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Delivering unrivalled live Delivering unrivalled live coverage - this is Sky News,

Australia's news channel. This is PM Agenda.

Good afternoon welcome to

the program I am David Speers. How would you Speers. How would you feel

about your phone calls and

e-mails being held on file

able to be accessed by law

enforcement agencies, for two

years? Well the

Attorney-General used to have

concerns about it, Nicola

Roxon just months ago said

that she wasn't convinced

that the benefits for law enforcement outweighed the

costs to privacy and the cost

to the private sector. But in

a speech today, the

Attorney-General has spoken

strongly in favour of these

sweeping new security powers.

Coming up we will have a look

what they would actually

involve, and we will be

talking to Greens Senator

Scott Ludlam who has serious

concerns about the new

security step. We will be taking a look at the impact

of the falling iron ore price

it is starting to bite. Fortescue Metals today

announced job cuts in the

shoveling the prospects. Now

where does fofrt fofrt stand.

Also the Prime Minister on

the heart -- Fortescue stand.

The Prime Minister on the

hard sell today trying to

convince anyone who would listen about her school

funding reforms. We will see

how she's going winning over

particular the main audience the state leaders in

for the Prime Minister in all

of this and comma exactly is

she selling -- what exactly

is she selling. Phil Coury

and Shane Wright our panel

today. The Prime Minister's education crusade is

continuing, after the release

of the Government's plan for

school funding. But with no

cooperate Julia Gillard is sign that the states will

trying to convince mining

bosses to use their lobbying

powers to get the premiers on

airwaves this morning Julia board. After blitzing the

Gillard took her education

crusade to parliament even

working the pitch into her

speech at a mining conference. You understand a

13 year pipeline of

investment in mines. I have a

13 year pipeline of

investment in mines. That

distant target a top five

education system by 2025 has

drawn criticism from the

states and the Opposition

perform I think this is a

prime minister who is more

interested in striking a

possess than she is in

delivering -- a pose than she

is delivering approximately

The Government is hoping to

strike a deal with the states

before the election next year

but the premiers are doubtful

with no indication of how

much they are expected to pay. That's time for the

Prime Minister to actually

sit down and negotiate these

things rather than conduct

government by media. At

least there is agreement on that. This isn't a negotiation around quantums

and money that Education

Ministers, Prime Ministers and premiers can conduct in

front of television cameras

and in the media. But the

big question remains, where

will the $6.5 billion needed

per year come from Actually

tell Australians where all

this money is coming from

because I can bet you Kieran the truth is they are trying

to put off the fact that they

are going to introduce new

taxes, new levies, and they

will have increased taxes to

pay for this this. Look at

prepared to take difficult our record we have been

decisions and they were

decisions which enabled us to fund some of the other priorities which are so

important for the country. Despite the criticism the

Government is enjoying this

fight, after the dental plan

and NDIS announcement it

keeps talk of Labor values on

the table. But it's unclear

from the latest polls whether

the shift in focus is paying

off. The Prime Minister's

approval rating is at a 7

month high, she's edged ahead of Tony Abbott as preferred

Prime Minister. But the

referee in Labor's primary

vote, has stalled. The

recovery on Labor's primary

vote has stalled. On these numbers of party will be

dealt a devastating election loss. Divisions within

Coalition ranks over foreign

investment have bubbled to

the surface, as Shadow

Treasurer Joe Hockey rebukes

some of his colleagues for

freelancing on the issue.

National Party figures led by

Barnaby Joyce have slammed the foreign investment

approval for a Chinese

consortium to acquire the Queensland cotton farm Cubbie

Station. Joe Hockey says

those who are being critical

do not speak for the

Coalition which he maintains

does support the approval.

The Nationals Senate leader

Barnaby Joyce believes it is

not too late to turn around

what he slammed a disgraceful decision. Nothing is too late

if the will of the people is

there and I'm appealing to

people to make the call to

your federal members. Those

calls should include Senator

Joyce's own senior coalition counterpart s. Some people

are freelancing they do not

speak for the Coalition. They

do not even speak for the

naisht or Liberal Party. I

speak on the fore investment

policy on the Coalition we

Investment Review Board. So support the Foreign

does the LNP Government in

kweemd but the shadow

minister for water and the nationals leader in the

Senate clearly does not. The

loss of another section of

our prime agricultural land

to an overseas interest. Next

water licence in our nation it's a loss of our biggest

to an overseas interest.

