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Lateline -

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Tonight - another red top bites the dust. Rupert Murdoch's trusted Lieutenant Rebekah Brooks
resigns.

It was inevitable she had to go. She gave the resignation statement that should have been given a
week and a half ago. I week and a half ago. I don't think it was any surprise to anyone that she's
gone.

This Program is Captioned Live

Good evening, welcome to 'Lateline', I'm Ali Moore. First, he was compelled to scuttle one of his
flagship newspapers. Then he was forced to abandon a key corporate takeover. And now a senior
executive in his ranks has walked the plank. Just how bad can things get can things get for Rupert
Murdoch as his company News Corp struggles damaging corporate crisis. And how much further up the
executive ranks will the impact be felt?

There are only two defences that James and Rebekah Brooks can advance. One is that they didn't know
what was going on in which case they weren't doing their jobs properly, or they did and their
complicit in cover-up and fraud. I suspect it is the first but that isn't an execution. It is an
explanation. But they should have both resigned ago.

Our guest top is the former chairman of the BBC, Christopher Bland who tells us James Murdoch
should have joined Rebekah Brooks. joined Rebekah Brooks. We'll speak to Christopher Bland shortly.
First our other headlines. Mug the punter e,er, the betting scandal that's rocking the AFL.
Savagery in Syria, more evidence of President Assad's use of political violence. And the illegal
boat arrival who established Melbourne in the 19th century. First tonight to developments in the
Murdoch media phone hacking scandal

News International head Brooks resigns

ALI MOORE, PRESENTER: But first tonight to London and developments in the Murdoch media phone
hacking scandal.

We're joined now by Europe correspondent Philip Williams.

Phil, the woman who everyone expected to resign about a week ago I think, she now has finally gone;
how has she explained her departure?

PHILIP WILLIAMS, EUROPE CORRESPONDENT: Well let's look at some of the words she's used. She said
that she "had a deep sense of responsibility for the people we've hurt and I want to reiterate how
sorry I am for what we now know to have taken place."

But she adds, "I believe that the right and responsible action has been to lead us through the heat
of the crisis, but my resignation makes it possible for me to have the freedom and the time to give
my full cooperation to all the current and future inquiries, the police investigations and the
appearance before the Committee on Tuesday."

So basically, she'd become the problem, she was too much of a focus and so she's cutting out of
this so she can defend her name and the company's name. That's what she says.

ALI MOORE: And interesting that her replacement is a man, not just with strong connections to
Australia, but also he's really a broadcast man rather than a newspaper man?

PHILIP WILLIAMS: Yes, Tom Mockridge, New Zealand-born but very steeped in Australian broadcast
history. Foxtel, News Limited, and even worked for Paul Keating at one point. So he knows Australia
well. Sky Italia, that's the current position that he runs Sky Italia, he's been seen as very
successful there.

So he's no stranger to broadcasting and he'll be a pretty popular choice. He's seen as a real doer.
So yes it's seen as a very capable man filling that post.

ALI MOORE: Well before we heard of Rebekah Brooks' departure, Rupert Murdoch gave an interview to
one of his own newspapers in the US. It seems that he's pretty pleased with how News Corp's handled
this whole affair?

PHILIP WILLIAMS: Yes, absolutely. I mean, I don't know which side of the Atlantic he's on when he
gives these sort of quotes, because from this perspective, here in Britain where this is seen as an
unmitigated disaster, it's odd to get a quote like this from him.

He said that "the company had handled the crisis extremely well in every way possible, just making
minor mistakes." He added that "the damage was nothing that wouldn't be recovered. We have a
reputation of good, great works in this country."

And he did say that he wanted to address, next week, he wanted to address some of the things that
had been said in parliament.

He said, "some of the things said in parliament, some of which are total lies", and he wants to,
he's talking probably there of Gordon Brown's accusations of criminal associations with the some of
the publications. and he said he was "getting a bit annoyed. I'll get over it. I'm tired."

Now, those sorts of comments have not gone down too well here. Most people regard this as an
unmitigated disaster and that he's really trying to put a very, gloss on a very terrible situation
for him and the company.

