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Inside Business -

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(generated from captions) say they want an inquiry into

manufacturing of course they

don't mean a fair dinkum

productivity commission inquiry

they mean an in inquiry which

ends up giving them hr handout.

The Industry Minister Kim Carr

a left winger has been quite remarkably rationalist over all

of this supporting the floating

dollar and so forth. I think

that may represent some of the influence of his new

departmental head Don rustle,

former adviesser to economics

adviser to Paul Keating,

ambassador Washington and a

rationalist but it does beg the

question now of what Julia

Gillard, Kim Carr and Wayne

Swan will come up with to

support manufacturing as a

political response. OK, we're

out of time but the latest

celebrity to be touted as

President of the United States

is George Clooney and he gave

the best reason yet why he

shouldn't go into politics.

Thanks for watching. Why would

anyone really volunteer for

that job? I have a really good

job, you know. I get to hang

out with very seductive people.

So I have no interest. Closed Captions by CSI

Hello and welcome to 'Inside

Business'. This week the

Federal Government finally

released its first legislative

response to the heart break

caused by the scandalous

collapses of the likes of Storm

Financial Trio and Westpoint.

What's changed in the way financial advice will be given?

We'll talk to the architect of

the reforms, Financial Services Minister Bill Shorten. We'll

also take a big picture look at

the reporting season that's

just wrapped up. And badly

burnt by their investments in

US paper, will the Chinese now

unleash a huge new wave of M&A

This Program is Captioned activity? We'll check it out.


In First Person power

failure, the tough times in the

Australian solar industry. If

you going to pay a fair price for anything of course it is

going to reduce the market.

That's why a national feeding

tap can be consistent and

stable. It is really urgently

required. But first, there's

more grim news out of the US on

the economic front. To check

out what the markets made of

the latest week employment

figures it is over to Jayne

Edwards. Thanks Neal. The

only real question to ask was

Wall Street didn't fall

further. Figures showing no

jobs were created in August

caused blue chips to slump by

2% on Friday and the broader

market by 3% before investors

retreated for a long weekend to

lick their wounds. That means

we're facing a dismal day on

the local market tomorrow.

Analysts were expecting a moderate increase in jobs

during the month and the flat

result caused a tumble in share

prices on both sides of the

Atlantic, a jump in gold and

safe haven currencies, a slide

in the oil price, and a fall in

bond yields. The economy grew

at such a slow pace, 1% in the

first-half of the year, but

these credit spreadses credit

yields and shock prices seem to

reflect the chance that it

could tip because this growth

rate is in stall speed zone and

could easily cause the economy

to tip. Investors are now

pinning their hopes on major

President Barak Obama next week job creation package from

and further action by the

Federal Reserve to provide some

buttressing for the economy.

The jobs report brought to an

end a sustained rally on world sharemarkets and most were up

over the week. The UK was the

best performer rising by 3%

while the Australian market

managed a 1% increase. With

details here's Tom Elliott. As

you just heard, the Australian sharemarket had a reasonable

week. We are at the tail end

of the results season and

profit reports are still

driving share prices. Firstly,

CSR, down 7% last week, it is

struggling with the high struggling another manufacturing company

Australian dollar and it

intends to sack 110 workers and

says its class business isn't

doing particularly well.

Leighton Holdings down 6% not

so much because of its recent

profit report, but there is a

proposed shareholder class

action against the company.

This relates to whether certain

profits in the past were

properly disclosed to the

market. Fosters shares were

down 4%. On the face it looks

bad it has to be remembered

Fosters went ex dividend during

the week. We haven't heard

anything new from SAB Miller

whether it is ill crease its

proposed takeover offer.

Paladin shares were down 3%.

It is of course a uranium

producer and Lo and Behold

admitted that low uranium

prices since the Fukushima

nuclear disaster had meant it

lost a lot more money than

expected in the past 12 months.

Whooift Coal shares down 5%.

For quite a while this company

was a mooted takeover target.