From a Coalition perspective

we understand the decision,

we recognise it's importance

in protecting jobs at Cubbie

Station. The approval by the Foreign Investment Review

Board and the Treasurer of

the acition of Australia's

largest cotton farm by a

Chinese led consortium has

put on display the tensions

that exist within Coalition

ranks on foreign investment

and if it's a rare break from the sustained public

discipline of Tony Abbott's

team. Front benchers have a

responsibility to be part of

the team. Backbenchers can

freelance because they are on

the backbench. Where is the

national interest if we don't

think our largest farm is in

our natural interest? Some

front benchers are easier to

rein in than others. The

Reserve Bank of Australia has

left interest rates unchanged

at 3.5% for the third board

meeting in a row. The

decision was expected with

most economists widely tipping for an unchanged

figure. No surprises that

focused a little bit more on

the moderate growth that's moderate growth taking place

out of China and the slowdown

in Europe as well. Those are

the key factors for the

Reserve Bank. Domestically we

have seen they upgraded

economic forecasts in the

monetary policy statements so

it seems to suggest they are

more comfortable about the

longer term outlook for the economy. Inflation doesn't

seem to be a concern either

so they have the opportunity

to cut rates if they were decidedly worried but it is more a wait and see mode at

the moment. The last time

the central bank cut its cash

rate was in June, by 0.25%

after a 0.5% reduction in

may. Construction workers at

the centre of an ongoing

industrial dispute in

Melbourne have written a

scathing letter directed at

the CFMEU. The group of Grocon workers say they have been intimidated by the union, they pay their

membership fees to, and they

just want to earn a living

for their families.

Arriving at work under a

heavy police escort, Grocon

construction workers were

called scabs. Their faces

photographed by union members. Earlier hundreds of

CFMEU workers again protested

at the emporyum site for the

14th day since the blokade

began. Their message consistent. Once again what

we do is call on grow to pick

up the ind pick up the independent umpire's recommendation. The 14 days

are gone and we are sit down and have discussions with

them to try oresolve this.

It didn't take long for the

works to get back on site, 53

of them in total. My understanding once again is

the number of workers are 20

or 30. They walk about to

agitate the construction

workers who are walking by,

seeing them. They send a

crane driver up he spends a crane round. Daniel Grollo


The Victorian Police

Commissioner Ken Lahey says

he wants to avoid the violent

scenes that occurred last

week. There's no clear

undertaking from these people

involved in this protest that

they will let people through

without violence. And now we

finally hear from the Grocon

workers. In a statement "All

we want is to be able to go

to work and provide for our

families and loved ones. We

have been unfairly singled

out by abuse, threats and intimidation by the very

organisation we pay our union

fees to in an argument which

is not of our doing" We

believe all participants

should adhere to the

instructions of the police,

all participants including

the CFMEU should adhere to

the Supreme Court orders.

Only a handful of CFMEU

officials remain heavily

outflanked by police guarding

the site but with the contempt proceeding against

the CFMEU under way, in the

Supreme Court, and no sign that Grocon will consider a

cooling off period, how much

longer will the unions

blockade continue? Peaceful

protests, whether we will be

here tomorrow or the next day

we will sit down and discuss

that. It comes as Victoria

Police issued awarrant to all

media outlets in Melbourne

including Sky News ordering

all raw footage from last

week's protest to be handed

to police as they investigate. South Australian detectives have

arrested three people and

seized more than $2.5 million

in drugs and weapons,

including a fully loaded oozy

sub-machine gun. Police found

the drugs and guns after

raiding homes at Salisbury

East and clove Ellie Park on

Friday and further sfrn

searchs on Saturday at somer

tonne Park, Camden Park, mel

rose Park and Eden hills. A

24-year-old man from Clovelly

Park was also arrested. Those involved in the enterprise

were organised and we have

made a significant dent in

the local drug

market. Particularly to the

distribution network. All three people arrested have

been bailed to appear in

court in October. The NSW

state government has

announced a 20-year plan to

ease the city's congestion.

Among the suggestions, a

second harbour bridge crossing. Sky News Sydney reporter Cameron Price has

more. It's no secret Sydney

has a traffic problem. Rated

the world's tenth most

congested city the creeping

commute is a way of life for

many living out of the city.

Today a state government blue

print for the next 20 years

and an attempt to fix

Sydney's traffic snarl.

What hasn't happened in

this city, for at least five

decades has been this sort of

approach to transport master

planning that does identify

corridors that are needed,

that does seek to put some shape around when those

corridors will be delivered.

