looked like it was a fire. I come from the bush and
that's what it's sort of like, same scenery you know.

TIMOTHY MCDONALD: And all that dust left a few Sydneysiders short of breath.

MALE SYDNEYSIDER 3: Too dusty here I think. Yeah I couldn't breathe properly in the morning, it was
too dusty.

TIMOTHY MCDONALD: Professor Guy Marks is respiratory specialist at the Woolcock Institute. He says
the dust could be a worry for people with breathing problems.

GUY MARKS: I think it's sound advice on the basis of caution that if you've got severe respiratory
problems, significant asthma or significant chronic lung disease, that it would be wise to stay
indoors with the windows closed, particularly if you notice any deterioration in your breathing

Also of course to have available your usual reliever type medications and to continue to use your
other regular medications.

TIMOTHY MCDONALD: And would it help to wear some kind of a mask if you go out in the street?

GUY MARKS: I suspect not. It's hard to know whether a mask would be helpful under these conditions,
I suspect it won't help all that much.

TIMOTHY MCDONALD: The sky in Sydney was so thick this morning that one side of the harbour wasn't
visible from the other. Brisbane and the north coast of New South Wales is also covered in dust.
But where did it all come from?

Dr John Lees works for the New South Wales Department of Environment and Conservation and is the
southern coordinator for Dust Watch.

He says a number of dust storms have been raging in South Australia for several weeks and have now
pushed out towards the east coast.

JOHN LEES: Dust came from there in several storms, there was one last week that went south down to
Hobart, there was one yesterday that was reported going through Canberra, and there was one today
which is through Sydney and all the northern part of New South Wales, and they're all coming out of
basically the same area.

TIMOTHY MCDONALD: He says every hour enough dust is blowing out to sea to fill 4,000 semi-trailers.
Much of it has been ripped from the topsoil of farms in the west of the state.

Judith Hams lives on a farm about 100 kilometres from Broken Hill. She says it's had a huge impact.

JUDITH HAMS: We were really dry, we've only had about 70 mils for the year, and we were starting to
feed stock, and we also sold a lot of our stock because of the drought, and most of the little bits
of grass that were trying to grow and herbage that was trying to survive will be destroyed with the
wind from last night, it was just a cutting wind that took everything with it.

TIMOTHY MCDONALD: Stephen Cattle is a senior lecturer of soil science at Sydney University. He says
that's a real concern for agriculture.

STEPHEN CATTLE: The topsoil is often some of the better soil because lower down the soil becomes a
bit more salty, a bit more sodium rich and not so hospitable for plant growth so by losing the top
soil in particular where most of our organic matter resides, most of our organic carbon resides, it
represents quite a loss to the productivity or the potential productivity of that soil.

TIMOTHY MCDONALD: Is this something that's made worse by the way the land is managed out there or
is this merely just a product of being on a very dry continent?

STEPHEN CATTLE: A bit of both, it can be the former, over-grazing in particular can cause
disruption of the top soil which leaves particles less aggregated and therefore much more easy for
the wind to pick up and so it certainly if you are careful with your stocking rates and don't
over-cultivate then that will certainly leave the soil better able to resist wind erosion but if
you say over-graze or over-cultivate it then that can exacerbate these dust storms.

But, yeah, more generally speaking, I think we pretty much all understand that Australia is
generally an arid continent and so from time to time when the rain doesn't fall and the wind howls
then these dust storms are going to occur.

So to an extent we can control the severity of these storms, but at the end of the day nature will
always win.

TIMOTHY MCDONALD: But Dr Lees says land management is constantly improving, and that's helping to
reduce the impact of dust storms.

JOHN LEES: We've seen basically an increase in good land management practices and a decrease in the
amount of dust that's been occurring in recent years.

ELEANOR HALL: That's the southern coordinator for Dust Watch Dr John Lees, ending that report by
Timothy McDonald.

Hole in Ozone layer closing up

Hole in Ozone layer closing up

Felicity Ogilvie reported this story on Wednesday, September 23, 2009 12:26:00

ELEANOR HALL: It was the big environmental issue of the 1980s, but today there is positive news
about the hole in the earth's ozone layer. Australian scientists say the ozone hole is shrinking
and that it could close completely by the end of the century.