But it's his prerogative, he's known for pressing through and usually for winning. And it's very
difficult to, foolish to write him off even though he is now 80 and perhaps some people are saying
he's seen his best days.

ALI MOORE: But indeed that's what makes this whole resignation of Rebekah Brooks so interesting,
isn't it? Because Rupert Murdoch is known for pressing through and he has been such a staunch
defender of her; that extraordinary footage of them walking down the street when he first arrived
in London. He was asked what his priority was, he turned around, he touched Rebekah and he said
"this one."

PHILIP WILLIAMS: Absolutely. And at a time when most people expected him to say: getting to the
bottom of this, solving this, making sure that those that acted, behaved badly are punished. No,
"this one", and yes, has protected her right up to the last. And it was always, people wondered,
what is this connection? How close is this connection?

It was obviously very, very close indeed. But now, it's become a liability, she's been jettisoned
and she'll face that committee as a former employee of News International.

ALI MOORE: Now this scandal, of course, is also is also spreading across the Atlantic, and really
right to the heartland of the Murdoch empire in the US?

PHILIP WILLIAMS: Yes, of course. Now there's an investigation been opened by the FBI (Federal
Bureau of Investigation), under pressure from congressmen and from senators, who've asked them to
look into media allegations that News of the World journalists may have tried to hack into phones
of the 9/11 victims and their families.

This has caused outrage in the United States. Now it's not proven, it's just one article, in one
rival newspaper, that quotes one policeman, unnamed. So it's maybe not true, but it's got enough
indignation going on, especially with the 10-year anniversary coming up, that an FBI investigation
is underway.

So this has spread, it's something that the Murdoch's will not want, they can do without, but they
can't get around.

ALI MOORE: Philip Williams in London, many thanks.

PHILIP WILLIAMS: Thank you.

Brooks' abandonment an act of desperation: Bland

ALI MOORE, PRESENTER: Well, with the Murdoch empire now without a profitable newspaper a billion
dollar takeover and a key executive, the phone hacking scandal has taken an enormous toll and still
counting.

After decades of power-wielding and corporate success, the Murdochs are under fire like never
before.

To discuss the developments we were joined a short time ago from London by Christopher Bland, who's
had a long career in the media in the UK both as a regulator and a company director and he's a
former chairman of the BBC.

Christopher Bland, welcome to Lateline.

CHRISTOPHER BLAND, FORMER BBC CHAIRMAN: Thank you for having me on.

ALI MOORE: Rupert Murdoch has finally given up Rebekah Brooks, perhaps it was inevitable, but given
the extent to which he defended her, does it start to look like desperation?

CHRISTOPHER BLAND: Yes I think so, because the first thing he said on arriving in this country was
that he wasn't going to push an innocent person under the bus. Innocent person being in his mind
Rebekah Brooks.

Well Rebekah and his son, James, had pushed 200 journalists, most of whom were innocent, under a
fleet of buses when they close the News of the World.

And the astonishing thing is that Rebekah didn't resign at that moment, and I still find it
surprising that James has not resigned too.

ALI MOORE: So you don't think ...

CHRISTOPHER BLAND: Tis position, I think, is untenable.

ALI MOORE: So even though Rebekah Brooks is gone you don't think that protects James Murdoch now?

CHRISTOPHER BLAND: No, I don't. Because there are only two defences that James, and indeed Rebekah,
can advance. One is that they didn't know what was going on, in which case they weren't doing their
jobs properly. Or they did, and they're complicit in cover up and fraud.

I suspect it's the first. But that isn't an excuse, it's an explanation. But they should both have
resigned a week ago.

ALI MOORE: Why do you think that Rebekah Brooks' resignation has been, if what we are told is
right, has been accepted now, just a couple of days before that Select Committee hearing?

CHRISTOPHER BLAND: Well the whole history of News International during this crisis has been that of
deluding themselves and being well behind events.

And that's the only explanation.