Some of the suggestions six

areas of concern around the

city to focus on. Including

a duplication of the M5

tunnel in the city's

south-west and a motorway

under the inner west to calm

Western Sydney's daily

grind. For the rail network

a second harbour crossing and

a move to single level

trains. And while the report

mentions the possibility of a congestion tax, the O'Farrell

Government says it is not on

the agenda. But within the

parameters of a congestion

tax I have ruled it out, the

premier's ruled it out. There has though been

criticism. The report has no

time lines, no costings, nor

any specifics. And many of the projects have been

earmarked for decades. But the state government says it is simply a vision to aim

for. This is a master

planning exercise and just as

JJC Bradfield travelled the

world and chained what he thoughts will be the design

of the Sydney Harbour Bridge there may well be changes

within the confines of the

master plan. And in sport,

the Australian rugby league

commission has suffered a

body blow with the AFL's chief operating officer

Gillmam McLaughlin confirms

he's not interested in the vacant CEO position. Des

Hasler has laughed off claims his knowledge of Manly will

give the Bulldogs an

advantage in Friday night as

final. Well, you are

probably - you know the

individuals and you know the

players. But at the end of

the day I'm in the dark. It

doesn't. Me. . It doesn't

help me. It is more the

moments that will be

presented in the game. . In

the meantime Bulldogs flak

Ben Barba is widely teped to

be awarded the rugby league's

highest honour at the Dally M


Now back to David Speers in Canberra as PM Agenda

continues. Thank you. After

the break we will look at

proposed new security power

which is could see all of

your e-mails and phone

Californias held on file for

two years -- phone calls held

on file for two years able to

be accessed by law

enforcement agencies we will

be talking to Greens Senator

Scott Ludlam who has concerns

about this. We will look at

Julia Gillard's hard sell on

school funding reforms and the split in the Coalition over buyers buying up Cubbie Station in Queensland. Stay

with us.

You are watching PM

Agenda. The Prime Minister

was on the hard sell today, she conducted four radio

interviews, a press

conference, and gave two

speeches trying to sell her

school funding reform plan

she unveiled yesterday. One

of the speeches the Prime Minister gave in Western Australia today was actually

to a mining industry

conference. May sound like a strategic audience to talk

about school funding but that didn't stop Julia Gillard she

in fact tried to rally the

miners to her cause. Now the

mining industry knows a thing

or two about lobbying, so

let's say you can be very

influential when you get

together. So use that tremendous organising power

to say to the premiers and

chief ministers get on board

with the national plan for

school improvement. The

miners may well have been hoping to hear a bit more

from the Prime Minister about

the Government's plans for

the resources sector, given

the fall in iron ore prices

is really starting to bite, a

little later in the program

we will look at what's

happening at feltss today. It has -- Fortescue Metals today

it has Shelled a couple of

projects and announced some -

quite a major downgrade in

its capital expenditure we

will take a look at that and

where things are headed as

demand from China starts to soften. Julia Gillard however was determined to stay on

message on school funding

today, her main target wasn't

perhaps so much the miners,

or indeed the listeners on the varies were radio

stations she appeared on but the state and territory

leaders they are the ones she

needs to get on board when it

comes to furthering the

school funding program. She's

not still saying how much the

Commonwealth is willing to

put in or what she wants the

states to put in but the

message is clear, the states

will need to stump up more

cash. However the reaction so

far from the states, well

less than overwhelming

generosity it must be said or

enthusiasm for these reforms. enthusiasm for these reforms. Here was the Queensland Premier Campbell Newman

today. Ladies and gentlemen,

stop believing our Prime

Minister. The Prime Minister

stands up and says I'm

passionate about education, I

will have a crusade. Well

look, the Prime Minister has

no monopoly on being

passionate about educating

kids. I'm passionate about

it, so is John-Paul Langbroek

and frankly people should

stop going ooh ahh and this

sort of complete uncritical

commentary so we are putting

more money in. It's time for

the Prime Minister to

actually sit down and

negotiate these things rather than conduct government by

media. The Western

Australian Premier Colin

Barnett was also critical. He

said the west won't be

handing control of their

school system to Canberra. Also attacked the Government

for not engaged in more

negotiation over this. A bit

of a friendlier audience from

the NSW Liberal premier Barry

O'Farrell. Julia Gillard did speak with him today about

all of this, and the NSW

premier, while expressing

some concern is largely on board with these sorts of

reforms. When ruby starts

school and you get on to the

school council you will

understand what master

planning is about it -- is

not about the here and now,

it is about ensuring that the

service or the case of

schools is planned for the

medium to long term future.

So - my answer answer on

that clear. So when money

becomes available it is

invested wisely. Bo of also launching that transport plan

for Sydney that we have heard

so much about. We will look

at how the Prime Minister's

hard sell on school funding

has been going so far. And

exactly what she is selling.