During the week two of its

biggest shareholders reduced

their stakes at a discouncil to

market. This suggests no

takeover offer is likely in the

near future. Telstra's shares

were down 1%. They were down a

fair bit more earlier in the

week when the ACCC came out and

said this had problems with

Telstra's proposed NBN deal.

The shares did climb back later

on during the week. There was

a bit of good news around. QRM

beat profit expectations. The

shares were brought up.

Macarthur Coal received an

increased takeover offer from

Peabody. The shares were only

up 1%. The market was pretty

much expecting this to happen.

DJs and Myers why up. This was

because the jewellery tail

sales number was a fair bit

better than expected. Winner

of the week is Count Financial

up a whopping 38% after

receiving a takeover offer from

the Commonwealth bank. Loser

of the week is G8 Education,

down 14% after underwhelming

the market with its full-year

profit. This week the Federal

Government unveiled the first

tranche of draft laws in its

future of financial advice

reforms. Among them an

increase in ASIC's power, a ban

on conflicted remuneration like

commissions and a rule forcing advisers to act in the best

interests of their clients.

The proposed changes were

generally welcomed by the

industry but will they be

enough to weed out the stifs

Financial Services Minister and charlatans. I spoke to the

Bill Shorten at the end of a

busy week selling the new

measures. Bill Shorten you've

announced a number of reforms

in your future of financial

advice package this he can woo.

What amongst that package will

actually stop a big collapse

week we've seen in recent years

like Storm Financial or open

opus prime or their like.

No-one can guarantee if a

person believes dishonestly the

rules will catch someone from

being dishonest. These rules

will eliminate some of the

disintend sifs for people to

insufficiently analyse the too

good to be true deals. What do

I mean in plain English? What

I mean is with Trio in 2002

advisers were getting 10% of

what was invested as a

commission. My opinion is that

whilst I don't want to

arbitrate the ins and outs of every matter, but what I do

know if I'm a customer going to

a financial planner I want to

know you're working for me, not

for someone else. What is there

in the package that will stop

unscrupulous promoters getting

out there and promoting these

unrealistic deals? Consumer

groups and people who have been

through the mill in terms of

these ter be financial

collapses will readily advise

me they want to know their

planners are working for them,

the customer and for no-one

else. We're trying reduce the

chance of divided loyalties.

That's why at the heart of

these financial advice reforms

is the concept that the best

interests of the client should

be the pre-eminent test to

apply to the advice and actions

given by advisers. Some of the

measures you've produced this

week impose a compliance burden

on financial advisers, that

particular the opt-in rule.

How is that going to improve

the kinds of advice they give

to their client the. I don't

accepts in's burden put on

planners. This opt-in rule is

one of the few matters of the

converse in a difficult package

to negotiate. We are where we

are and a lost people are on

board. All we're proposing

once every two years, once

every 7 days a financial

delayers will re-invigorate the

mandate they have from their

customer by seeking reconfirm

mation that that person wants

you to keep advising them.

This is not an onerous business

practice. Many practices talk

to their customers much more

regularly than once every two

years. Rice Warner, a very reasonable and responsible

analyst in this industry, says

the opt-in will cost $11 per

client. It might be a minor

burden on the financial adviser

but it won't improve the

quality of advice, will it?

What I'm interested in is

stopping people having their

income balances, their account

balances, taxed without their

consent. What I'm about is not

just the individual

transaction. I have a vision

that Australians should be able

to retire comfortably, that

Australians should be able to

retire on 70% of what they were

earning before they retired.

If we're going to do that, we

need to have compulsory super

increased from 9 to 12%. If

we're asking Australians to compulsorily save more money

for their retirement, I want to

make sure that there aren't

rent seeking behaviour by a few

who just tax people's accounts

and never check if the people,

the clients, actually want that

to occur. This is a modest

change. The big part of the

package is already agreed by

everyone and I think that the

goal is the customer and people

retiring in Australia with

enough money so that their last

20 and 30 years after they

retire can be lived comfortably

and with somegry of

decency. One of the things that

people in the industry are

saying about this package is

that it could lead to more

consolidation and we've already

seen a step in this direction this week with the Commonwealth

Bank announcing plans to take

over Count Financial. Would

that be a negative outcome for

clients if there's fewer

players and less competition in

the industry? There are 28

assumptions and questions in

that one statement you just

made. First of all, the

argument that because we

announced reforms on Monday

that by Tuesday count and

Commonwealth Bank conducted and

concluded a negotiation is a nonsense. They said this was part of the reason themselves?