The idea that, as Rupert Murdoch has gone on the record as saying, that this crisis has been
handled in the best possible way is plainly nonsense. For example, both James and Rupert said, in
the first instance, that they weren't going to appear in front of the House of Commons, and then
with 24 hours they agree that they will appear.

So they're behind events, and have continually been behind events throughout the crisis.

ALI MOORE: Well of course, as you say, they are scheduled to appear next week. No doubt it will be
great theatre; do you think it will be particularly informative?

CHRISTOPHER BLAND: No I don't, and I think the only thing that could produce a feeling of mild
sympathy for the two Murdochs is the feeding frenzy of the House of Commons. I hope that they'll be
restrained and I fear that they will not. I think that it will generate more heat than light and
that is a real risk.

If only they'd concentrate on the real issues which are: what did James know and when? How much was
he misled, by which advisors when he authorised the payment of hugely over-the-top sums to silence
people whose phones have been tapped?

If they forensically focus on those issues and don't pay too much attention to grandstanding then
it will be a useful inquiry. But the history of Select Committees of the House of Commons has been
that of grandstanding rather than that of evidence-based analysis.

ALI MOORE: News Corp companies now face investigations on both sides of the Atlantic, with the FBI
now having launched an inquiry into News Corp's activities in the US. You've just returned from the
US; how serious is this for the Murdoch group of companies?

CHRISTOPHER BLAND: Well I think it's increasingly serious, but we have to recognise that the
American situation at the moment is all innuendo and allegation. There's absolutely no hard
evidence that anyone has produced that phone hacking of the 9/11 victims actually took place.

But I think more important than that is the long reach of the American law under the Foreign and
Corrupt Practices Act. They can feel the collar of senior executives in organisations that have
been guilty, proved guilty of bribing, say, policemen. And if that turns out to be the case in this
country, and again that's not yet proven, then right at the top of News International, News
Corporation, a lot of people will be feeling very uncomfortable.

ALI MOORE: I accept your point that this is all innuendo at this point, but do you think it is
possible that it could reach as far as Rupert Murdoch himself?

CHRISTOPHER BLAND: I don't think it can reach as far as him, no. But it certainly, the
responsibility certainly for some of the activities that occurred on his watch plainly rest with
James Murdoch. And that's why he should go.

ALI MOORE: Well of course Rebekah Brooks is being replaced by a broadcast man, Tom Mockridge, from
Sky Italia. Is it possible, do you think, that Murdoch will move to get rid of his other print
interests in the UK, despite his denial that that's on the cards?

CHRISTOPHER BLAND: Well he has said very firmly and vehemently that he's not about to sell his
newspapers. And we have to recognise that one of his most redeeming features, and there are some,
is that he is a newspaper man through and through, unlike his son.

So I think he'll be very reluctant to say goodbye to the newspaper empire that he's built up in
this country and worldwide.

ALI MOORE: But of course, from a business point of view, from a revenue point of view, BSkyB was
much more important. When they announced that they were withdrawing their bid to take 100 per cent,
they said that "it was too difficult to progress in this climate." Do you think News will come back
for a second try?

CHRISTOPHER BLAND: I think they may do. But that begs the question of whether they are found to be
fit and proper persons to hold a broadcast licence, which is currently under scrutiny by Ofcom. So
it may not be possible.

And the point about BSkyB is this: that this is a powerful, strong, cash-rich, UK-based company
that can have a life independent of News International, News Corporation. There's no need for it to
be taken over. And indeed it might be the best possible thing for broadcasting in the United
Kingdom if it remains genuinely independent.

ALI MOORE: But I guess that sort of begs the question of well, is it independent because at the
moment they have 39 per cent, and I understand really effective operational control. If they're not
considered appropriate owners to have 100 per cent, why is 30 ok?

CHRISTOPHER BLAND: Well 39 isn't ok if they're not fit and proper persons. They could be forced to
sell down to a maximum of 29. And certainly, as I pointed out earlier, James Murdoch's conflict of
interest and chairman of BSkyB, is obvious today, but it's been obvious for a long time.

