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Inside Business -

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(generated from captions) election campaign. She's back

in control in the country

having a news conference at 10.45 eastern standard time. If she does anything about Kevin

Rudd there could be a

that seat. This is a cartoon niche government now and I think Julia Gillard is

finished. Something right off

politics. The theme to this show is by the great Herbie

Hancock, from his LP, the Drum.

He's coming back to He's coming back to Australia.

We might not see him again.

This show should interview him

and say he's very unown

and say he's very unown version

of what was it, we're very excited to have you here tonight. We're about to hear

that again, Malcolm, but before

of the we do we'll leave you with one

school in Virginia. Thanks for

guys. Hello. I'm assuming you watching. Hello

guys are all aware this is the teacher's birthday. She's been

teaching now for 10 years

before she was teaching, she was a journalist. She decided

to make a change and get into something useful. (Laughter).

I couldn't resist it. I con Gidday,

welcome to program. Wall

Street seems to have crook

cracked but why? There is

ongoing unrest in the Middle

East and sovereign debt crises

in Europe, but perhaps the

knowledge that the Federal

Reserve's QE2 is coming to an

end. For an insider's view of

Federal Reserve policy, we will

talk to former Fed Governor

Rick Mishkin. We will catch

up with Oz Minerals Terry

Burgess who reckons he may have

got his hands on the next big

thing in Australian mining. It

is no longer spilt milk, the

real drama is in the packaged

stuff. We will check out who

is being squeezed in the discount war. This Program is Captioned


The hard sell, belt

tightening and online

competition make tough times in

retailing. If you look at

retail generally, last time I

saw it, the average net profit

is 3.6%. So that if everyone

reduced their prices by 5%, I

think they would go out of

latest business and market business. First with the

news, over to Jayne Edwards. Thanks Alan. Wall

Street showed some resilience

on Friday as investors digested

earthquake and tsunami in the implications of the

Japan, the world's thirds

largest economy. Each of the

indices closed the day half a

per cent higher. Shares in Japanese-based companies

including Toyota and Sony were sold off on Wall Street while

the prices of metals and fell.

There is expectations

significant chunks of Japan's

currency will be needed for

insurance payouts and rebidding. In Europe, the

major re-insurers were hammered

as the full impact of the

disaster was still emerging.

The earthquake hilt at the end

of a week which had put equity

markets firmly in the red as markets firmly in the red as

unrest continued in the Middle

East and Africa, China showed

evidence of a slow downand the

focus came back to European

debt. The US had the

strongest share market, while

the Nikkei finished 4% lower

and our local markets slumped.

To tell us why, here is Marcus

Padley. As of this week, the

glass is officially half empty.

The market has been up 18% since the bottom of the market since the bottom of the market

in May last year. We have lost

a third of that this year. The

Chinese growth story was

questioned for the first time

since the first or second

quarter of 2009. Their

five-year GDP forecast reported

a scary trade deficit in

February and saw iron ore

imports down 29%. That's

before we start worrying about

Europe, the Middle East, no-fly

zones and that stuff. The

currency was down this week and

very scary for international

institutions who lose money on

share prices and the currency,

that makes them to be

sensitive, causing a

shoot-first, ask questions

later policy. BHP were in

ex-dividends this week. A

couple of stocks going up in

resources. Extract Resources

on talk of Chinese bid and

Riversdale Mining as Rio upped

the terms of their bid. We saw

the Ten Network sue the Seven

Network for poaching one of

their employees. Amcor settled

a class action, also had a

successful you Euro bond

issue. Telstra pulled a call

centre contract. Car sales

did remarkably well this week

considering 49.1% of the

company was placed by private

equity early in the week. Finally, the Ombudsman service has suggested that anyone

wanting to trade CFDs should

perhaps get a certificate from

their accountant or financial planner saying they are

competent to do so. Winner of

the week this week was Extract

Resources up 12% on talk of a

bid from the Chinese who have

bid for their largested sh sht

er - shareholder. Loser of the

week is Fortescue Metals. In

one of the more extraordinary

moves in the market this week,

the $240 billion giant Pimco

decided to sell its entire

portfolio of US-related debt.

Pimco has placed a huge debt

the Federal Reserve will end

quantitative easing by June.

