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(generated from captions) the nontradable private sector in inflation in that regard. In sector there's been no pick-up domestic economy and private break down into the purely slices, what is clear is we inflation into different look at and break down the We need to be careful. If we The inflation is trending up? clear the disinflation's over. vegetables and petrol. It's impacts on fruits and been heavily distorted by of the headline numbers that's Initialising listener on channel 2

deteriorated markably so their underlying growth data has that's happened is the behaved. One of the things at, they're actually very well can privately-set prices are where private demand is at and been an issue but in terms of they've been ongoing, they've things, which are clear and education and these sorts of to areas like rents, insurance, largely supply side issues due inflation is emanating from is are been no pickup. Where the sources of inflation there's

inflation broadcasts are

broadly correct, their growth

view is roning. You made

interesting comparisons between

now and the GFC where growth is

going back to around what it

was at the depth of the GFC or

that's what you're saying will

happen. Inflation was higher,

4.5% also, and at that point

aggressively the RBA was cutting

aggressively but you are still

saying there's no case for them

to cut aggressively this time?

No, I think we need to be

careful about saying what we'd

need to see in order to get

them to cut rates and I think a

lot more would need to be seen

nOed to get to that conclusion.

We think a rate hike will

invariably occur but in the

early part of 2012. I think as

we've seen you rightly point out, what

we've seen is a 3-month

deceleration we think in terms

of both confidence indicators,

tightening up of financial

indicators broadly, currency is

a large part of that, wealth

indicators falling away as

well. Three important dynamics

that drive economic cycles. All

those are flashing red. Now, in

terms of the deterioration in

growth we've seen - and we

growth we've seen - and we

haven't got June quarter data

yet - but if it comes in around

0.8% because the export

reacceleration due to the

anticipated pickup in coal

exports out of Queensland

hasn't materialised. We can see

that clearly in terms of the

port data. You're looking at a

number that may be 0.8 or 0.9

which would take the headline

GDP to a number very similar to

hot we got to in

hot we got to in the era of had

depth of 2009. Of course we can

say there's distorgs that are

do that, and there are, but the

baseline is a little worse than

trend. I thought one of the

real surprises out of the CPI

was the tradeable goods price

still rising despite the high

dollar. Correct. It must be

disappointing to the Reserve

Bank. What's going on there? I

think the clear reason for that

is if you look around

is if you look around the world

who'd been tightening rates

aggressively? Of course it was

China, India, Korea and been

doing most of the heavy lifting

in our region and of course

they're very significant import

partners as well as trading

partners on the export side for

us so there's No Doubt about

it, their own wage rates and

input costs are going up,

largely a function of commodity

prices out of Australia as

prices out of Australia as

well. It's come full circle.

What's your call on rates? We

have rates on hold through the

course of 2011, we are one last

rate hike at the end of the

first quarter of 2012. And no

more after that? No more after

that. And Nick on the block,

what do you think about the

dollar? There's definitely new

term reasons why it's still

going up. There is - I would

put a caveat on it that as we look a little

look a little further out to

the mid part of next year the truth serum for the currency

will always be- Truth serum?

When your trade accounts start

to deteriorate materially. It

seems completely inconsistent

you could have some degree of

falling commodity prices which

we are still expecting as our

base pace and a material surge

in capital goods imports which

if we get is a funk of the mining boom,

if we get that the dollar will

change direction. At what point

do the currency markets factor

that in? Probably as we get

more into early 2012. In the

interim which $is some good

reasons the dollar will

continue to drift higher.

Thanks for joining us, Tim.

Thank you. What does it all

mean for retailers who are

under pressure from consumers

who suddenly prefer saving to

spending? Now they face the

prospect of high interest rates

prospect of high interest rates

to stamp out inflation. There's

been a slew of profit

downgrades and store closures

across the sector in receipt

weeks and things could get a

whole lot worse. Neal Woolrich

reports. This book store might

be bustling now but ask anyone

in the trade and the past ear

year has made for grim

reading. Probably if you take

Amazon and book

Amazon and book Depository,

they're probably the biggest

book seller in Australia. They

are having a dramatic impact as

well as the soft retail

conditions, those two combined

almost have been like a perfect storm. Mark Rubbo runs Readings

Books, a chain of six stores in

Melbourne's inner suburbs.