And they say this should bring more rain to eastern Australia, as Felicity Ogilvie reports.

FELICITY OGILVIE: In the early 1980s scientists discovered a hole in the ozone layer - a hole that
would let unfiltered UV rays through to the earth with dangerous consequences. So 22 years ago, the
world took action under the Montreal Protocol to ban the CFCs that were creating the hole in the
ozone layer.

Matthew Tully from the Bureau of Meteorology in Melbourne says it's because of that protocol that
the hole is now healing.

MATTHEW TULLY: If we had of not taken action when we did, and the usage had of continued to
increase at the same rates it would be an environmental catastrophe now and it would be getting
worse and worse.

So basically each year the ozone hole, which at the moment is contained by Antarctica, the size of
it would have grown to cover more and more of the world so that probably by about 2050 it would
have covered Melbourne, maybe even Sydney.

FELICITY OGILVIE: The scientists are thankful that the worst case scenario has been averted and the
hole is now shrinking. The Australian Antarctic Division is using weather balloons and lasers to
measure the hole in the ozone layer. Andrew Klekociuk is the head research scientist.

ANDREW KLEKOCIUK: We've been looking at the ozone hole from Davis station and this year we
certainly see that the ozone hole is not as large as it was last year, but similar in some respects
to 2007, so yes it is smaller than last year in particular.

FELICITY OGILVIE: And just how small is small? How big or small is the hole in the ozone layer now?

ANDREW KLEKOCIUK: Well it's still very large, it's over three times the area of Australia so this
year's ozone hole would rank in the top 10 or so ozone holes that we've seen, but certainly not as
large as 2006 which was a record year or 2000 which was quite similar to that one.

FELICITY OGILVIE: Measurements taken in Antarctica just a few days ago show the hole in the ozone
layer is now 26 million square kilometres. It has a long way to go before it closes up but
Melbourne University's climate change fellow, Roger Dargaville, expects it will continue to shrink.

ROGER DARGAVILLE: The ozone hole was an environmental disaster with the amount of UV radiation
coming through the surface in the Antarctic reaching really extreme levels, so the fact that the
hole is now appearing to be closing up means that the Montreal Protocol, perhaps one of the most
successful treaties ever signed, is actually doing a really good job.

FELICITY OGILVIE: The hole is invisible to the naked eye, but thanks to his lasers Andrew Klekociuk
says he's seen what it looks like.

ANDREW KLEKOCIUK: A region that's extremely cold, with pressures that are similar to the surface of
Mars where winds are whipping around at up to well over 300 kilometres per hour at times, quite a
hostile environment. And the stratospheric clouds themselves are comprised not of water ice that we
general see near the surface but also acid droplets, sulphuric and nitric acid. So that's a pretty
hostile place, quite different to what we experience on the ground.

FELICITY OGILVIE: The scientists can see the hole is closing up but they're still trying to work
out exactly what effect that will have on the world's climate. Doctor Dargaville expects the
healing of the hole in the ozone layer will change the polar winds that drive storms.

ROGER DARGAVILLE: The expectation is that you actually get a northward shift in the storms that
bring moisture to the southern capitals, cities like Melbourne, Sydney, and Hobart. So there is a
hope, we could call that, with the closing of the ozone hole, we actually get some more
precipitation in the southern hemisphere.

FELICITY OGILVIE: But the wait for that rain could be sometime - the scientists don't expect the
hole in the ozone layer to be completely healed until 2075.

ELEANOR HALL: Felicity Ogilvie with that report.

New Zealand back in the black

New Zealand back in the black

Kerri Ritchie reported this story on Wednesday, September 23, 2009 12:30:00

ELEANOR HALL: New Zealand is back in the black. New figures show the country has just scraped out
of its longest recession on record.

It is only by the thinnest of margins, but the Government is making the most of the results

As New Zealand correspondent Kerri Ritchie reports.

KERRI RITCHIE: While Australia has narrowly avoided the dreaded R-word, New Zealand has been in
recession for 18 months. It's been a cold, depressing winter for many Kiwis.

The New Zealand Herald newspaper has been full of hard luck stories - businesses closing and
unemployed parents struggling to feed their families. But today, finally, some good news.

FEMALE NEW ZEALANDER: Fantastic, great news.