With our panel Phil Coury from the 'Sydney Morning

Herald' and Shane Wright from

'The West Australian'. The

Government has also been

engaged in some repositioning

today on a sensitive new

security power. Some months ago Nicola Roxon the Attorney-General, wasn't so

keen on the idea of a

allowing internet service

provide arpsz and phone

companies to hold, to store

phone call and e-mail data

for two years that law enforcements agencies will be

able to access when needed. Today the Attorney-General

has spoken strongly in favour

of these new powers. It has

always been a balancing act between providing proper

protections for the community

who expect to be safe, expect

our law enforcement agencies

to be able to track down and

prosecutor those involved in criminal activity or those

intent on causing harm. But

with that always comes proper

oversight, how you make sure

we are not reaching too far

into the private lives of

Australians. Greens Senator

Scott Ludlam is one of those

who is very concerned about

these proposed new powers and

the shift in the Government's

thinking on them. Given most

of us have smart phones these

days, Senator Ludlam fears

that law enforcement agency

also essentially be able to

track us whenever we go,

whatever we do. I spoke to

him from Fremantle a little

earlier this afternoon. Senator thanks for your time.

What concerns you about this

plan? I have got real concerns the Government

appears to be falling in

behind an idea for total real time surveillance of the

entire Australian population.

Everywhere we go, where are

carrying a phone, every

e-mail sent, every footprint

we take that has some kind of

trace on-line the Government

wants to Force telcos to

retain all of that material

so it can be data mined

whether you are suspected of

a crime or not. It's a gigantic overreach, expansion

of surveillance powers that

exist. I'm interested in

working with law enforcement

agencies to work out how to

give them the tools they need

but we shouldn't be proposing

this gigantic surveillance proposal for the entire

country. Nicola Roxon says

this information would only

be used by crime fighting

agencies, police and the

like. When it's needed. So,

why are you worried about all

data being used - stored and

used inappropriately? I think

they there are real problems

not just about with the

obvious privacy im plic implications there but with

the costs and the fact the

data stores will become ennor

muscly valuable and we --

enormously valuable and we

have seen it lr leak on to

the public domain. We need to

take it to principles whether

or not government will

install video cameras in the house and tape conversations we have just to case people

turn out to be a criminal. We

place boundaries on police

and intelligence gense

agencies because we are not a

police state. I think the Victorian privacy

commissioner is using that

language. This is a very

serious proposal comes coming from the government instead of pre-empting the work from

the committee I would have preferred to see Nicola Roxon at least sit on the fence for

the time being and wait for

it to do its work. What about the counter argument

when it comes to any of these

tougher new security laws

that it could prevent,

perhaps could prevent climbs

but also the argument it

makes it a -- crimes the

argument it makes it easier

to solve crimes, to find perpetrators and convict them. Is there some

justification in doing this

for those reason? I think there would be justification

for extending the reach of

law enforcement agencies uses

targeted warrants and using

very specific surveillance

powers if they are chasing

particular crimes. That's

been the prevailing system in democracies for the last

hundred years or so.

Experience that's coming from

the US suggests all that

happens is law enforcement

agencies are then drowning in

data about ordinary citizens

while criminal activity is pushed further joined r underground. That's the

evidence from overseas. I

think we need too take a

careful look at why these

powers are being asked for,

and why we are all to

be treated as criminal

suspects in this huge criminal surveillance

dragnet. Wouldn't the data

be stored by the ISPs and

phone company s but only

accessed by the lay agencies

when they need it? What is

the definition of need?

There is no proposal we can see coming from the Government these should -

that there should be required

to be warrants. What's happening at the moment even

with the limited amount of

data already collect about

people, a quarter of a

million access requests were

made in the 2010 financial

year, the data is being

hoovered up at an enormous

rate not just by police, by

the Tax Office and welfare agencies and other, and

nobody knows what is becoming

of it so if the prop sl to

radically expand those powers

without any expansion of privacy protections in

Australia I have real

concerns. What if this was

restricted to only being accessed with a warrant?

Would that satisfy you? Well

that's not even the way that

- that's not even the system

that pre rails at the moment.

The industry is telling us it

could worst between $50

million and $.00 million to

in$700 million to institute a

system like this. Technically

it will be very difficult to

bring about and even if it

were used only by warrant,

which is an improvement we

have on the situation at the

moment it doesn't prevent

unauthorised use, or

corruption or doesn't prevent

the data being leaked. So the

Government needs to take a

backward step and at the very

least let the law enforcement

committee do its work.

Thanks for your time. I'm

thank you much appreciated.

After the break, we will shift to the Prime Minister's

hard sell on school funding

reform and also the split

within the Coalition over

whether a Chinese consortium

should be allowed to buy

Cubbie Station the giant

cotton farm in Queensland.

Stay with us.

Are you watching PM

Agenda our panel in just a Agenda our panel in just a

moment. First to check the news headlines is Vanessa


Prime Minister Julia

Gillard has called on the big

miners to lobby state

governments over a new

schools education funding

model which will require an

extra $6.5 billion a year.