Readings Books has weathered

the storm when others have

failed, most notably the

Group which own Borders and failed, most notably the Red

Angus and Robertson but went into administration in

February. We found the last 12

months very difficult but since

the Red Group did fail we've

noticed quite a big lift in

sales. Perhaps it had to happen

that the Australian market had

too many book retailers

participating in it. And it's

the not just book sellers feeling

the pinch. This week Premier

Investments which owns Just

Jeans, Portmans and Jay Jays

amongst others, slashed its

profit forecast and announced

that 50 stores will close. It

follows downgrades from David

Jones and Myerer. All three

retailers are expecting this

year's profits to be lower than

last year and now official

figures confirm that retail

sales across Australia are flat-lining.. It's no wonder

flat-lining.. It's no wonder that people are talk about

consumer caution, it's no

wonder that retailers find this

very tough indeed. Coming after

a period where real per capita

spending has been rising by

2.8% a year for 10 years, no

net growth over three years is

quite a change. You see it in

business surveys that we run

where the retail sector is

producing the same results

producing the same results as

the bottom of the GF krO, so at

the current level in June it

was basically the same level as

November 2008. And that's

leading to what seems to be a

never-ending cycle of

discounting but while retailers

bemoan the ongoing consumer

thrift, this week's inflation

figures tell a different story.

The data shows robust price

increases for a range of

increases for a range of discretionary items like furniture, clothing and

household appliances. When we

generally look at retail

pricing in surveys we run, we

see very, very little increases

in prices. Now, the

statisticians have gone out and

recorded them and said they've

gone up so they've gone up but

to the extent they've gone up

in a weak environment you would

expect then a significant round

of discounting to be happening

of discounting to be happening now. We've always had some

books on special to try and get

- we've never gone with deep

discounting. We're a

full-service shop. We have very

high overheads so we've got to

pay for those but we do try to

source good deals for customers

where we can. It seems not all

retailers are created equal.

One of Australia's

One of Australia's biggest

property managers, colonial

first State, is reporting a

mixed bag of result for its

tenants. Over the past 12 months supermarkets and

specialty retailers have

reported solid sales growth but

shoppers are deserting

department stores. Another area

that is flourishing is

rentling. We will do well at

any time but particularly when

things are uncertain. John

Hughes is chief executive of the Thorn

the Thorn Group which owns

Radio Rentals. He says the

rising cost of living and high levels of underemployment which

are hidden in the official

statistics are also significant

factors in the retail malaise

but he argues some retailers

are also to blame. If you

don't reinvent yourself then

you're going to lose market and

lose the loyalty of consumers.

I think there's lot of retailers

retailers today that haven't

abided by that and they haven't

reinvented their offering,

their stores or anything out

there to consumerland so

they're not creating that style

of newness and innovation that

is required in retail. The

prospect of rising interest

rates is often given as a

reason for the lack of consumer

confidence and the threat

leevel was raised several notches this week after a

higher-than-expected inflation reading

reading but the Reserve Bank

Governor argues the elevated savings ratio does have its

benefits. We're actually

building resilience into the

balance sheets of our

households pretty smartly right

now and I think that's a thing

which will stand us in good

stead particularly if there are

troubled times at some point in

the future Even if the savings ratio levels

ratio levels off at its current

high rate then income will

continue to grow at 4% and that

means basically consumption

will start to pick up but that

might be six months or so down

the track. But that in itself

won't be enough to kick-start a

fragileal economy which has

already reported a large drop

in activity in the March

quarter. The role of the

household sector in driving

demand forward in the futurer upswing won't be the same

upswing won't be the same as it

was in the preceding period And we'll learn this week whether that will force the Reserve

Bank to lower its forecast of above-average economic growth

in the year ahead. This week

Graincorp bought a German

malting business for 58 million

yurpoes to complete its global

portfolio of malting factories.

A year ago when CEO Alison

Watkins took over that would

Watkins took over that would

have translate under to $84

million. Today it's 75 million

which is the silver lining of

the rising exchange rate. The

deal is also a continuation of

the company's diversification

away from its traditional base

in grain handling which start

would the big purchase of

United Malt Holdings two years

ago. I spoke to Graincorp chief

Alison Watkins about plans to

transform one of the last big

transform one of the last big

listed agricultural players

left in Australia. Alison

Watkins, you announced the bid

for AWB, basically the moment

you arrived at Graincorp as

CEO. Obviously the plan was

cooked up before you got there

and a year later you've taken

over a German malting business.