MALE NEW ZEALANDER: That's marvellous, great news, absolutely.

KERRI RITCHIE: The New Zealand economy has expanded for the first time in six quarters and it took
just about everyone by surprise. The GDP rose 0.1 per cent in the June quarter.

Cameron Bagrie is ANZ's chief economist in New Zealand.

CAMERON BAGRIE: The Reserve Bank's cut interest rates down to 2.5 per cent, so you'd be hoping at
this juncture that the economy should be regaining a bit of forward momentum as the bungy cords
attached, and we think it is, we're seeing the housing market starting to recover off those
precipitous lows and big falls we saw in 2008 and that's starting to diffuse through to the wider

KERRI RITCHIE: What really helped was growth in the primary sector, particularly fishing and
forestry - basically China wanted a lot more of New Zealand's logs. The housing market has also

Cameron Brewer from the Newmarket Business Association in Auckland, says New Zealanders have also
begun shopping again, as we race towards Christmas.

CAMERON BREWER: I think people are very recession wary, let's not forget that a lot of people like
to plan, a lot of people haven't got a lot of money, there's been a lot of job losses this year.
And so people like that time to plan, put away bargains that they see.

KERRI RITCHIE: But some economists are warning Kiwis not to get too carried away. Statistics New
Zealand says it's such a modest increase, and so close to zero, that no significant conclusions can
be drawn that this is a turning point.

But on the streets of Auckland, locals weren't going to let anything bring them down.

MALE NEW ZEALANDER 2: [Laughs] Well maybe my dollar will go further, but maybe my investments will
grow again, and maybe we can relax.

KERRI RITCHIE: Do you feel a shopping spree coming on?

MALE NEW ZEALANDER 2: I've just bought a lotto ticket; that's unusual.

FEMALE NEW ZEALANDER 2: Probably start buying a house, saving for the mortgage yeah.

KERRI RITCHIE: But a few kiwis were still a bit confused by the whole global economic crisis.

FEMALE NEW ZEALANDER 3: I didn't realise there was one actually, so yeah pretty good, excellent.

KERRI RITCHIE: Do you feel a shopping spree coming on or...?

FEMALE NEW ZEALANDER 3: Go for it, if you want to use your money and use it wisely.

MALE NEW ZEALANDER 3: I'm just doing the normal things I always do, I can't see why I shouldn't do
those things. I'm at the stage where it should be entitlement for myself.

MALE NEW ZEALANDER 4: I never thought New Zealand was in depression. I think it was just like, all
the media built that up from what was happening overseas. But actually in New Zealand I never
really saw that, it was just talk.

KERRI RITCHIE: No, never a depression, just a very bleak recession. Kiwis have their fingers
crossed that the better financial times are here to stay.

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

Keating concerned as big banks get bigger

Keating concerned as big banks get bigger

Eleanor Hall reported this story on Wednesday, September 23, 2009 12:34:00

ELEANOR HALL: Well New Zealand may be out of recession but Australia's former prime minister Paul
Keating is not convinced that the global financial crisis will leave Australia, and its banking
sector in particular, unscathed.

Mr Keating says he is concerned about the reduction in competition in the banking sector in the
last year that has seen the big four banks now writing more than 90 per cent of the country's new
mortgages compared to around 60 per cent before the crisis.

Mr Keating joins me now in The World Today studio. Mr Keating welcome and thanks for coming in.

PAUL KEATING: Thank you Eleanor.

ELEANOR HALL: Australia's banking sector has come through this financial crisis better than almost
any other country in the world, the banks are strong and stable; why do you have a problem?

PAUL KEATING: Well, they are strong and stable because, fundamentally because of a policy I
implemented in 1990/91; this is what's called now the four pillars policy. That is, I wanted to see
banks into separate and discrete units operating effectively without the cross contagion of
becoming too big.

There's a great debate in the world now about this question of too big to fail - if an institution
becomes too big then the onus falls on the taxpayer to maintain the solvency, far better to have,
to have smaller discrete units operating and Australia adopted this policy 17 years ago.

ELEANOR HALL: Were you predicting the crisis at that point?

PAUL KEATING: No it's just that, you just can't fall for the bankers' nonsense about we've got to
get big to grow up. I mean the fact is if they become too big they present a systemic risk.