She's told mining bosses it's

in their best interests for Australia's education system

to improve, and has ruled out tax increases to pay for the

new plan. The Reserve Bank

of Australia has left the

cash rate unchanged at 3.5% for the third board meeting

in a low. The decision was

expected with all 13

economists widely tipping for

an unchanged figure. The last

time the central bank cut its

cash rate was in June,

cash rate was in June, by

0.25% after a 0.5% reduction

in May. Opposition treasury

spokes person Joe Hockey has

lashed out at jj and other

National Party freelancers -- Barnaby Joyce and other

National Party freelancers

who criticised the proposed

sale of Cubbie Station. Last

week Treasurer Wayne Swan

approved the sale of Australia's largest cotton

grower to a Chinese dominated

consortium. National Party

figures led by Barnaby Joyce

have slammed that foreign investment labelling the

decision a disgrace. Workplace Relations Minister

Bill Shorten has announced a

national agency will oversee

the removal of intonz from

all government and commercial

-- asbestos in government and

xhesh buildings at a union summit today. The plan comes

after a review released last no recommending the Commonwealth lead the charge

on the issue. Mr Shorten

hopes the removal will be

completed by the year 2030.

Grocon the construction

company at the centre of a

bitter industrial dispute has

released an open letter it

says was written by workers

at its Melbourne CBD site. In

it they say they are sick of

the CFMEU Australia actions

and want to return to work

without fear of reprisal.

They say they have no

argument with their employer.

This morning police escorted

two bus loads of workers on

to the site, where union

members have been picketing

for almost a fortnight. And

Australian swimmer Jacqueline

Freney has picked up her

fifth gold medal at the

Paralympic Games in London.

It came in the free style S 7

class winning in record time.

The 4 by 100m free style

relay Freney along with 13-year-old Maddison Elliot

and Katherine Downey blitzed

the record in record time.

The weather very windy with

showers across the south

tomorrow. Warm and windy in

the east.

Thank you, welcome back

to the show welcome to the

panel. Shane Wright from 'The

West Australian' and Phil Coorey from the 'Sydney

Morning Herald'. Thanks for

yoin joining us I want to start with the Prime

Minister's hard sell she's

been in the west today as I

mentioned earlier a lot of

radio interview, press

conferences speeches. The

speech to the mining industry conference seemed like a strange audience to make this pitch but the Prime Minister pitch but the Prime Minister

did find a way of linking

school funding reform to the

mining industry. You

understand a 13 year pipeline

of investment in mines. I

have a 13 year pipeline of

investment in mines. She

did that with a straight

face. I think she should get

a gold medal for creativity

if nothing else. Was it a

strange audience though to

make this pitch to? It is

strange but given that the

whinging that the mining

sector has gone on Foran the

best part of a decade about

the lack of skilled workers

yes you could mount a case

saying yes it's the right audience. But I don't know

if it would last very long.

Belting some of the miners

around the head for the last

six months or so now they are saying come and help us put

pressure on the states. I

don't think they will be wait

fogger that to occur but she

-- waiting for that to occur

but this group ordinarily no

one would care what she would

say so she's talking to a

greater audience, that's why

she has done the radio and

things. How is she going to

you think with the sales

pitch? Alright. It's just a victory for this Government just to have everyone talking about what they want them to

talk about, whether it's good

or bad and this has been her

goal since the winter break.

We have had talking about dental, talked about

disabilities now we are

talking about education. A

few weeks time we will

probably be talking about

industrial relations when

they do the fair work review

so it is all about best be

talking on our topics rather

than talk about the carbon

tax again or anything else.

You intercept. With the

speech of the miners she could hardly announce

whatever she has announced whatever she has announced

today and go and talk about

something else today so there

were a few niceties at the

start about the strength of

the mining inof industry and

the boom and the heroic ic

sec way which she showed. Campbell Newman didn't look comfortable

having to defend where he is

going autoin his press

conference there was a lot of education and National Disability Insurance Scheme

and that's the aim to get on

to space she is comfortable

in and it doesn't matter, she

coulding launching an assault on Mt Everest and she could

be talking about how she

learnt and all the Sherpas

got educated when he went there. Campbell Newman is

not a back flit. His back is

not well. His clearly been

burnt by the reaction of not

getting on board National

Disability Insurance Scheme

trials and now doing his own

things what it comes to the

Fremantliers and the school

funding issue they want talks to happen negotiations in private, that's what they

will get. Though they don't

want to pay too much. This is

$6.5 billion it will cost

each year extra, Adrian

Peccoli the NSW minister said

yesterday and this morning,

they are fairly - they like they are fairly - they like this. Pretty happy. They

like the direction of this,

they like what Gonski recommended. They have already done a lot of it

themselves anyway with the

funding models and literacy,

so their concern is haven't

got allow the dough, they

will be hit up with a lot

more dough with the NDIS they

are on board so long as the Federal government picks up

the lions share of this new

funding which I think you

will find will be the

case. The snoo the Western Australian premier is quite

different because he is

saying we are already doing a

lot of this, he is saying we

are already spending a lot more than the benchmark

average. They are but they

don't get the ruts and that's

partly to do with the larger

-- results and that's partly

to do with the larger

Aboriginal population that

effects the marks the kids

are getting as well so that

drags you don't but Colin

Barnett line says we don't

want a snivelling public

servant.... I think that will servant.... I think that will change because as we reported --. If you read 'The West Australian' you would know