It feels like a change of

strategy. AWB, grain handing

and marketing, malting is grain processing

processing so is that a change

of strategy? No, I was

involved in the AWB acquisition

and decision to make that offer

for AWB. It was a little bit disappointing didn't end up

going ahead but we're really

focused on three main

businesses, our handling business, marketing business

and downstream businesses of

which malt is one of the most

important so AWB wasn't to be. I

I think it was a very good

outcome for the AWB

shareholders that Agrium came

along. We've actually been able

to make great progress

organically on building our marketing business, in

particular, but also our

handling business and now with

this acquisition we are really

strengthening our malt business

so I think it's always a

combination of organic

investment and acquisitive investment

investment and it depends

what's right for the time.

There aren't many opportunity

to grow by acquisition in grand

in handling anymore? In

handling we're in an extremely

strong position in Australia

and I think we're very, very

comfortable with the position

we've got and it's really for

us about making the most of

that and making sure our

network is as efficient as

ititably can so we can serve

end-user consumers of grain,

end-user consumers of grain, both off shore and onshore, as

cost effectively as possible,

as well as the exporter

customers who rely on our

network. We're very, very

comfortable with our handling

assets. The AWB combination would have been a nice to have

but not a must-have. With

malting I can see how the food industry around the world is

growing, there's lots of

opportunities and revenue

growth there, but malting is

growth there, but malting is attach ed to the beer industry,

it supplies beer which is in

gradual decline around the

world. Explain why maltinged?

In decline along with beer?

Malt's all about taking barley

and converting it into malt. We

sell it to brewers and also to whiskey distillers so there are

a number of markets for malt

and it's true to say that the

consumption of beer over the

last couple of years - and I think particularly influenced

think particularly influenced

by the GFC - has declined in

mature markets so the developed

economies, the consumption of

beer has definitely dropped

off. We actually expect that

that will improve as those

economies recover and also we're seeing some terrific

growth in the developing

markets so some of the Asian

markets, the South American

markets, the African markets

are growing very strongly and

are growing very strongly and

the other big trend we're

seeing is a great focus on

quality rather than quantity in

beer which is probably not a

bad thing so the challenge for

us is to make sure we've got a

very good footprint in malt

which the German malt

acquisition gives us, so we can

serve the big global brewers

and aggressively attack the

export markets, and German malt is well placed, for example, into

into Africa, and continue to

serve thiez growing craft

premium brurs well. I've been

told the African brewers and

emerging country brewers

generally aren't that

interested in the malt that you produce, they're more

interested in cut-price malt,er

is that right? There are

different brewers who will use

different qualitieses of malt,

that's certainly true, and

different approaches even to

making beer that we're seeing in different countries, but

in different countries, but I

think there's always good

demand for good-quality malt

and we're able toicate to a

range of different qualities in

any event. I think it's all about really being close to

those customers, those brewer customers, and really being

able to respond to their

requirements and to be

adaptable. Your total profit

looks like being about 150

million, two-thirds of which is

grain handling and marketing

and 50 million is grain

processing. What's the balance of your

of your business likely to be

going forward? Our businesses

vary quite a lot across the

cycle and I think I've been

very fortunate in my first year

to come along and have a bumper

east coast harvest and that's certainly driven very strong

grain handling and grain

marketing earnings for us this

year, that's very true. As

we've already discussed, the

malt industry's been a little

bit soft because of the demand

bit soft because of the demand

situation in beer. We know that

those things will vary across

the cycle so while sitting here

today I'm hopeful we'll have

another good harvest here on

the east coast of Australia.

It's really in the hand of the

gods and the weather conditions

that we experience over the

next couple of months will be

critical there. I expect, based

on the kind of rationalisation we're starting to see happen in

the malt industry, that our

malt margins and volumes will

improve steadily over coming

years. The mix will vary from

year to year but roughly

speaking we've got half of our

assets off shore now so I

expect we'll be getting

earnings commensurate with

that. How do you see the

outlook for the grain business

in general and farming? The long-term

long-term fundamentals are

undoubtedly strong. I think

that the challenge is for us as

a country to make sure that we

create the conditions that

allow Australian farmers and

participants in the whole

supply chain like us to really

make the most of the

competitive advantage that we

have as a country. Sometimes it

feels like we're not doing that

feels like we're not doing that

to the extent that we could so

wee particularly keen to see

continued investment in critical infrastructure, to see

investment going into the

research that will support

greater yields in our industry

and other industries and I

guess to make sure that we

don't keep adding to the regulatory burden and while

certainly weer support the concept

concept of pricing carbon, we

are concerned about the

framework that's on had table

now and the impact that that

will have on growers' costs

because while there not be

direct impact as such, there

will be a lot of indirect inimpacts flowing through from

energy increases, farm input

costs, operators like us will

costs, operators like us will incur significant costs and

those do all end up

unfortunately back with the

farmer and ultimately the

farmers are price takers

because they operate in world

markets and so there's No Doubt

it will have an adverse impact

on farmers. Farming is a tough

enough business as it is.