Pimco is an influential player

and its move sent' shudder

through markets. Will QE2 end

in June and will QE3 begin? I

asked a former Federal Reserve

Governor rubbish Rick Mishkin

who is in town to speak at the

Lowy Institute this week. The

quantitative easing at the

Federal Reserve started two

years ago on Thursday, buying

bonds, monetising the debt, in

effect. Since then, the Dow

Jones has almost doubled. To

what extent is that cause and

effect that the extra liquidity

and the lower bond yields have

resulted in the stock market

going up so much? First of

all, it is sliegtly different. The Federal Reserve took

this extraordinary actions during

this crisis. I think it

deserves a lot of credit for

avoiding a depression. We came

close. In any case, it avoided

the worst problems. The way

they did this was two different

kind of programs. One was they

had liquidity facilities which

were self-liquidating because

they were lending facilities at

penalty rates. Of course, when

the financial markets started

to recover, then people stopped

borrowing. Those are now

eliminated. The other was they

started purchasing assets.

This is much more complicated

in the sense controversial. Particularly important was they

started purchasing a trillion

and a quarter of

mortgage-backed securities,

particularly focusing on the fact that the housing market

was a key element of the

financial crisis. Now we have

gone to a different episode

where they have been purchasing long-term government

securities. It is not that they were expanding the balance

sheet. We know when that's

done, if you bought for example

short-term treasury securities

it has no impact. We

understand that from the point

of view of economic theory and

actual outcomes we have seen in

other countries. How would you

feel if you were at the Fed and there was a trillion and a

quarter on the balance sheet?

This worries me a tremendous

amount. I have been concerned

about this aspect of what's called quantitative easing.

Because it leaves the Federal

Reserve in a very dangerous

position. First of all, one

of the phrases you used was

monetise ing the debts. One of

the concerns with the recent

bond-buying program is it gives

the perception the Fed is going

to monetise the debt, particularly when the Federal Government has been

irresponsible. In fact, we

actually have bipartisan

politics in the United States,

people don't think so. Both

Parties have been equally bad

on dealing with long-run fiscal

difficulties. It is more than

the perception, it is the reality. There has been

purchases of long-term bonds.

The issue is what they will do

going down the road. If the

purpose of doing the purchases

is monetary policy, it means

when the economy is fully when the economy is fully

recovered and inflation becomes

more of a problem, the Fed will

withdraw those holdings of

long-term securities, then, in

fact, you are not aiding and

abetting the bad behaviour of

the fiscal authorities. The

problem is that people are not

convinced the Fed will do

that. By which you mean the Fed

would let the government off?

Right. The quantitative Right. The quantitative

easing done during what I could

like to call credit easing

because that's the term

Chairman Bernanke used, it was

done during the deep phase of

the crisis was, in fact,

focused on doing whatever it

takes to prevent a depression.

Anyway still seem to be

targeting asseting prices. I

wouldn't describe it as

targeting asset prices. What

I would say I have been

concerned about is the fact

they can't ease monty policy -

monetary policies by lowering

the policy rate, so this has

been focused on trying to lower

long-term rates when you can't

lower short-term rates further.

It is basically viewed as

another tool of monetary

policies. In speeches, Ben Bernanke seems to be Bernanke seems to be talking

about that, he is implying they

are interested in getting the stock market stock market up in order to improve wealth and therefore

the economy. Sure. Here is

the situation the Fed has been

in - from a pure monetary

policy, I have some doubts this

was the right thing to do from

other viewpoints because of the

issues of potential looking

like you are monetising the

debt and the danger of having a

balance sheet which could leave

the Fed exposed to losses which

means the Congress goes after them. Therefore, do you join

those who call Ben Bernanke a

money printer? I don't at all.

The purpose here is not to

print money and not worry about

future inflationary

consequences. There is an

issue when you have a balance

sheet this large, particularly in long-term in long-term assets and housing

assets, the Fed is involved in

the plit sides of all financial

markets in the US. The Federal

Reserve and the Government has

been involved in large

transactions to help the

economy and bail-outs. The

Government is not going to lose

a penny on everything but one.

The Fannie and Freddie, a

couple of hundred billion

dollars. This is an indication

of how crazy some policies have

been. We missed a lot of

things in the crisis, much too

trusting of the quality of

prudential supervision which,

by the way, in your country was

done much much better than many

other places. I don't know

whether you are lucky or good.

Good. Maybe both? Is there

going to be QE3 do you think?