they reckon there is a $1.5

billion hole this this year's

budget because of what's

happened with the iron ore

price so instead of a $200

million surplus and he's got

problems now and he's got an

election in March. That will

hit him. It is a different

reaction from some of the

different conservative

premiers. We did see a similar sort of game being

played in the lead-up to that COAG on National Disability

Insurance Scheme, she ended

up getting a deal with at least, a couple of the big

state premiers. All except

Campbell Newman ultimately.

What does she need here for a pass? Thy this is different

because as she said in the

speech yesterday I will not

be held to ransom with

recallsy trants. It doesn't

have to be a national thing.

Medicare has to be national

and this has to be national

so it can be uniform. If she

gets NSW on board, South

Australia one or two others

she will take that and take

it to the election with all

the others. That will be her attitude. You would think

if the Commonwealth is, and

who knows where the money

would come from but if the

Commonwealth is putting in a

lot more money for the states to sign up that will put

pressure on the others. We pressure on the others. We

are talking about making bunt

cuts and so forth but it's

starting school year 2014 and

wouldn't be spending the $6.5

billion into 2020. That's in

the never-never. You are

lumbering the future G with

that bill -- Then are you

lumbering, if we assume it is

Tony Abbott you are lumbering

him with having to unwind in

the face of, we will give

money to kids, we will give

money to disabled people, that's -

that's - and give given what

he's already said in terms of

having to wind back the

budget, he's going to look

very unpopular bog through

those mechanisms. I notice

Chris Pyne yesterday

certainly wasn't as emfasic

as the Coalition has been on

the carbon tax and the mining

tax about getting rid of this reform. The carbon tax and

mining tax will go day one, if Julia Gillard does get a deal on school funding it is deal on school funding it is

hard to see with the states.

Hard to see. Depends what

they legislate. This will

start school year 2014, 2

will be in the May budget

next year if the Coalition

wins the election in October

next year they will inherit

the spending and the cuts.

And the new funding model whatever state

whatever state so they will

have to - I guess they may

have to - it wouldn't have started either. They can actually say no they will not

do it. They could make the savings that's an savings that's an option for

them. Which would have to be something that Joe Hockey

would be saying that's

something to take into account. Speaking of Joe

Hockey, the Coalition have

been a bit Arthur and Marth

on this issue of Cubbie

Station the cotton farm

should be sold tie Chinese

consortium the Foreign Investment Review Board has given conditionable approval

to it. The Government is

happy therefore or defending

that process and defending

that happen Barnaby Joyce is the loudest voice in the Nationals raising concerns

about this. Here he was yesterday. Have a

look. Nothing is too late if

the will of the people is

there and I'm appealing to

people to make the call to

your federal member. It's a

loss of another sense of our

prime agricultural land to an

overseas interest. Next it is

the loss of our biggest water

licence in our nation to an overseas interest. Where is overseas interest. Where is the national interest if we

don't think the largest farm

is in our national interest.?

Look he's a Queensland

Senator, he recommends that

area of St George and covers

that and you try to get the

lower house seat that would

cover this seat area as well

so it gives him entitlement to talk about this Joe Hockey

the Shadow Treasurer seements

though think not -- seems to think not here he was this

morning on Sky News. Some

people are freelancing they

do not speak for the

Coalition. They don't even speak for the National Party

or the Liberal Party. Front

benchers have a

responsibility to be part of

the team. Backbenchers can freelance because they are on

the backbench. Joe Hockey and Tony Abbott support this

foreign investment, Phil

what's going on here in This

is national Liberal product differentiation. This stuff

is burning who out in the

bush. It is also Barnaby

Joyce running for the seat of

Maranoa. He wants to knock

off Bruce Scott the sitting.

Member. Who supports this sale. He is the lone

navshl. The farm has been in

administration for three

years. It's doing well at the

moment but if it is another

drought the bank also sell

off the water licence and

shut the farm. He said it is better selling it better selling it than the

risk hanging around. There is a lot of internal National

Party politics here and

internal Coalition party

politics. Joyce is as member

of the front bench and ad

hoccy pointed out as a front

bencher you have to support

policy, and a couple of weeks

ago Abbott released a policy

paper on fol foreign policy.