Farmers have seen a steady

decline in their terms of trade

over many years now so I think

over many years now so I think it's unfortunate we're adding

more costinise to it for our

farmers. The other thing is

the high Australian Dollar. How

much of an impact is that

having? All eelse being equal

we'd love to have high commodity prices and a low

dollar but it doesn't usually

work that way. I think we have

had pretty good strong

commodity prices over the last

8, 9 months or so and the fundamentals doer

fundamentals doer support

strong commodity prices going

forward, though of course there

will be many bumps in the road

along the way. I think we all

have to learn to live with the

high exchange rate and for

farmers, as long as the

commodity price continues to be

strong that does offset to

quite an extent the impact of

the high dollar. Thanks very

much, Alison Watkins. Thanks very

very much, Alan. Some of the

loudest cheers for Cadel Evans'

historic win in France arguably

came from Australia's cycling

industry. More and more of us

are using pedal power to get

about these days, with improved

bike paths and high fuel costs

encouraging many to don the

lycra. This rise of the

commoter cyclist has many

predicting a boom for

predicting a boom for the local

industry but one retailer warns

there are still many

significant speed bumps ahead.

We've seen cycling grow in

Australia exponentially over

the last two years. We're moving towards a greener

society and I think that, given

the opportunity, people will

take up that option. The founder of St

founder of St Kilda Cycles was

ahead of his time when, 22

years ago, he established a

shop targeting the urban and

commuter cyclist. He was insightful enough to identify

certain needs in the cycling

market that, to this day, we

still offer. There was a need

for urban commuting products,

touring bikes, folding

bicycles. It was a prescient

move. Vince Attree estimates 80%

80% of his customers are using

their bikes as a form of

transport rather than simply for recreational sport. Luckily

for the shop, they're also

becoming less reluctant to

invest in that transport.

We're seeing a great influx,

especially in the workshop, of

people who are willing to spend

money on being able to just focus

focus on the riding rather than

on the actual machine

itself. More than a third of

the bikes sold at the shop are

created specifically for the

commuter, such as the folding bike. You can use them on

public transport, people who

live in high-density housing,

people who want to integrate

part car travel and part bicycle travel, they can park

outside the city boundaries and

ride in the shorter distance, fold it up,

fold it up, take it into the

office where there's less of a

theft concern. However,

alongside the steadily

increasing customer base has

come fresh challenges. There's

a lot of competition in the

bicycle industry, there's a lot

of shops, it's very price-driven. There's a lot of

choice in the market and there

are prices and margins are being squeezed

being squeezed down. The

strong Australian Dollar also

has an adverse effect where

people will shop off shore,

again on Internet sites. We

have seen sales go off shore on

the Internet. It's not just the

high-end racing stores that are

suffering. Like most retailers,

St Kilda Cycles is wrestling

with how best to respond to the

online threat. There are

things that we sell, I know,

that are available at a greatly

reduced price overseas. We run

the risk of of course stocking

those items, people coming in

and having a look, walking out

and purchasing them on the

Internet for sometimes half the

price. We have to counter that

by offering of course that

service, having the stock here,

there's no use running away

from it and burying your head

in the sand. You've

in the sand. You've just got to

reach more contact points with

your customers and eventually I

think that they will come back

to the store. Vince Attree is

also counting on ignorance

about the intricacies of bikes

to work in his favour. Unlike

other retail sectors, the

bicycle is a mechanical

component and of course over

time they will need to be

serviced. We don't berate

people for buying things on

people for buying things on the

Internet. I think everyone does

it but I think over time there

will be a levelling of that

purchasing from overseas. And St Kilda Cycles will continue

to focus on the urban and

commuter cyclist. I don't

think we're terribly

ground-breaking but I do think

the vast majority of other

shops may still be focused on

the recreational sports side of things. Bicycle shops have lot

things. Bicycle shops have lot

of work to do. It's a

competition thing. The cream

will rise to the top, I

suppose. That's it for the

program. Now if it you'd like

to check out any stories and

interviews again, we'll have

transcripts, video and a vodcast posted on

Hello and welcome to

Hello and welcome to Offsider

s. The weekend stnd out was an

astonishing performance by the

Hawthorn in the AFL. It was Hawthorn in the AFL. It was 37

goals they equalled their own

record for the most scores

goaled in a match. The coach of

the hapless Demons has no where

to run.