Now, so the good news is, our banks did better because of the separation, but the less good news is
that the cost of this crisis has been that they have swallowed up some of the second tier banks,
like for instance Westpac swallowed up St George, the Commonwealth Bank, Bank West, and this has
reduced competition particularly in the housing market and we are to see the effects of this in
interest rates.

ELEANOR HALL: But hasn't the market though done what it is meant to do in these sorts of
circumstances; I mean, shaken the system out and allowed the most capable banks to survive?

PAUL KEATING: No, no, it's not that. All that happens is central banks get into a huddle whenever
there's a real financial crisis and the central banks want stability in the system so they don't
mind the big banks swallowing the small ones.

But central banks are never interested in competition, they are not the primary regulator for
competition, that's got to be with the Treasurer and the Government.

ELEANOR HALL: But what should the Government have done?

PAUL KEATING: Well basically, probably supported Bank West; with St George I never would have
agreed as Treasurer to allow St George to go into Westpac because you go from six banks or seven
banks to four.

And in the end what they'll do is, working on the basis never give the suckers an even break,
they'll simply put the margins up. So we believe, I mean it's good our four banks are well managed,
they've had good managers, they're now into wealth management which is a good thing.

For example Westpac acquired BT and all their superannuation savings, Commonwealth acquired
Colonial First State, NABs acquired Aviva, and the ANZ is in a position where it could acquire, and
I think in public policy terms could acquire, businesses like AXXA or ING. All that makes the four
solid, but what we want is a competition.

You see, in 1992, the margin on a housing loan was 350 basis points, 3.5 per cent over the cost. By
2007 that had reduced to under 1 per cent, so it was under a third, 90 basis points. So it went 325
to 90.

ELEANOR HALL: And it's rocketing back up again now.

PAUL KEATING: And that 2.5 percentage points was enjoyed by every homeowner in Australia. So we
just can't afford really for that competitive quality to leave.

ELEANOR HALL: And yet aren't you endangering consumers if you encourage them to go to the smaller
banks - Suncorp, Metway and other smaller banks like that - that were actually in trouble during
the crisis?

PAUL KEATING: Well they were only in trouble in the extent that their book, their assets were being
supported by borrowings offshore. If they pull the size of their book, their assets back to more
closely match their domestic deposits then we're fine.

The real trick in all of this is to separate the utility function - that's a bank buying deposits
and lending them safely against good assets - from the casino function which is investment banking,
proprietary products, derivatives, hedge funds etcetera. What I always wanted to do was to keep a
separation between the utility and the casino.

ELEANOR HALL: Now you say the Government should have intervened to prevent competition being
reduced, but I mean it was hardly a priority in the midst of the crisis?

PAUL KEATING: That's what happens you see, in a crisis everyone runs for cover, but afterwards you
get left with a system which is less competitive and I think the Government is now conscious of
that, and that's good, and I think therefore the premium on competition will probably rise.

ELEANOR HALL: How would you score the Rudd government in terms of its response to the financial
crisis - we've just heard the former US president Bill Clinton refer to Kevin Rudd as one of the
smartest leaders in the world today?

PAUL KEATING: Well he's got an eye for quality that Bill. He's always had an eye for quality, he
used to think that about me at the time. I liked him too.

ELEANOR HALL: Now New Zealand has just come out of a recession, Australia actually technically
didn't even fall into one so I guess that's, is that due in large part to the good management of
the Rudd Government?

PAUL KEATING: No, it's the flexibility of the economy, it's the good management of the Rudd
Government, yes, but it's also the flexibility of the economy. The exchange rate, the wages system,
these changes which were put into place in the 1980s and 90s which fundamentally stood Australia in
good stead.

And the Government responded quickly and effectively with the stimulus and the Reserve Bank
responded by dropping the level of interest rates, softening monetary policy quickly - that quick
response by Australia meant that as we saw a fall in private demand, the public demand from the
budget was there to take its place and people's disposable income was increased as interest rates

ELEANOR HALL: Are we now though in a real recovery or is this a stimulus driven blip before the
world plunges into a double dip recession as many economists suggest?

PAUL KEATING: Well the real challenge now, and this is perhaps more of a challenge for the
Americans and the Europeans than it is for us, is to, how do you withdraw the public stimulus and
when do you withdraw it because you can only really withdraw it as a private economy comes up as
investment and private spending rises.