I thought it was a great deal for count and Commonwealth

Bank. How is it that the

government doing the wrong

thing when all the parties to

the transaction get a good

outcome? When is it the

government ever gets a break

here? What I'm interested in

is not the people currently

getting financial advice and I

want to make sure they're okay,

I'm interested in the rest of

the people not even getting

financial advice. Anyone who

thinks the financial advice in

Australia is well distributed

and lots of Australians are benefiting from it, are wrong.

What I'm interested in is

making sure consume verse

decent accounts at the end. In

terms of the market

consolidation, I have seen very

few mature markets or maturing

markets where there isn't some

degree of consolidation. Is anyone seriously suggesting if

we just ignored the issues of

financial advice, the larger institutions would seek to

merge with growing institutions in You've got more reforms to

come on the future of financial

vietion, restrictions pop

people using the perm term

financial planner. What's the

process there. Is there a need

for that to be tightened up

because at the moment people

can do an eight day training

course and call themselves a

financial planner after that?

I think that question about

the need to tighten financial

planner, is there an issue,

tending to underline and

confirm the wisdom of our

earlier action in building confidence in financial

planner. The fact of the

matter is the serious financial

planners in the industry, the

Financial Planning Association

of Australia, they've come to

me and said Bill, there's whole

lot of changes, we can live

with most of them. We might disagree with some at the

margin, we think if we're going

through this process of change

we want to turn financial

planning into a profession.

They've asked me to to

seriously contemplate how we

might incorporate in the

Corporations Law the term

financial planner so it has a

degree of security to it and

people know that it is a brand

which people can trust. I do

want to make people confident

of financial plansers are a

profession as opposed to

perhaps a retail sales

operation and nothing more.

Again, this is about building

confidence in financial advice

and the wealth management industry such that all Australians who work hard their

whole life, pay their taxes,

save their money, will have a

decent nest egg along with their house when they

retire. One of the issues still

to be addressed is compensation

when a financial planning group

collapses. What are your

thoughts on that at the moment

especially with professional indemnity insurance a financial

planner may have a limit and if

a claimant comes along after

that limit has been reached

they miss out. Are you looking to increase professional

indemnity insurance. It is

already in your's in a APRA

manned fun. There's mechanism

ing for people in APRA regulated superannuation funds.

Beyond that the deal is not

clear. You can go to the

financial Ombudsman service and people do that. I haven't got

a fixed or final view about

compensation arrangements. I

guess I'm governed by a couple

of things. Making sure that

the buyer know what is they're

getting so they're on notice.

I also don't want to put

serious extra costs on industry

if there's no need to. We've

got work being done. I'm

waiting to receive reports.

One thing which we have done throughout this whole financial

advice provisions since I've

been a Minister in the last 12 months, whatever I think our

critics can say it won't be

lack of consultation. On this

issue of compensation of a

completely open mind, I have

can see arguments for and

against, but I'm mindful of

cost. Bill Shorten turn ago way

from the financial advice

issues, this week there was

news with the release of some

Wikileaks cables that suggestion that Reserve Bank

board discussions had been

leaked to the Federal

Government and then passed on

to the US Government. Does

that concern you in terms of the independence of the Reserve

Bank board? I haven't seen the

Wikileaks' cables. I do have a

view on Wikileaks that you've got some people in Australia

working for the United States's

government who jot down notes

of conversations and bits and

pieces and report it back. I

know this Government doesn't

comment on the accuracy or

otherwise of cables. I know

from personal experience some

of the observations are right

and some are wrong. I'm not

putting too much store in the

Wikileaks' cables. What I do

know is the Reserve Bank of

Australia does a good job and it is independent and we

respect that. There will

always be fierce debate in the

community about decisions of

independent bodies, but we've

got to respect that independence. Would it concern

you if the deliberations of the

Reserve Bank board are being

leaked outside the Board and

mund yning its independent. Surely that's inappropriate. I'm a very

pragmatic person and I don't

deal with home as. Have you made inquiries whether leaks

have been coming out of the

Reserve Bank board. I don't

deal directly with the RBA.