ALI MOORE: If the BSkyB deal had gone through, how would that have changed the broadcast landscape,
do you think, in the UK?

CHRISTOPHER BLAND: Well not hugely, because it's cash-flows, or what are of interest to News
Corporation. And to be fair to BSkyB and News they've shown no attempt to influence the coverage
and nature of the news coverage of Sky News, which is a very good service and has been throughout.

So, one of the prices that they were prepared to pay for acquiring 100 per cent was hiving off Sky
News into a separate operation, and that really didn't make long-term sense. Broadcasting
organisation divorced from their news supplier are always weaker and less interesting as a result.

ALI MOORE: Would it have had, though, much of an impact on the BBC, because of course you're a
former chairman of the BBC, and there's a fair bit of competitive tension, for want of a better
description, between the BBC and News Corp, going back to James Murdoch's speech when he talked
about a dominant BBC threatening independent journalism, and talked about the BBC's activities and
ambitions as 'chilling'.

CHRISTOPHER BLAND: Well who's chilling now?

ALI MOORE: It's that simple?

CHRISTOPHER BLAND:I think so.

The, both the Murdoch's have never loved public service broadcasting. It's almost as though the
slightly higher moral tone of public service broadcasters is an affront. And they've always
resented, in whatever country it's a strength, they've always resented the activities of public
service broadcasters.

To the point of which they've made remarkably, I think, foolish and ill-founded assertions about
the BBC and about public service broadcasting in Australia as well.

ALI MOORE: The latest arrest in this case, Neil Wallace, a former deputy editor of News of the
World. It's emerged he'd been employed as an advisor to Scotland Yard. That sort of brings me to
all these police, media, political associations that we've seen in this case.

I know that the deputy prime minister, Nick Clegg, he talks of a "fundamentally corrupted
relationship between politics, the media and police." It's hard to believe this is all confined
just to News International; I mean how big a problem is there in Britain.

CHRISTOPHER BLAND: Well it plainly is not confined only to News International, they're just the
biggest of the animals that swim in this particular pond, but the other red-tops are just a guilty.
Well, maybe not just as guilty, but it will be few of them that are nervous about any far-reaching
inquiries into their relationships.

So, it's not only News International that are at fault here I suspect.

ALI MOORE: So is this whole episode going to be a game-changer for the regulation of journalism?

CHRISTOPHER BLAND: Well the game has already changed. And I think the ability of News International
to get politicians in this country to dance to their tune, which has been in existence for a long
time, and thoroughly unhealthy - I think that's gone and I don't think it will return.

The risk, of course, is that in looking for a different and more powerful form of regulation of
journalism in this country that the baby goes out with the bathwater. That investigative journalism
of the kind, for example, that has revealed the extent of MPs fiddling their expenses and had
resulted in several MPs and one or two members of the House of Lords going to jail. That kind of
investigative journalism continues to be really valuable. And if that gets knocked on the head,
we'll be a poorer place for it.

ALI MOORE: How do you ensure that it's not knocked on the head? How do you beef up, for example, a
Press Complaints Commission that has proved itself to be totally inadequate, without going too far?

CHRISTOPHER BLAND: Well it's a good question, and I think that one thing you could look at is the
membership of the Press Complaints Commission. It's dominated by the very people that it regulates,
and I think that's a mistake. It needs a far more independent life with the same remit.

The fact that its composition is, I think, fatally flawed, is something that could be improved on
without necessarily introducing a very complex and elaborate form of statutory regulation, which I
don't think will work.

ALI MOORE: Christopher Bland, many thanks for joining Lateline this evening.

CHRISTOPHER BLAND: Thank you.

Carbon still taxing Government's approval rating

ALI MOORE, PRESENTER: Well now to domestic politics.

Tonight new polling shows Prime Minister Julia Gillard's big sell on the carbon tax has failed to
arrest her Government's slide in popularity.

In fact the Coalition has registered a record lead over Labor in a Roy Morgan poll conducted in the
wake of Labor's carbon tax announcement.

Political correspondent Tom Iggulden has more from Canberra.