But as you know the Americans overdid spending, and American households are now rebuilding their
own savings, and so of course if they're building savings they're not going to be spending on
consumption at the same level.

So what's going to take the place of that? Well the answer is net exports. The Americans are going
to have to be exporting more, and importing less. And that means an American will be looking at a,
let's say an air conditioner made in Milwaukee compared to one made in Taiwan or in China and
they'll buy the Milwaukee one if the price is right, and the price will be right if the American
dollar falls further.

ELEANOR HALL: What about in Australia though? Is the stimulus overdone here?

PAUL KEATING: Oh no, no, no. And I think the good thing is the Government designed these as one
offs, they don't continue to be a cost to the budget, and as the stimulus comes back, you know, I
think there's going to be a reasonable, given the level of corporate profitability etcetera there's
going to be a reasonable level of private investment and consumption.

So in other words, we ought to be able to make a smooth transition from the stimulus back to the
private economy. Much tougher for the Americans.

ELEANOR HALL: Now Mr Keating we'll wrap it up shortly, but just one final question to you, we'll be
coming to a story shortly on the tensions on the Fairfax board, and a couple of people have
suggested that I ask you whether you're interested in a position on the board?

PAUL KEATING: No, no, no. Board positions, public companies, you know, they're a torture stretch.
No, no, we can just look at all of this as spectators.

ELEANOR HALL: Surely the Fairfax board would be appealing to you?

PAUL KEATING: No, I think, the great days of Fairfax and the print media are probably past us.

ELEANOR HALL: Paul Keating, thanks very much for joining us.

PAUL KEATING: Thank you, thank you indeed.

ELEANOR HALL: That's Paul Keating, former prime minister of Australia.

IMF urges pre-emptive action on rates

ELEANOR HALL: The International Monetary Fund is advising central banks to take pre-emptive action
to control asset price bubbles by raising interest rates. In research released overnight, the world
banking body says monetary policy was not the main cause of the global financial crisis, but that
it did play a part.

Finance reporter Sue Lannin has more.

SUE LANNIN: Did low interest rates encourage reckless lending and thus lead to the global financial
crisis? The International Monetary Fund says there was evidence that monetary policy was too loose
in the years before the meltdown but it was not the main cause of the crisis.

IMF senior economist Alasdair Scott says there were warning signs that policy makers could have

ALASDAIR SCOTT: We don't see evidence that monetary policy was the smoking gun, we don't see
evidence that monetary policy was the main systematic cause of the crisis, but that's not to say
that monetary policy was entirely without blame.

Now interest rates were certainly low in the immediate aftermath of the .com crisis and some say
that that was the cause of the crisis, but we think that there are too many exceptions in terms of
countries experiences with asset prices for this to hold.

SUE LANNIN: The IMF has urged central banks to take pre-emptive action and raise interest rates to
prevent asset price bubbles even when inflation is not a concern. Alasdair Scott wants policy
makers to take a boarder approach.

ALASDAIR SCOTT: There might be times even when inflation is under control, but they should think of
what's happening in asset price markets to see whether these, there are these kind of financial
vulnerabilities building up.

And if that's the case they should strongly consider taking pre-emptive action and not think that
we can just pick up the pieces after the crisis has happened should that be the case.

SUE LANNIN: The Reserve Bank says it will raise interest rates from what it's called emergency
levels sooner rather than later to keep inflation under control. Interest rate strategist at
Macquarie Group, Rory Robertson, says the issue of pre-emptive action is a debate that has been
going on for years.

RORY ROBERTSON: The thinking is basically, central banks have done a good job at keeping goods and
services price inflation low and now there's a question mark about whether central banks can do
something over and above targeting inflation.

SUE LANNIN: Don't you though, if you raise interest rates too early, say in the case of Australia,
don't you risk stamping out any fragile economic recovery?

RORY ROBERTSON: Right now we're in the, the economy's very weak phase and I think central banks
everywhere will be very cautious about raising rates aggressively because they don't want to nip
the recovery from the biggest global recession in generations, they don't want to nip that recovery
in the bud.

