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(generated from captions) Annabel? What he said and

also in 1984, when the Hawke Government rejected a very fast

train proposal, one of the many

Governments eventually knocking instances of Australian

it back, it was partially on

environmental grounds and

environmentalists an the protests against the plan from

Democrats. I wonder how long

the Greens' enthusiasm for this

process will survive once some

discovered whose territory is fat-tailed bush rat is

in the corridor We leave you

now with the Queensland

Treasurer Andrew Fraser, a

little annoyed, to say the

least, that Campbell Newman

seemed to have all the answers to Brisbane floods well after

the event. Thanks for

watching. Had I been the

Premier at the time, we would

have acted, we would have drawn

the dam down. Of course, what

we've got now is old captain

hindsight, Mr Speaker. We can

only begin to marvel and wonder

and imagine at the ills of the

world, but Campbell Newman

could have saved us all from

it. If he was captain Cook, he

would have steered clear of

Hawaii, if he was the captain

of Titanic, he would have

swerved away from the iceberg,

if Harold Holt, he would have

swam between the flags. Closed Captions by CSI This Program is Captioned Live G'day there and welcome to

the program. When

day of reckoning arrived it was

swift, brutal and unforgiving.

The own surprise in the end was

that it was a surprise at all.

The or 10s were glaringly

obvious. The ineptitude and

impotence of European leaders

to deal with their debt crisis

and the grim farce of US politics where the health of the world's biggest economy is a bargaining chip in an ideologial war. The last

thread of confidence snapped sending

sending markets plummeting. Yesterday Standard & Poors

We'll look at the new reality downgraded America's debt.

for the world's developed

London economies including a cross to

London for an interview with

Rio Tinto chief Tom Albanese.

We'll also talk to Transurban

chief Chris Lynch who summed up

the GFC Mark 1 pretty quickly

and slashed his debt. And now he's sitting on safe steadily

growing revenues from toll

troubled roads. Pretty attractive in

The freefall produced by

better than expected US employment figures late on Friday night may be shortlived

with the announcement several

hours later that the world's

biggest economy has suffered the humiliation of the first

ever cut in its AAA credit

rating. To check on the last

day of an extremely ugly week

on global markets it's over to

Jayne Edwards. Thanks Alan.

you say, that unexpectedly

strong rise in employment

provided something of a

circuit-breaker at Wall Street

on Friday morning. It was

still a wild session with the

market swinginger rhetoricly market swinginger rhetoricly on

high volumes. By day's end the Dow was half a percent higher but the broader market finished

where it began and the Nasdaq

lost another 1%. The job numbers

for the ailing US economy with

117,000 created last month.

Market sentiment reversed when

rumours emerged that ratings agency Standard & Poors was set to downgrade the US credit

rating. That rumour became rating. That rumour

reality four hours after the

market closed and we're set to see the investor reaction in

the coming days. On the

positive side of the ledger,

Italy pledged to speed up its

austerity program after a day

European leaders and Barack of phone hook ups between

European Central Bank will act Obama raising hopes

to support Italian bonds. With

the worries remaining are

Eurozone and US death traders are bracing for more volatility. We're going to see

very jittery markets. If we've

learnt anything from the Greek

and Irish crisis it can get

bigger very quickly. That's

the concern I think for markets

over the next few weeks. At

the end of a terrible week,

worst Europe and the UK faired the

worst with double digits get

losses, while Japan fell by 5% carnage. Now with details on

Australian stocks here's Tom

Elliott. As you just heard, the sharemarket experienced a rather torrid week of selling

with most of the damage being done on what's already termed Black Friday. Rio actually surprised Black Friday. Rio Tinto

with a better than expected actually surprised investors

first-half profit of $7.(800)

000-0000 US, however its cost

base is rising, as a result Rio

shares down 10%. Fellow miners

BHP and Fortescue didn't fare

Gold was much better over the week.

another wise gloomy market.

The gold price hit a record

high ever in human history.