I think the answer is that the

threshold for doing QE3 is very

high. It is actually very

unlikely. What do you mean by

the threshold? For them to go

in and do it. The reason is

that QE2 has been very badly

received by the markets, by the

politicians. When you have

Sarah Palin Tweeting about the

Federal Reserve, complaining

about the Federal Reserve, you have got

have got a problem. I think

that a big problem that a big problem with what they did here

they did here was they did not

couch it in a long-run

strategy. One of the things

the Federal Reserve needed to

do was make it clear inflation

control is the primary long run

goal for a Central Bank, as you

have done in your inflation

targeting regime here in

Australia, and then couch the

use of QE2 as consistent with

that, which is, in fact, I was

the intent on the part of the Federal Reserve but has never

been articulated in a clear

way, saying the balance sheet

should be shrunk when we need

to do so in order to keep inflation under control. This

is a program that will be

finished in June, it will not

be pursued further. The only

wildcard could be if, in fact,

we start going into double-dip

recession which I think is

unlikely at this point. It is a fair bet the stock market will

go into a double-dip, or at

least a dip. In a sense people pay too much attention to the

stock market. The stock

market tells you information

but it may be the symptom of

what are deeper causes. The

big problem here is what was

happening in credit markets.

The stock market reflect ed the fears that occurred as a result

of the credit markets. We know

the stock market goes up and

down and the impact of the

economy is not that large

particularly if you don't see a

credit problem at the same time

the stock market crashes. In

this case, when we had the

stock market crash down almost

50%, we had a major credit

crisis. That was the big

problem in the US. In fact,

the stock market has recovered

tremendously but there is still

some problems in the credit

market. You have got to be

careful. The stock market has

some information but there is a famous quip from Paul

Sammuelson 'The stock markets

predicted nine of the last five

recessions'. You have to

recognise it is only one piece

of information. More

important in terms of assessing

when you have problems is when

the credit markets get out of

whack and they got out of whack

in a big way. Thanks for

joining us. Normally a

diskoupt war would be a cause

for celebration. But the milk

price war has led to ferocious

recriminations and Senate

inquiry. While consumers are

lapping up cheap milk and Coles

is puring at the attention.

Everyone else has their backs

up. Neil Woolrich reports.

Couple of years ago we had

our milk price slashed mid

season which hadn't happened

for 30 or 40 years. That was

pretty hard to take.

Mick Hughes comes from a

dairy farmering family. He says

times have been tough enough

with a decade of drought

followed by recent flooding

rains. Now the industry faces

another challenge as the major supermarkets

supermarkets slash prices on

their plain label milk by up to

a third. I can't see that the

industry can force the

supermarkets to pay more. We

just get told what we are paid

and that's what happens for the

year. We get told a flat year. We get told a flat rate

and that's it. Mick Hughes'

milk is mostly destined for the

export market so he is largely

unaffected by domestic

pricingle . He is keenly

watching the Federal Parliament's milk pricing

inquiry which opened this week.

I would hope something would

be could out but sceptical

anything will come out of it.

We have endeavoured to be as

fair as reasonable both to

protect the processors and the

farmers. We believe the

consumers shouldn't have to pay

for the processor' profit mar

gins. Coles supermarket fired

the first shot in the milk wars

on Australia Day when it

started seing plain label mil

mill for $1 a litre. We are

trying to lower prices overall.

It is only 2.5 years ago there was the Competition Commission

Inquiry into why grocery prices

were too high. We have

consumers benefitting from

this, more milk sales because

of this and farmers producing

more milk which means higher prices for farmers. While

Coles says it wants Coles says it wants a sustainable dairy industry,

others are not convinced. At

this week's sitting into the

inquiry, a host of critics

lined up to slam the retail

giant. It gets up my nose that

every day I figure out I am

subsidising Fonterra to sell

house brand milk to Coles. A

value chain of $1 a litre would value chain of $1 a litre would not appear sufficient to deliver to

stakeholders. National Foods

anticipated a profit margin of

2% this year and there is

before the recent spate of

discount. Indeed, firms like

National Foods are likely to be

the biggest losers from price

diskoupting as consumers switch

away from food processor'

profitable brand of milk. We

are going to see more

rationalisation in the industry

going forward, margins cut,

probably see them being forced to make significant investments

in cost-saving technology. We

are going to have a leaner

process sector. When we look

at the key processor and their

Ebit margins, they are 5,

Ebit margins, they are 5, 6, 7%

respecty. Coles is making 4

cents in the dollar. Our

margins are lower than theirs

are. There are opportunities

for us to still provide a great

price for the consumer and for the processors to participate in that as well.

Coles has maintain

discounting won't affect farm

gate prices although it doesn't

contract directly with farmers. But the But the Senate Committee heard

this week some producers are

already receiving less because

consumers are buying more plain

label milk. However, former

ACCC Commissioner Stephen King

says dairy farmers will

eventually have to be paid more

as milk con consumption rises.