A discussion paper to draws

this sort of thing and take

the tension out of Coalition

under that discussion paper

and its proposals this still

would have been approved the

paper was done with the input

of Warren Truss the narnls

leader and even if that

policy would be applied

Cubbie would have been

approved to be partly sold

though this Chinese group and partly to the Australian

group. Warren Truss not as strong as batsman but has

weighed in clearly expressing

great concern about this as well. What's the real concern

here in From the lifbt's

point of view, and Joe Hockey was speaking -- Liberal

Party's point of view and Joe

Hockey was speaking with

absolutely clarity today, is,

like, bar nanny might go on

about the -- bar na by might

go on the... selling the farm

but what about the 170 people

who have got a job because of

that company still going. And

that got forgotten and Joe

was talking for those 170

people. It's just foreign

investment. The farm is not

going anywhere, the water -

they are still bound by the

same... There is an

emotional attachment to a big

#235r78 farm and holding of

water rights. But technically

there is no difference between that and any

Australian company. As Bob

Katter the Nationals sold Queensland to the Japanese in

1980 and protested then. They

were in government for 12

years and did nothing to stop foreign acquisition of land

when they were in government.

Katter has opposed it all the

way along. There is that

worry, that within certain members - within certain

parts of the Liberal Party

that if they get seen to be so antagonistic towards

foreign investment and there

are those question marks over

what's going on within the

Abbott office and how close he is to Barnaby Joyce, Joe Hockey was standing up for those on the right of the

party saying look we are the

Liberal Party and the Liberal Party believes in foreign

investment, the country is

built on it, let's move on. That's effectively the

message he's trying to get across. Stop Liberal Party

and National Party. I A sensitivity in the National Party they think the bar is a

lot lower for agricultural

acquisitions there is tighter

laws if a foreigner wants to

buy a house than for Cubbie

Station and when they look at

the things for the bid by the

Singaporeans for the ASX the Stock Exchange that got

blocked and they reckon the

city sliekers block things

but don't like flogging off

the farm. They say there is

two standards apply. Who is

this Chinese consortium. Will

they do anything different

other than run it The The

Australian partner which owns

Drizabone, 20% of this,

Australian family owned rural business will administer and

run the thing, as far as we

know the Chinese textile

style firm will have a 80%

stake, under the terms of the

agreement they have to sell

that down to 51% within three

years but, sure, profits will

go to them, for their stake

but, what else will you do. Will you let it collapse or

just leave it. Is ta Chinese government controlled

company? A bit nebulous. If

you talk to people they say

it is not state owned it is

owned about I - there is is

a Japanese interest but it is

a whole bunch much people. As

soon as you get into Chinese,

government interference

somewhere along the line. A

grey line. That can change

or can raise questions about

the motivation of the company. We should have

looked at this the Foreign Investment Review Board

looked that and I I think

what what are the Nats are

saying the ones not as shrill

as Joyce,fy owan Nas -- Fiona

Nash is saying let's have transparency. Detail the

reasons and if they open up

and explain a lot of the

hostility will abate. The

secrecy behind these

decisions is often the

problem rather than - And

politically for Tony Abbott,

he clearly tried to put a lid

on this with that discussion

paper a few weeks ago. How

sensitive is this

politically? Well, the fact

that it ran on the front page

of the 'telegraph' on Saturday saying we sold the

farm which they are off with

the fairies again, given this

whole country is built on

foreign ownership in terms of

its farm - that's how the

country got built. Let's not

forget where the past has got

us to, where where we are

today but politically it will

play because remember Cubbie

is not the National Party and

foreign ownership, it is

environmental as well so

there is all the discussion

particularly through the Darling area of that water

that's held in Cubbie and you

can't get away from - so

there is you have the right

arguing about that but on the

far lest there is also this

tension over -- left there is

tension over one bloody big

farm. Final issue the

Reserve Bank kept zbrats on

hold today, Shane I know have

you been pouring over the

Reserve Bank statement. My

quick scan of it, seems to

ind the Governor Glenn

Stevens and the board are still concerned about what's

happening in the global

economy, economic activity in

Europe is contracting, growth

in the US only modest. Growth

in China remain reasonably

robust albeit well below the

exceptional pace we have seen

in recent years. The key

message they have the rate

cuts from May, the half and

the quarter in June, give us

more time and let that work

its way through. We are getting a little bit worried

what's coming out of China

and the big issue today, as

revealed exclusively in 'West Australian', was about

felgtss knocking off --

Fortescue Metals knocking off

$1.6 billion in terms of

CAPEX, it will sack 300

people there have been

emotional scenes over parts

of WA -- We will hear about that more after the break

this is the hard edge of the

slow down in the iron other

than price. This is the hard

edge. As I said the state

budget is looking very sick.