Big gold miners like Newcrest saw their shas saw their shas down 1% and

small gold miners like Anglo

glold and Eldorado bought up glold and Eldorado bought up by

investor. The bank sector did

it very tough. The big four

commercial banks all sold off

heavily. Our nation's biggest

investment bank Macquarie was

absolutely smashed in trade over the week. Macquarie shares aren't quite at shares aren't quite at their Global Financial Crisis lows

either. Kathmandu surprised but they're not that far off it

the market with its full-year profit forecast.

We've seen all of its fellow retailers hit hard in recent weeks. Kathmandu shares

rewarded their investors by

managing to stay flat in Telstra has passed on to the otherwise very bad week.

ACCC full details of its proposed structural separation.

This is good news T means the

deal with the NBN is more

likely to proceed. Telstra

shares were still sold off down

around 3% for the week.

Transurban had an excellent

full-year result. Profit was

up almost 90 per cent to just

under $113 million. The dividend

cents a share to 27 cents. Normally this would be seen as

everything else Transurban very good news. But like

shares were sold off again

around 3%. Winner of the week

is Silver Lake Resources up 11%

after announcing a gold

resource upgrade. Loser of the

week, and there were plenty of

them Bandanna Energy down 31%

after an Indian suitor decided

not to bid company. Even a record not to bid for the

first-half 7 billion profit and

a 35% increase in earnings was

not enough to spare the giant miner Rio the pain in the market rout.

As fears grew that the

commodity boom might come to a grinding halt. I spoke to Rio's chief Tom Albanese Rio's chief Tom Albanese in

London on Friday night before

news of the US downgrade had

filtered out. Have the events

this week on the markets

changed your view of the

economic outlook. We did

announce our results for the

first-half yesterday and these

were record results. We're very pleased with the numbers.

$2 billion and more of cash

flow per month. Our business

strong. Our physical markets

in Europe and the US are

strong. We have to recognise

that we are to some extent a

lagging cater rather than a loading indicator. loading indicator. We're

watching this with considerable interest ourselves. As I look into the second half of the year, I

year, I expect to see continued

strength of the physical

markets. We would continue to believe that China will be

growing this year more than 9%,

probably close to 9.5% and that

will leave global GDP growth in

excess of 3.5%. We would be

assuming assuming the US markets are

really growing but very, very

slowly from a low base and the

same thing even less so from

Europe and if that's what we

see for the second half, that's good for our good for our businesses but we

do have to be watchful. We're

in certainly volatile

conditions. What do you say to

small investors now in general

after this week's events? Hold

your nerve or get out?

Watching the US markets

yesterday, there was not a lot of movement among retail

shareholders. There was not shareholders. There was not a change in redemptions, et cetera, from mutual funds, in

the US market. My sense is

these are basically large institutional funds that are moving into more liquid

situations, but from

I've seen and meetings I have

been having with banks over the course of today and discussions

yesterday, not seeing a lot of

retail movement. I think it is

quite important not to be overreacting. We should be

reflective of the fact that there are challenges in OECD

markets. There's significant

debt concerns in Europe debt concerns in Europe and in

the US that do need to be advantaged. to be fixed overnight.

Hopefully it is going to take

several years of progressive

hard work and hopefully slow

economic growth to get through

this quite difficult stage that again the markets have been in for quite a while. It is not necessarily an environment for

overreaction and certainly I

would hope that people wouldn't

be overreacting. You've been

spending a lot of time in China. What are you seeing

there now? I've been to China

several times this year, not

just to the big cities in

Shanghai, Beijing but I've getting out into some of the interior provinces, Szechuan,

et cetera, and I'd say the growth continues, certainly

everything I've seen in all everything I've seen in all the discussions I've had would