TOM IGGULDEN, REPORTER: Julia Gillard warned the Labor caucus not to expect a bounce in the polls
after last Sunday's carbon announcement.

In fact, there's been a significant slide.

A dramatic six point dip in Labor's primary vote will be hard for Government MPs to ignore.

A four point uptick for the Coalition has it almost doubling Labor.

The two-party preferred picture shows the Coalition opening up a massive 20 point lead, a record
for the Morgan poll.

The Government's been saying it won't be ruffled, however strong the headwinds.

And it's got little choice but to press on with its plans to introduce a carbon tax.

WAYNE SWAN, TREASURER: I think this week we've written a new chapter in Australia's reform history.

Pricing carbon pollution will build a stronger economy for Australia for years and years to come.

TOM IGGULDEN: The Government's been hoping generous compensation schemes for households and
industries will turn support in favour of the tax.

GREG COMBET, CLIMATE CHANGE MINISTER: Tony Abbott's been through Wyalla in the past, whipping up
fear, instilling concern in people, though without any basis, whatsoever about their job security.

JULIA GILLARD: G'day, hi how are you?

TOM IGGULDEN: But as the Prime Minister's been touring the country on her sales pitch this, it's
been Tony Abbott's attack on her credibility that's caused the biggest problems for her.

FEMALE CONSTITUENT: Why did you lie to us.

TOM IGGULDEN: There's been question after question about her honesty in ruling out a carbon tax
before the election.

TONY ABBOTT, OPPOSITION LEADER: And I think that explains the added level of feeling in the
community. There's not, there's not only the usual arguments about the merits of the policy, but
there's a feeling amongst a very big section of the population that they've been ripped off.

TOM IGGULDEN: And he raised the stakes by promising a double dissolution election if the Greens
block his pledge to rescind the tax.

TONY ABBOTT: I was asked the question "what would you do if you needed to use all your
constitutional options?" And obviously they're available, and they'll get used if necessary.

TOM IGGULDEN: Bob Brown's raised the stakes further by guaranteeing he'll block attempts to rescind
the tax, effectively daring Tony Abbott into the electoral equivalent of nuclear war.

The Greens leader predicts he'd win more seats in a double dissolution, though he accepts Labor
could lose enough to hand Tony Abbott control of the Senate.

BOB BROWN, GREENS LEADER: That's the constitution. That's democracy, but boy oh boy he's got a few
big hurdles to jump on the way and you shouldn't take the Australian voters for granted.

TOM IGGULDEN: But there was a hint of remorse too from the Greens leader, who blocked Kevin Rudd's
attempts to bring in an emissions trading scheme.

BOB BROWN: And we had misgivings about that but we did the right thing.

TOM IGGULDEN: It's hard to see a tougher situation in which a minority government could find
itself. Bob Brown dictated the introduction of the carbon tax, and so far it's spelling an
electoral wipe-out for Labor.

Another poll or two like today's and Labor MPs will be asking themselves, if they're not already,
how far they're prepared to go to defend a policy they had no hand in writing.

Tom Iggulden, Lateline.

IRC president encouraged to step down

ALI MOORE, PRESENTER: Public criticism of new industrial relations laws in New South Wales has led
to government suggestions that the president of the Industrial Relations Commission stand down.

In May, Justice Roger Boland spoke out publicly against the Barry O'Farrell government for
stripping the IRC of power in wage cases.

The Crown Solicitor's office has this week written to Justice Boland suggesting he remove himself
from presiding over public sector wages case because he may be seen to be biased.

Barry O'Farrell says Justice Boland has to make his own decision.

BARRY O'FARRELL, NSW PREMIER: It is important that justice not only be done but it be seen to be
done. So it is up to Justice Boland to make any such decision. There is a case, the Government is
defending its new legislation and we expect it to be played out in the usual course of events.

ALI MOORE: The Premier says the letter did not come from his office and he denies it amounts to
interference in judicial matters.

Magpies fined over betting

ALI MOORE, PRESENTER: An AFL player has been suspended for 14 weeks until the finals for placing a
bet on a match involving his team.