SUE LANNIN: Keynesian economist Professor Geoff Harcourt is Emeritus Reader in Economics at
Cambridge University. The Governor of the Bank of England, Mervyn King, is one of his pupils.

He says higher interest rates have to be applied with caution.

GEOFF HARCOURT: I don't think the interest rate is the appropriate weapon to use. We are a bit
constrained, well very much constrained because we have floating exchange rate all around the world
now. I still think that those people who advocated that running capitalism in the long term
required interest rates to be low and to kept there and to use other forms of policy to bring about
growth and full employment.

ELEANOR HALL: And that's Professor Geoff Harcourt from Cambridge University, ending that report by
Sue Lannin.

Australia takes gold in population growth

ELEANOR HALL: Australia is forecast to grow faster than any other industrialised nation over the
next 40 years.

A Washington survey predicts that Australia's population will grow by 55 per cent by 2050 - that's
even faster than China or India.

The news has been welcomed by economists but conservationists say it will be a disaster for the

Annie Guest has our report.

(Sound of song Apeman, by The Kinks)

ANNIE GUEST: It's 40 years since The Kinks' Apeman captured the hippie generation's concerns about

(Sound of song Apeman, by The Kinks)

Debate over population has only intensified over time, helped along by forecasts like today's from
the Washington-based Population Reference Bureau.

Its World Population Data Sheet shows Australia is forecast to grow by 55 per cent over the next 40
years - that's faster than any other industrialised nation.

And economists like the Commonwealth Bank's James McIntyre points out population and economic
growth have been integrally linked in Australia.

JAMES MCINTYRE: In Australia, population has been possibly one of most vital parts of the economic
story over the last year or so.

ANNIE GUEST: Continued growth has helped sustain Australia's economy through the financial

Today's predictions by the private US group reflects a population totalling 34 million by 2050.
Last week Treasury forecast a figure of 35 million.

And economist James McIntyre says there are several messages in the data.

JAMES MCINTYRE: They expect our aging population to be less of a burden than our peers and they
also think that the dynamics of the global economy and the shift in the world's population more
towards our Asian neighbours. That will be a benefit to us.

ANNIE GUEST: There he's referring to the tyranny of distance that hampers business.

But he says plans for roads and other infrastructure will have to be overhauled.

JAMES MCINTYRE: The size of the population increase is above and beyond what's currently factored
into any of our investment plans for things like infrastructure and how we're going to have to
shape and evolve our cities over time.

ANNIE GUEST: So that by the time all these big projects that are underway in several states,
particularly Brisbane, are finished, governments in Australia are going to have to turn around and
do it all again.

JAMES MCINTYRE: To some extent that's true, but keep in mind that these projections are out to 2050
so we do have some time to get things in order.

ANNIE GUEST: How will having the fastest population growth of any industrialised nation change
Australia's standing in the world.

JAMES MCINTYRE: Well, obviously with our industrialisation peers having sort of declining or slower
growing populations and also more ageing populations than Australia, us being able to grow and also
to escape some of the burdens from population ageing means that we will be faring a lot better.

ANNIE GUEST: However, the Conservation Foundation's Chuck Berger is appalled by the population

CHUCK BERGER: There's a whole range of consequences. For each additional million people that we add
to Australia's population, we're having to deal with another 25 million tonnes of greenhouse

ANNIE GUEST: Chuck Berger says allowing a large population boost is nonsensical.

CHUCK BERGER: We're already stretching our water resources and we've over-allocated many of our
rivers. We know that the Koorong is South Australia is in dire straits, the Murray-Darling Basin is
over-allocated, so increasing our population by, you know, 50 per cent is going to put even further
stress on those water systems. So we're already suffering from very severe growth pains in
Australia and if these projections hold true, we're really going to be facing an environmental
crisis that is much than the one we're already in.

ANNIE GUEST: And how do you think it will affect Australia's ability to meet any greenhouse gas
emissions targets?

CHUCK BERGER: It's going to make it difficult, possibly impossible for us to do it ourselves. It's
certainly going to make it much more costly.

ELEANOR HALL: Chuck Berger from the Conservation Foundation; he was speaking to Annie Guest about
that population growth report.

Fairfax chairman considers future

ELEANOR HALL: There are signs of a truce in the Fairfax boardroom this lunchtime. The media
company's chairman, Ron Walker caused a revolt late last week when he signalled his intention to
seek re-election as chairman.