indicate to me 9 plus% GDP

growth should be expected this

year. It will moderate but it will

will be well above 8% next

year. The pace of building

construction continues. It is

shifting a bit from commercial

and the higher end residential

to probably what would be more middle class residential which

we would see as a

Probably real estate price are

still too high and inflation

still day challenge to policy

makers, but when I look at the

people I talk with and what I

see on the see on the ground, growth continues. The world is full of

things you can't control at the

moment, but what about the

things you can control, in

particular, costs? They seem

to be rising lately. We've had noticeable cost inflation,

particularly in local hotspots

and Australia's very much a

local hot spot. Of course we

had weather issue in the

first-half, I mean, terrible

impacts from the cyclonic activity, the flooding in

Queensland, the heavy rains and

the weather conditions in the weather conditions in WA,

but we've also seen increased

labour cost, cliented labour cost, cliented input costs particularly in mining

hotspots. So Queensland, WA,

parts of South America, parts

of Africa, are seeing higher

than normal inflation. It has

been offset to some extent by

more normalised conditions in

say the US, Canada et cetera,

but this is a going to face not just this

year but in the coming years.

It is going to be particularly

important for us in Australia

to do a better to do a better job of

controlling our policies.

We're going to be suffering We're going to be suffering the

dual effects of rising costs, rising labour rates, and rising labour rates, and a strong currency. That's going

to affect not only operations

but also the pace and the ex

expense on capital projects T very important to stay competitive in Australia. How

do you feel now about the

Australian Government's carbon tax proposal. you some of the challenges

we're facing on cost pressures

in Australia and the carbon tax

as it is currently be

envisioned will add to those

cost pressures and will create more competitive more competitive challenges.

We applaud the courage of the Australian Government to be

seen to be ahead of the main actors, particularly the US,

China, et cetera. Our position

is that from in terms of coming

one a price on carbon, our suggestion, our engagement

would be that it should be

gradual, it should be tested over time

not having a negative effect

and certainly this is not the

time to be experimenting with

the prosperity that we're seeing in the Australian economy. If anything, uncertainty in the financial

markets we've been seeing over

the past two weeks only

reinforce the point this is it

not the time to experiment with

an economy. Virtually all of

your profit growth in the

latest half year came from

increased prices and in

particular, of iron ore. How

long you can keep increases

prices at this rate? I'd say

again we have to recognise that

prices go in cycles. That's why it is important

recognise that we can't allow

our cost structure to get to a place where our businesses

would not be sustainable in

those normal low points in the

cycle. Right now our markets

are quite strong and these are driven by the

continued out performance of

the Chinese steel sector. It

continues to consume more steel

than people would have

predicted 12 months ago. Many

producers around the world are

struggling to with their own

supply and their own growth and

that's continuing to keep tight

conditions and higher prices.

Higher prices don't last

forever. Again, I think it is

really going to be driven those supply demand factors. I think our team on the ground we

work very close which the

Chinese customers and our Asian customers

customers and all of our customers they continue to want our product and we will

continue to deliver that product. Your profit margin in

iron ore is 70%. That's not sustainability, is it. It's

about delivering the lowest

cost production in a market that's quite strong and

expanding the business. Again,

I consider our iron ore

business to be the best iron

ore business in the world. I

think that the team in the

Pilbara and our other iron ore

operations around the world are

place at the right time, we

have competitive ore bodies, a

great set of capabilityings

we've got the rail and port

infrastructure ready so we can

deliver to the market and we

can expand for that market. It

is a good place. You've been

giving a lot of money back to

shareholders in dividends and

share buy-backs. At what

point will you go on the front

put and use that cash for acquisitions rather than giving

it back to shareholders? I

want to say we have a very

strong set of organic growth

opportunities. We've got great

mines in Australia, great development opportunities in world, and I say first and

foremost I want to look at

bringing these new

developments, these expansions into place, as the market

requires them.

time we will look at the

possibility of acquisitions and again, first-half we were

successful with Riversdale and

that's an Australian company in

Mozambique but again this was

something that frankly most

people didn't think we'd be

able to successfully execute.