I think I am saying it is

like a canarey it is wheezing

and it is losing a couple of

its feathers. I think, and

like all for all the talk we

have had about the GST and

GST being flowing out of WA

and the rest of the state,

ref the country, WA might be

seeing itself some GST

flowing back from your

state. Is that right. In the next couple of years. Wouldn't you love to

see that. You might. Shane

Wright and Phil Coorey thanks

for joining us. We will be

talking more about Fortescue

Metals having to lay off some

staff, shelve projects and

write down some CAPEX. We

will be Victoria a look at

that and what -- having a

look at that and what impact

this falling iron ore price

is having in Australia. Stay

with us. .

You are watching PM

Agenda as we mentioned a little earlier Fortescue

Metals is feeling the pinch

of the falling iron ore

price. At the of last year

the price was $180 a tonne,

today trading at about $81 a

tonne. That price has fallen,

Andrew Forrest and Fortescue

Metals expect it will recover

but they are holding out hope here in the meantime today

they have had to announce the deferral of a development at

the Kings Deposit and also,

the deferral of full

completion of a fourth berth

at the Herb Elliot port. They

have also had to slash the

planned capital expenditure

by about a quarter. So a

significant figure indeed.

This does mean impact on jobs, impact on profits,

impact on the share price and

ultimately it will mean an

impact on federal budget

coffers as well. To look at what's happening at Fortescue

and what's happening with

iron ore more generally David

Lennox is a resource industry

analyst joins me now. What do

you make of what Fortescue has finally announced today -- seems they have been

holding out for some time but

eventually have to to do this

today. We certainly think

Fortescue Metals had to take

some steps to look at its

cost structures and to look at its capital costs going

forward. The reason we say

that is as you mentioned

David we have seen a significant decline in the iron or price, what that's

doing is it is having a very, very severe impact on

Fortescue's margins. We do

think at this point in time

their probably have on an

operating margin of somewhere

perhaps $10 to $15 per tonne

of iron ore they are

extracting. What the iron ore

price was at that peak area

they would have been earning

a very good margin. So it's

not surprising that they have

now had to capitulate and

they will look at their cost

structures. They are trying

to extract we think about,

they have suggested $300

million out of their

operating structures. And

they have also slowed down

their capital expenditure by

about $1.6 billion for next

year. Explain to me why

this fall in the iron ore

price because of weaker

demand from China is hurting

-- Fortescue more than BHP or

Rio Tinto. The real simple

answer is Rio and BHP have

been extracting iron ore from

the Pilbara region since Gina

Rinehart was a kid, so their

cost structures, their

capital cost structures and the amount of other costs

that they have been able to

write off now have being long

and well and truly sunk many

years ago. Unfortunately for

Fortescue they have only really in the last couple of

years completed their mining

operations, at a pint in time

when the actual capital cost

to develop the mines were

high, and now the actual

costs to operate a mine is

high. So that's the real

difference between what we

are seeing for Rio and BHP

compared to what we are

seeing happening to Fortescue

at this very point in time

-- So the crystal ball where

are things headed I know Andrew Forrest has been optimistic about a turn

around he expects the price

to come back, particularly as

we see a leadership

transition in China. It is

all pegged to what happens

with that growth story in

China. What do you think is

going to happen? Look, we do

think that China will

probably slow to around about

the 7%, where it is now. And

we do think that will

probably be the base. But at

this particular point in time

you would have to suggest

that all the data that we are

still seeing come out of that

country is still tending to

suggest that the economy is

still shrinking. So while

that's happening we do

believe that there is still

going to be a fair amount of

pressure to not so much - to

probably hold the iron ore

price from rising over the

foreseeable future. But once

we see I guess the

authorities in China to perhaps ease their interest

rates, ease the banking

ratios, so that they can free

up activity within their own

economy, we think that that's probably going to be a good

signal to allow the iron ore

price to perhaps recover. We

are not expecting any great

activity probably until into

2013. But, nonetheless

given we have seen this hit over the course of this

financial year, are you able

to say what impact this will

have for the Federal budget

in particular with the mining

tax, company taxes. Is this

going to deliver a hit? There

is no doubt depending how

good their forecasts were

when they were looking at

their amount of tax that the

mineral resources rent tax would raise. One would have

to suggest that they probably weren't really foreseeing

such a dramatic change in the

iron or price. And you would

have to suggest that the industry was caught somewhat

by surprise as well. And that's really because when

you look at the history of

ion iron or up until only a

few years ago it was on a

annual pricing basis and

no-one really worried too

much about monthly or daily

price fluctuations. Now of

course we have got daily

price fluctuations, not a very long history

very long history of it so

it's been very difficult for

the industry to adjust and of

course I wouldn't think that

federal forecasters would

have had any better chance at

forecasting it. So we would

be expecting a hole in the

numbers that they have got.

Yeah. David thank you so much

for giving us your insiekts

on what's happening in this fast moving market. We are

out of time for today's show. We will be back same time tomorrow. See you then. Live Captioning by Ai-Media