How do you entice somebody to

produce more? Pay them

produce more? Pay them

more. If the milk problem drags

on, Victoria has a plan B, they

have the export market.

Elsewhere, others don't have

that aption option. In States like Queensland where

95% of the milk goes into the domestic market and we don't have other alternatives have other alternatives in

terms of market we are left in

a difficult situation. Adrian

Peake says $400 million has

been stripped out of milk sales

over the past decade because of

the switch by consumers towards

more plain label milk. He

expects that trend will only

gather momentum if the plain

label discounting continues.

Those producers at that level in the value chain in the value chain need

longer-term security in terms

of their price formats. What

you have to remember here is

actually the price has come

down by about 4.5 crepts a

litre. That will not destroy

the dairy industry. Farmers

from drought will be carrying

debt and from lower milk prices

possibly will be carrying a

huge amount of debt and some will

will be affected with flood as

well. They would have costs

incurred in that. They will

need a higher price to get

through. While Coles can't say how long the discounting will

go on, it seems the dairy

industry is about to undergo

another shift, perhaps as

significant in its impact as

the deregulation reforms that

happened a decade ago.

Not so long ago, the mid-tier

miner Oz Minerals was in deep

trouble. Mired in debt from the

Oxiana-Zinifex merger and

forced to sell all its assets

except Prominent Hill to the

Chinese to survive. As proof

of a return to health, the

miner splashed out at least

$250 million to buy a copper

and gold deposit not too and gold deposit not too far from Prominent Hill and BHP's

monster Olympic Dam. I spoke

to Terry Burgess after he flew

back from kicking rocks around.

It seems like a big price for

an unproven deposit. Are you

sure there is that much copper

there? What is the best thing about this acquisition is it

ticks all the boxes for us. We

clearly said we are going to look for something look for something in copper,

it is in the right jurisdiction

and it has the capacity to

produce between 50 and 150,000

tonnes a year of copper. It

ticks the boxes and we think

there is the prize at the end

after the necessary exploration

and technical assessment. We

are pleased. Tell us about a

history of the deposit and the

guy who found it and how you

came about learning it was on the

the market and buying it? It is

a very interesting story. I

think it is part of the work that the South Australian

Government have done to support

mining in the region. Rudi

Gomez, who was the prospector

who found Carrapenteena,

actually utilised those funds

and it was in one of the very

early stages of the exploration

program that he drilled the

Carrapenteena discovery hole. Carrapenteena discovery hole.

We have heard this asset could

be up for sale. It has been a

tender process and a number of

discussions held over the last

year or so, some of which we

participated in and some of

which we stepped away from.

But ultimately we ended up buying the asset. Prominent

Hill has an eight-year mine

life currently and this seems

to be about to start in eight

years' time. It seems there

is a continuous program there. In

In fact, Prominent Hill had

eight years mine life last year

as well so you are going to

keep extending the mine life of

Prominent Hill and end up with

two mines? That's the objective. As you mentioned

there, we did extend the mine life by a year in the last

year. We got a lot of exploration being done at the

moment. We are spending $70

million this year on exploration around Prominent

Hill itself and in the region and the objective and the objective is to extend

the life of Prominent Hill and

hopefully find another deposit

which we could also treat

through the Prominent Hill

operation. Carrapenteena is

closer to the port than

Prominent Hill, isn't it? Yes.

How long a mine life do you

think you will end wup there?

- up with there? Is it richer?

It has the capability to be

larger than what we know today

at Prominent Hill, but ultimately ultimately at Prominent Hill

who knows, that depends upon

exploration. We would be

looking at having the two

operations in time to come and

you can imagine there will be some sinnergies between the two

operations because of the

proximity and jurisdiction of

SA. How much cash do you have

left after writing a cheque for

$250 million? $750 million of

cash available for growth but we will be able we will be able to do the

capital management plan, we

have the 12 cents per capita

plan and make a $2 million

buy-back in the 12 months after

the capital return is made.

That capital return is subject

to shareholder approval. Are

you still in the market for

pros pegts? Definitely. All pros pegts? Definitely. All

the wisdom is the prospects are

in Africa. Australia is the

area we would be happy to find

things. We have certain

geographies we are happy to

work in. We have exploration

people looking in South America

and the team is looking in

different places but confined

within the guidelines we have

laid down for countries we are comfortable to

comfortable to work in. You

have this protection of

Prominent Hill in Woomera so

there is a potential defence

problem but is anyone sniffing

around your company? There is

no-one knocking on our door.