I was pleased to see that just

this last Monday we reached this last Monday we reached the 100% points and Riversdale is points and Riversdale is 100%

owned by Rio Tinto. We're instigating those Mozambique

coking coal assets into the

business and it will be one

more opportunity for future

growth. We'll always keep our

eyes on the commercial

landscape. Not too much out

there right now and we have the

best quality iron ore

businesses and great copper opportunity in Mongolia great coking coal opportunities in Australia and in Mozambique and a whole range of other things

that weigh can do around the

world, it is a strong position

to work from. Thanks very much for joining us Tom Albanese. Good to talk to you,

thank you. This week's market

meltdown was no technical crash, it was a

of the US and Europe were

broken. No-one knows how to

fix them. Neal Woolrich takes

a look at how things unravelled

and what may follow. Raising of the debt ceiling has been

unsettling. To give you a

reality check, here is the size

of the US debt at this

minute. To be frank, almost

everything else about this deal smells. Investors have

basically said you can keep the

cheese, let me out of the

like this. Once Washington

finally resolved its debt

impasse, markets were expected

to rally. Instead, it's been a

rout. What's really happened over

over the last 24, 48 hours, over the last 24, 48 hours, is

global growth concerns have

taken over as the driver of

risk assets and as a result,

we've seen equities throughout

the world fall, we've also seen

the Aussie dollar, which is

classic canary down the coal

mine growth indicator take a

big tum ber. What is very

plausible is a prolonged period

of very weak growth. It might be positive. My expectation it

will continue positive growth

but it will be very weak and

could be accompanied by

continued rising in the

unemployment rate in very, very little job

possibly even job loss. The

data from the US this week only

gave the pessimists more

ammunition. It showed continuing weakness in

manufacturing, a reduction in

consumer spending for the first

time in two years, and an unemployment rate stuck above

9%. Late on Friday in the US,

Standard & Poors Arabed more salt into the wounded downgrading America's credit

rating for the first time in

modern history. The risk world

recession next year are growing

by the day and what the market

is doing actually increases the risk

risk and my view is if that's

what unfolds and I put it as a

fifty-fifty chance, there is,

in my view, a lot more downside

in global equity markets. The

markets are overly pessimistic. What we're going to see is a

mini GFC which markets priced

never eventuated. We're see a

small re-run of the same

process where markets are price

ing ina global risk of

recession which isn't going to eventuate. Not even the 11th eventuate. Not even

hour deal to lift the debt

ceiling gave much relief. With hours to spare, America

has avoided the national

humiliation of not being able

to pay its bills. Make no

mistakes, this is a change in

behaviour from spend, spend,

spend, to cut, cut, cut. Some

economists worry the promise to

comes just cut back government spending

most needs a boost. The comes just when the US economy

recovery is very, very weak and

this is the big tragedy at

least to my the biggest tragedy

in this whole debate

Congress the President tied up

literally for months yellinging about the debt ceiling which

doesn't mean anything. Have

you to do it but it is like taking out the garbage Dean

Baker argue the United States

debt problems were overstated

by politicians and what they

should have been focused on was growth or the lack of

it. There's no sector of the US

economy that has any great dine Nammism to construction in general is

going to be depressed for the foreseeable future because we

had so much overbuilding.

Consumption people are

trillions adjusting to the loss of

bubble wealth. The foreign trillions of dollars in

sector is not going to do very

well many of our trading partners, Europe is in a bad slump. The Europeans though do

have genuine debt concerns. While Greece's crisis appears

to be under some sort of

control, it is the bigger control, it is

economies that investors are

now worried about. We're now

ceiling new stress coming on

much more important economies

such as Spain and Italy and

once again that involves

feedback loops. These are countries that are arguably

solvent if the market prices them as solvent. In other

words, charges them a low

interest rate. But if the market prices them as

insolvent, that is pushing up their interest rate, they become insolvent. Those economies are growing

reasonably. They're not

spectacular but they are

growing reasonably. A lot of

the US data that everyone has been pessimistic about was expansionary economic data. While other parts of the

developed world recession in Australia it is a different story. Reserve Bank

is forecasting GDP growth of 3.25% by December and 4.5% in

lower than previous estimates, 2012. Although that's slightly 2012. Although

the Reserve Bank's outlook is seen

seen as optimistic, especially

given this week's developments. The bigger worry

to me is that we now have

policy in Australia very

restrictive on a number of

fronts. Monetary policy is

restrictive. We're about to embark on a quite significant

The currency is clearly sucking tightening of fiscal policy.