Collingwood player Heath Shaw was also fined $20,000, while Collingwood captain Nick Maxwell was
fined $5,000 for bets placed on the same match by members of his family.

NICK BAILEY, REPORTER: When Collingwood hosted Adelaide in round nine this season, eyebrows were
raised when Captain Nick Maxwell, one of the league's most recognised defenders, started in the
forward line.

But not everyone was taken by surprise.

Fellow halfback Heath Shaw had shared $10 in a $20 bet on his skipper to kick the first goal of the
game, at odds of 100:1.

He also passed on the information to two other friends who placed bets on the game.

The AFL'S response to his actions was emphatic.

ADRIAN ANDERSON, AFL OPERATIONS MANAGER: As a result of his conduct, Heath Shaw will be suspended
for 14 matches, six of which will be suspended. He was also be fined $20,000.

HEATH SHAW, COLLINGWOOD DEFENDER: Obviously it was a stupid thing to do. And these days yeah, you
can't get away with anything. But everything's being watched, you know, I didn't really think of
the consequences at the time.

NICK BAILEY: Maxwell himself had advised family members of his surprise shift up forward. Three
bets, totalling $85, were then placed on Maxwell as first goal kicker, resulting in a $5,000 fine
for the 2010 premiership captain.

NICK MAXWELL, COLLINGWOOD CAPTAIN: I had no idea until yesterday that they had used that
information to bet. They'd never done it before.

ADRIAN ANDERSON: The key fact here is that Nick Maxwell had no knowledge or intent that that
information would be used for betting purposes.

NICK BAILEY: It's an issue that's been on the league's radar this year after Brisbane full-back
Daniel Merrett and Hawthorn defender Brent Guerra were also backed to be the first goal scorers in
their respective round seven matches.

EDDIE MAGUIRE, COLLINGWOOD PRESIDENT: Everybody should now know, going forward, that this can't
happen. The integrity of the game is everything.

NICK BAILEY: Heath Shaw is now an example for his footballing peers, but for all the wrong reasons.

Nick Bailey, Lateline.

Syria closes border to press as protests continue

ALI MOORE, PRESENTER: Hundreds of thousands of Syrians have reportedly taken to the streets across
the country, continuing five months of mass protests against the regime of president Bashar Al
Assad.

In the capital, Damascus, security forces fired live rounds and tear gas at demonstrators; killing
at least five people.

Foreign reporters are banned from entering Syria but the BBC's Ian Pannell managed to sneak across
the border

IAN PANNELL, BBC REPORTER: This is the only way to report freely in president Assad's Syria.

Taking the smuggler's route through the mountains.

Everyone treads carefully to avoid the border guards.

The patrol passes and we're told to run.

Since this conflict began, the Syrian regime has tried to control what the world sees and hears.

(In the back of a truck)

We've come to find out what it's hiding.

Well we're now travelling on the Syrian side of the border. As you can see we're having to keep a
pretty low profile, we're actually in the back of a farmer's truck at the moment. We're told that
the Syrian military and the feared secret police have walked into this area and it's just simply
too unsafe to stay out in the open too long.

The security forces have tried to crush anti-government protests here, forcing more people to leave
their towns and villages.

We're taken to a camp in the woods, it's not much but it is home.

(At the camp)

Thousands of families have been forced into hiding and they treat strangers with caution. Some have
been here for months.

They all have a story to tell and it's remarkable how similar they are: terrorised by government
attacks, living in fear of a late night visit from the thugs who do the regime's dirty work.

What has life been like here for his wife, for his children?

MAN (Translation): The Syrian army and the secret police move around in the trees and check on the
people. They want to catch people, to plant weapons on them and to accuse them of being criminals.

They went into our houses in the villages and damaged them. This is why no-one will return back to
their homes.

IAN PANNELL: The Syrian army keeps a watchful eye from the hills.

Unlike Egypt and Tunisia, they've taken sides with the regime.

Now, rare testimony of what that means.

(Samir speaking).

Samir is a soldier from Damascus. He says he was ordered to shoot at protesters who'd gathered
after Friday prayers.