But now Mr Walker says he will step down at November's annual general meeting in favour of the
company's deputy chairman, Roger Corbett. But his anticipated departure has at least three
replacements jostling for a spot on the Fairfax board.

As business editor Peter Ryan reports.

PETER RYAN: Discontent in the Fairfax boardroom turned hostile late last week when Ron Walker
signalled he'd stand for re-election as chairman at November's annual general meeting.

John B. Fairfax, who's Marinya Media owns almost 10 per cent of Fairfax, said he'd be voting
against the bid, questioning Mr Walker's record during the current turbulence at the once mighty
publishing empire.

But now despite a show of support for Ron Walker from boardroom colleagues including deputy
chairman Roger Corbett, Mr Walker appears likely to step down, now the chance of a boardroom
vacancy has contenders jostling for a seat, among them shareholder, activist and online publisher
Stephen Mayne.

STEPHEN MAYNE: I agree that it's time for Ron Walker, who's now 70, to retire, then I think there's
an issue around the fact that all of the directors bar one are over 65, and in the whole sort of
new media era I just think they need some younger, fresher directors who've got some media

They need to move on from the era of having traditional ageing directors who don't necessarily have
direct media experience.

PETER RYAN: Stephen Mayne says Ron Walker appears to have taken the hint about his plan to retire
next year after a controversial and possibly marginal re-election in November.

STEPHEN MAYNE: There doesn't seem to be much point in losing a lot of political skin and going
through a huge battle just to serve for another three months, so I think it's pretty clear now that
Ron will probably go at the AGM, and the debate then becomes whether he can hand over to his
preferred successor Roger Corbett, whether the Fairfax family and the institutions will wear that.

PETER RYAN: Do you think this has been a major miscalculation by Ron Walker about that strategy?

STEPHEN MAYNE: Certainly having turned 70 and with his CEO having departed last December, and with
the share price having been under pressure, I do think it was an overreach to attempt to be
re-elected in that environment, and I think Ron Walker is now recognising that the public brawling
isn't very helpful.

And he'll bow out at the AGM being able to point to some successes he's had over the last four and
a half years as chairman.

PETER RYAN: Another contender is Gerard Noonan - a long time Fairfax journalist and editor, now the
chairman of the $2.4 billion industry superannuation fund Media Super.

GERARD NOONAN: I would not normally have considered standing for this position, but I just thought
that the activities in the past week, some of the ridiculous performance by, in particular the two
leading characters, you know they were like a couple of bulls in the bottom paddock.

It led me to think, look, it's time that we actually stood up on this one.

PETER RYAN: Like Stephen Mayne, Gerry Noonan says the Fairfax boardroom needs an injection of
journalism, in addition to corporate oversight. But he doesn't blame Ron Walker for all of the
current problems.

GERARD NOONAN: I think he's done actually some important work for Fairfax, but I come from a
different quarter on this one, I think that the issue is about high quality editorial and that does
need representation.

PETER RYAN: Who would you be backing as chairman?

GERARD NOONAN: Look, I think it perhaps needs a new chairman from within the board, clearly that's
where the chairman will be drawn from, but perhaps not one of the ones that have been talked about
at the moment.

PETER RYAN: Not Roger Corbett?

GERARD NOONAN: Mr Corbett is clearly a very experienced businessman, he's on the Reserve Bank
board, he's been a very, prominently at Woolworths. Is he the right person to be actually chairing
a company like Fairfax media? I don't really know.

PETER RYAN: Gerard Noonan and Stephen Mayne are in the company of another contender from the world
of journalism, Steve Harris - a one-time editor of The Age and Herald Sun in Melbourne. Stephen
Mayne, a self confessed serial boardroom contender, made this prediction.

STEPHEN MAYNE: I think Steve Harris actually is the perfect candidate, I mean he has a lot of media
experience, he's independent, and I wouldn't be at all surprised if he gets elected.

ELEANOR HALL: Endorsement from shareholder activist Stephen Mayne, ending that report from business
editor Peter Ryan. And Peter's full interviews with Stephen Mayne and Roger Corbett will be on The
World Today website later today. And as we heard earlier, Paul Keating says he's not a candidate
for the Fairfax board.