the objection gens again out of

Australia is the great the traded good sectors.

under-performer of Asia and has

been for a few years now. We

really need to lift our game

through productivity and the and the only way to do that is

only way to a evangelical chief productivity gains is fresh

capital investment. We've got

to lower our tax system quite

significantly if we're going to

get those sort of productivity

gains that we really need going forward. However, despite this week's sell-off, Clifford

Bennett remains optimistic

about long-term prospects for global markets. We're advising short-term investors to be

cautious and take a little bit

of a wait and see approach, but

certainly long-term investors have got to be gently

accumulating each day

point. You never know when

you're going to see the low in

we've seen it yet. I think we the market. I don't think

probably will get just a little

bit lower. That's about as upbeat as anyone these days, so

it looks like some time yet

before buyers come rushing back

to the market. It was a

fittingly shocking end to a

wild week on the markets. About 10 o'clock morning our time 8pm Washington time, ratings athcy Standard &

Poors put out a press release

announcing it had downgraded

America's debt from AAA to

double A-plus. An historic

event that had been predicted but not really expected. US

Treasury had spent the

afternoon trying to talk S a

and P out of claiming the

calculations contained a $2 trillion mistake. The agency

put it out naysaying the political brinkmanship of

recent months highlights what

we see as America's governance we see as

and policy making becoming less stable, less less predictable than what we hard previously believed. It is

hard to disagree with that. Is

it the end of the world as we

know it? No. Where else is

China going to invest China going to invest its cash.

Italian or Japanese bonds?

Hardly. There is a I global

glut of savings at the moment

and very few safe places to put

it. US Government debt might

be a notch riskier according to

one of the re-ratings agencies,

although it is no riskier today than it was on Friday really,

and the US dollar's status as the

currency means it is unlikely

do more than wobble after

yesterday's events but it sure

deals like a big deal. It feels like another important

marker in America's economic

decline. The set of revision as announced last week to depth of the 2009 recession. as announced last week to the

It was much deeper than

previously thought and that was

cited by S&P as an important

factor in yesterday's downgrade. America has too

much debt, a dysfunctional

political system and a weak

economy which we already knew and now it is

One company that weathered

the week better than the week better than most was trapb which this week announced

it had almost doubled its

profit to $112 million. It was

a per performance vindicated

the decision three years ago to

kill off the debt driven

Macquarie model for owning infrastructure. I spoke to

Chris Lynch after he released

his results on Thursday. I'm

flows that you're seeing say interested in

about the economy. I noticed

in particular that in particular that Citylink in Victoria in the second half up

6.2%, but M2 traffic was down

in the 6 months to June and M5

not up very much. Is there

Victoria and NSW that you're something going on between

traffic seeing? No, Alan. I think the

traffic numbers are pretty much

very predictable. If you're

looking for any underlying

economic outcome manifesting

through the traffic, You've boop through a lot of

refinancing. How much exactly

did you end up refinancing?

Over the last few years we've refinanced probably $4 on various project level debt

and some corporate level debt.

We're through that phase. We were able to do that

successfully no matter where

you were in the GFC cycle.

Obviously, refinancing costs

have come down in recent times

and this year we've got

virtually nothing prospective

that has to be refinanced in

the FY 12. How much did you

save in interest? If you the underlying interest rates,

they've moved over variously,

but the spreads from the worst

of the GFC to now are probably

down anywhere 50 to 100 down anywhere 50 to 100 basis points. Has that saved a fair

bit of money for you? Are you

able then to pay more distribution as a result of that, for example? The

distributions have been very

strong. If you go back to when

we reset the distribution policy back in the middle of

2008, we set the first of the

reset distributions was 22

crept cents for FY 09. FY10 was 24 cents, FY11 we've

concluded was 27 cents. We've issued

issued guidance now for FY12 at

least 29 cents. It has been a very strong distribution growth and I and I think that would probably

be fairly unique in that last

three years to see that solid growth. One of the first

things you did when you took

over declare distributions are

to be made out of cash. No

more paying distributions outs

of debt. It was a line in the

sand at the time wasn't it.