When you say you were ordered to fire on the people, was that with live ammunition and where you
told to shoot at the people or to shoot into the air?

(Samir speaking)

He says they were given live ammo and told to fire at the legs of defenceless protesters.

(Start footage of protest at a mosque in Damascus)

Just look at this rare demonstration at a mosque in Damascus.

The BBC has been given footage of the rally. We can't verify this but it appears to show government
thugs, beating and threatening protesters.

The graphic images show the changes those calling for change now face.

(End footage)

This is now a fight for their future. And in a country that's a fragile mix of race and religion
it's also a battle for the shape of the region.

This Arab revolution is going to be a long bloody struggle for change.

The Long view on the economy

ALI MOORE, PRESENTER: And joining us now for our regular Friday night chat about the economic
issues of the week is economics correspondent Stephen Long.

Stephen, sovereign debt problems have dominated the week, in Europe and now the United States.
Let's start with Europe, we've seen Ireland's debt downgraded to junk status and now worries about
Italy. How serious are those problems?

STEPHEN LONG, ECONOMICS CORRESPONDENT: I don't think Ireland is major problem, at least the
downgrading to junk status, because it confirms already what we knew, that Ireland's a basket case.
No news there, it won't be a big deal.

Italy's a different story. If it were to get into serious sovereign debt problems, and the cost of
funding its debt is approaching unsustainable levels, then that's a big deal because it is such a
large economy in Europe.

If we were to see Italy or Spain go down, it changes the whole ball game. No inevitability about
that, but it is a serious concern.

ALI MOORE: And I suppose, in that context, how long can the European Union continue to throw money
at this?

STEPHEN LONG: I don't think it's sustainable that they throw money at Italy or Spain. Basically,
they're too big to bail, but too big to fail. So it's a dilemma, what do you do if it reaches that
situation?

I saw an analysis through the week of the chief economist of a major European bank that the
European bailout money would have to rise to 7 trillion euro were the contagion to spread to all
the so called pigs economies, including Italy and Spain.

And that would effectively mean, because Germany is the mainstay, that it would be paying 28 to 30
per cent of its GDP (Gross Domestic Product) out and it would have its own debt crisis; as would
potentially France and the Netherlands. So it just can't happen.

So there is no answer. If it gets that bad, we're in dire straits. Now if it's contained just to
the peripheral economies - Portugal, Ireland, Greece - that's potentially manageable, as is the
fall-out for the banking system, a few hundred billion. Unless there's panic.

And the sentiment issue, of course, can be divorced from the actual reality. Banks might be able to
sustain the losses but if there's panics about the situation with the banks, and incidentally, the
stress testing of 91 European banks come out overnight, it's said to be far more stringent than the
previous stress tests, seen as a whitewash, it could expose some cracks.

ALI MOORE: And as you say, if it's all about sentiment, it could become a self-fulfilling reality
if you like.

STEPHEN LONG: A source of financial instability, yes.

ALI MOORE: If we look at the US, Moody's and Standard and Poor's are threatening to downgrade the
US national debt. Now this is crucial isn't it, because we're what, only two weeks away from the
August 2nd deadline to lift that debt cap, that debt ceiling?

STEPHEN LONG: That's right Ali. And I think that this is, in effect, a shot across the bows of the
US Congress, to lift the cap in the short term, so the US can manage the situation, and it won't be
seen under any threat of default.

Long term, of course, it is a different story because the US just doesn't tax its citizens enough
to maintain its spending. And it has a huge debt and an unsustainable deficit and an ageing
population and potentially it could be insolvent over the long run unless it addresses it.

ALI MOORE: I think we're going to hear a lot more what's going on in the US in the next two weeks.

STEPHEN LONG: We will.

ALI MOORE: Stephen Long, many thanks.

STEPHEN LONG: You're welcome, Ali.

Book reveals Melbourne's illegal settlement

ALI MOORE, PRESENTER: The history of Melbourne is usually told as a story about how hardy,
entrepreneurial settlers established a great city against the odds.