There would be a number of companies that could do that

even with the fact we are in Woomera. It doesn't provide

takeover protection? No. I

think we are takeover think we are takeover

sensitive. What sort of company

would you like to end up with

assuming you don't taken over?

Would you see yourself being a

global miner of base metals? A

company that gives good returns

to our shareholders. If we can

grow larger and continue to add

value for the shareholders,

that's what we will do. We

are not going to rush into any opportunities unless opportunities unless we see the

value. You have seen that in

the last 12 to 18 months in the company where we have been

disciplined in the approach we

have taken and only done things

that add value. Also talk about

the possibility of rare earth

for Carrapenteena and that's

been ab market that's taken off

in recent times. Do you think

there is potential for a rare

earth mine at that site? Certainly rare Certainly rare earth in the

vicinity. Some of the test

work done in the past indicated

rare earths in the concentrate. Whether or not that's

commercial is something we have

to look at. Our primary goal

is for copper and gold out of

Carrapenteena at the beginning.

Thanks for joining us.


The days of shop till you

drop must seem like a distant memory

memory to retailers at the

moment. Statistics confirm

prizing shoppers from their

savings is getting harder and

hadder. Then there is the

issue of Internet shopping

which some predict will close

the high street shop. There

is one retailer taking the long

view and that's thanks to the

hind sight that comes with more

than 50 years in the business.

It is like farming. You have

good seasons and you have

not-so-good seasons, but a

farmer keeps on farming. Sendai sen has been selling

high-end audiovisual equipment

for more than half a century. for more than half a century.

This is not one of the good

times. People are tightening

their belts to an extent. The

same person who will buy an

expensive car will agonise over

a minor difference over the

price of the item and we have

people who will buy a TV by the

width and size per dollar.

Despite importing much of his

stock, the retailer says the

Australian dollar has failed Australian dollar has failed to

protect his bottom line. It

has hurt slightly which may

sound paradoxical because TVs

have dropped in price, you are

buying it for less but you are

selling it for less. Like

others in retail, he has been watching the growth in online

shopping carefully. If you are

talking about locally, yes,

there is a definite there is a definite market for

people buying online on the

Internet but usually in the

lower-cost area, not in the

medium and upper area. As an

electronics retailer he has

little to fear from overseas

web sites To bring something

from America, a loud speaker,

can cost you as much as or more

as the object itself to get it

here. The online prices can

be a bit misleading if you are

be a bit misleading if you are

looking overseas. Alex Encel

admits that isn't the universal

experience of competition for

all retailers. He has taken a

dim view by some of Australia's

largest stores to stem the flow

of customers to online. I

thought it was somewhat mis

guided because all it did was

make people think 'This is something I should something I should be looking

at' and created more interest

in the subject. That's not to

say he thinks the GST exemption

on online imports under $1,000

is fair. We are told it is too uneconomic to collect. Other

countries in Europe, like the

UK, they collect it. What's

not practical here is practical

in Europe. A lot of people

abuse it. They might say buy

several things at the under

several things at the under

$1,000 threshold and then clump them together and sell them

here. In reality, it is not

going to change things so much.

It is just one of those things.

We have to accept it the

Internet is there and not going

to go away. Alex Encel

believes there is little more

retailers can do but try to

ride out the tough times. We

can all save money, move to a

low-rent location, employee

cheaper staff and less material

on display. There is lots of

money to be saved. The

customers don't want to go to

the outer suburbs. If you look

at retail generally, the last

time I saw it, the average net

profit is 3.6%. So if everyone reduced their prices

by 5%, they would all go out of

business. In the end, things average out.

average out. Things will get

quiet for a while but those who

didn't buy during the quieter

time will buy during the more

active time. I am

philosophical about it.

That's it for the program.

If you want to re-live it, we

have transcripts and a video and


again. Two things happened

this this week that must have cheered lug league second stifs of the competition got underway

and Brendan Fevola was back in the headlines. Fevola along

with Ben Cousins has to be the

most disastrous Aussie rules personality in a generation.

Still, a football club has happy to play him and the media

happy to pay him. Take a look

at that morning. Look at a racetrack legend Black Caviar at that morning. Look at a

the first horse in this country

she to win its first 10 starts and

she did it emphatically running

the fastest Newmarket in 110 the clock tower. This is a

moment offe written perfection.

Black Caviar broke away with