It was, yes. Do you you this

that Macquarie model for financing

and structuring infrastructure?

I think it was certainly the

change from... Most companies

in the space adopted a similar sort of policy. I think

whether it is the Macquarie model or whatever, Macquarie

did a lot of work in the early

stages of that process, but I think

think the reality was that easy

and cheap debt wasn't going to

last forever and the idea of

borrowing money to pay borrowing money to pay straight out the door to me. The distribution policy

have you now, is that going to

restrict how much money you've got to reinvest in the

business? What it does, by

definition, it puts us in a

position where he if we anything substantial in terms

of growth, we need to take it

back to the market, back to our

shareholders and see whether

they agree with our view of a transaction. We've been able

to do that on the for instance the Lane Cove tunnel last year

we raised $630 million to fund

that acquisition, some of that

was equity, some debt. We're

comfortable if we see a deal that we think is value and attractive for shareholders, they'll support

us when we need it. You more or

less ruling out internally

funded growth, are you? We have some capacity. For

instance, if we were to receive

approval to proceed on the M5,

we have that in our balance

sheet ready to go, it is a

fairly modest sum of equity

required, $100 million, so that

we can do off the back of our

own balance sheet that's there

now. If there was anything

that was substantial in nature,

we would by definition be back

to our shareholders. You ought

to be taking over ConnectEast, shouldn't which has made the takeover

offer. When we consider

anything like that we primarily

just view it totally from a value proposition for our

shareholders. That's shareholders. That's the way

we'll make any assessment we make. What do you think of the

price they're bidding for

ConnectEast? It would be

inappropriate for me to comment on that, Alan, for any transaction that's live in the

market. We value... Is it

live? From your point of view,

is it live? I think you've

seen some shareholder comment

about whether or not there's a higher price that could be paid

from the CP2 consortium. We

have a view about our valuation

of it. You can get synergies they can't get. That's true. Watch this space. That's

your projection on that, not

mine. The key thing from our

point of view is if we see

ourselves as the logical owner or a logical owner, we're

interested and that's there, I

think the key thing really is going to be a function what

value we see in for our our shareholders. There are one or

two Brisbane roads available as

well. There's one that's on

the market as we speak, but the

key issue for a toll road is

traffic and there's always a

right price, but it is a function... That one in

Brisbane got their projections

wrong, doesn't they? Yeah.

Yeah. Putting it in simple

terms, yes. How important to

your future growth, leaving aside acquisitions like that,

is the widening of roads? You

get the impression that most of

the these toll ways were

actually too narrow when they

were built. You'll always have some capacity, but

inevitably they'll con guess

and they reach

the peak hour. You've always got capacity there during the

day, but the peak hours will

always be the first thing that

will saturate. When we look at

growth, we can see underlying growth will come by way of

example, the M5 peak hour now

starts to establish at 5 am.

If you went back to 1996, the

peak hour would start to

establish at 7 am. It now goes

through until about 9, 9.30, so

the peak spreads, people solve

their own problem, and if you

apply it to yourself, if you

hit congestion having left hit congestion having left home

at 7 o'clock, you probably

leave quarter to and see how

you go with that. Ha happens

on a grander scale. Thanks for

joining us Chris Lynch. Thank

very much, Alan. That's it from

us in what's been an extraordinary week To keep up to date on the

latest developments in this

fast-moving story, you can log into ABC News Online or if you

like to check out anything from

our program again, we'll have the transcripts and I a video

and vodcast posted on our

Hello. Welcome to

'Offsiders'. Suddenly the AFL

is confronted with serious

integrity problems on tanking

and poaching, but maybe there's

another issue that might be

troubling supporters even more,

that's the ridiculously

one-sided results in too many

games lately. In Rugby League,

surely it's time to

unofficially declare Melbourne

Storm minor Premiers. Given

recent history, what a

remarkable achievement that is.

Around the legs there of

Cameron Smith. Feeding it

back. Kicks it off the outside

of the boot. Comes down.

Billy the Kid.