But a new book has been praised for challenging some of these assumptions, and explains how
Melbourne was actually settled illegally, in opposition to the wishes of the colonial authorities
in London.

Hamish Fitzsimmons reports.

HAMISH FITZSIMMONS, REPORTER: Like a lot of Australian fortunes, the early wealth of Melbourne was
built on property speculation.

The Port Phillip district was settled by investors from Van Diemen's Land who, in defiance of the
colonial authorities in London, broke the law to settle here.

JAMES BOYCE, HISTORIAN: In 1835 when Melbourne was founded the British government's policy was
quite clear and the law was quite clear, that any Europeans settling outside defined limits of
location were to be considered trespassers on Crown Land, they were breaking the law.

HAMISH FITZSIMMONS: In his new book about Melbourne's first years, historian James Boyce points out
the settlement of modern day Melbourne prompted a political crisis in London which led to a change
in colonial policy in 1836.

He said it was this that set the scene for the conquest of the southeast of the continent.

JAMES BOYCE: And the speed of expansion is unparalleled. In just a few years we have more land
occupied than in the 50 years before, and in 15 years most of the grasslands of eastern Australia
are settled.

HAMISH FITZSIMMONS: The work has attracted the attention of at least one of Australia's lawmakers.

Malcolm Turnbull says the book is the sort of magisterial history needed in Australia.

MALCOLM TURNBULL, OPPOSITION COMMUNICATION SPOKESMAN: The interesting thing about Melbourne was
that it started off wealthy. The foundation of the colony at Sydney Cove was a struggle for many
years.

Melbourne started off prosperous because the settlers took over the pastures created by the fire
stick farming techniques of the Aborigines; just as they had done in Tasmania. And that was really
what drove the move to Port Phillip.

HAMISH FITZSIMMONS: But by the 1850s the mania striking the colony would be the desire for gold.

While Melbourne has long seen itself founded by free men and free enterprise, James Boyce says that
story was written in the 1860s after the gold rush made it one of the wealthiest cities in the
world.

JAMES BOYCE: I think after the gold rushes, marvellous Melbourne wanted to tell a certain story
about itself. And that story was that here it was free enterprise, in defiance of government,
creating wealth and prosperity.

The story I tell is that, in fact, it was overwhelmingly former convicts who were the first
residents of Melbourne.

HAMISH FITZSIMMONS: John Batman was the driving force behind the settlement of Port Phillip and
signed a treaty with the Indigenous Kulin people for their lands.

James Boyce says Batman had to act quickly because he knew he was dying of syphilis.

JAMES BOYCE: Batman. Batman is a very critical person in Melbourne's story because of that. He was
the one prepared to take the plunge. And he also knew an awful lot about dealing with Aboriginal
people and dealing with the land.

He was an unusual landowner. Son of a convict himself, he had grown up with a lot of Aboriginal
people, knew about how to survive in the bush.

HAMISH FITZSIMMONS: Indeed, John Batman wanted to name the city after himself.

One of many possible names that didn't catch on.

MALCOLM TURNBULL: I do wonder, would Melbourne be different if the original name had been used
instead of Melbourne. After all the settlement was originally going to be called Batmania.

Now this would mean that the respectable, and sometimes staid Melbournians would nowadays be
Batmaniacs. Would this, would Melbourne be pop, if it was inhabited by Batmaniacs instead of
Melbournians?

HAMISH FITZSIMMONS: The book also discusses how the rapid speed of the settlement brought disease
and violence and had disastrous consequences for the Kulin people.

JAMES BOYCE: By 1850, just 15 years after the first settlement, 80 per cent of what had been the
most densely populated part of Australian population had died.

HAMISH FITZSIMMONS: And that's a legacy Australia still grapples with.

Hamish Fitzsimmons, Lateline.

shower or two in Sydney, morning frost in Canberra and Hobart, partly cloudy in Darwin mostly sunny
in Melbourne and Adelaide. That's all from us. If you'd like to look back at Tonight's interview
with Christopher Bland or review any of Lateline's stories or transcripts you can visit our
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night.