Again, Wikileaks is a veritable

chest of information, some of

it right, some wrong, I'm just

not getting into debating the

last cross T and dotted I of Wikileaks. Live in the real

world, not the hypothetical

world. Thanks for joining us

Bill Shorten. Thanks very

much. Takeover activity in the

resources sector is starting to

heat up again with Shell and

Petrochina teaming up for a

$500 million bid for the

Queensland coal seam gas outfit

Bow Energy. Whilst it's not a

massive deal, there's increasing speculation that

China is about to unleash a new

wave of buying physical

resources. Having become deeply disenchanted with its

huge investments in US debt.

Stephen Letts reports. China

is absolutely flush with cash.

Its foreign reserves are well over three trillion dollars and

rising rapidly on the back of a

urnt current account surplus

that looks like being about

$250 billion this year. Its

economy is steaming along,

growing at about 9% a year, and

there's every likelihood it

will be the world's largest

economy before the decade is

through. As very rashs as its

domestic economy is, it can't

soak up the frenetic output

from its industrial base which

is responsible for about 10% of

global trade. While that

surplus of cash is a nice

problem to have, it is still a

problem. Particularly in a

country where you've got a

managed exchange rate, if you

don't want the kurn to

appreciate and you have a big

inflow of foreign funds you

have to take them and push them

out of the country again. Those

funds traditionally have been

pushed into safe havens like US

Treasury bonds, making China America's biggest foreign

creditor, holding about 1.2

trillion dollars of its debt.

The head of the economist

intelligent unit's Beijing

office Duncan Innesker says the very low returns and concerns

about the greenback's future

has China looking to diversify

its investments and that most

likely means increasing its

appetite for risk with mergers

and acquisitions. There's

certainly going to be an

increase. If we remember just

five years ago, we were talking

about Chinese outbound direct

investments of merely ten to 20

billion dollars a year. We're

looking at that moving up by a

factor of 10 in the next few

years. Most people expecting

100 billion US dollars of

outbound investment on an

annual basis at least by 2012,

2013. I hear that there's

another wave on its way very

soon. Andrew Thomson is a former Howard Government

Minister and has worked through

Asia and the Middle East

consulting on mergers and acquisitions and government

relations. He says he's

noticed a change in sentiment

in Beijing of late. Many large

Chinese state-owned enterprises

eager to buy large-scale

assets, personally in bulk

commodities, have really been

told to wait and see for the

last couple of years, but now

perhaps triggered by the recent

uncertainty in the market and

some re duckses in share

prices, that the authorities in

Beijing are now much more ready

to give them permission to make

these acquisitions. China has a

lot of money, but it is an

error to think of it as China

Inc. It is a set of large

companies competing against

each other for funds to be able

to invest and what we're seeing

with China Minmetals

corporation our larger shareholder they're supporting

us to go out and grow in

investments in the minerals area throughout the

world. Andrew Michelmore knows

a fair bit about Chinese

foreign investment. He ran Oz

Minerals when Gerard Minack

brought a handful of mines in

Australia and Asia for $1.4

billion two years ago. The new

owners rebadged the company as

MMG, kept the existing

management, and gave them a

very ambitious growth target.

Our challenge is to around $20

billion size within three to

five years. That's a fell of a

change. That's a growth of

about four times. But you need

that growth to build a platform

just as the big guys have done

in the past. And then you keep

building on that platform and

as you get it you can start injuriesfying looking a tear

one assets. Overpaying for

asset before the GFC the

Chinese this time around are

likely to be far more

circumspect. A case in point

was MMG's refusal to engage in

a bidding war for the

Australian listed copper producer Equinox Minerals

earlier this year. It is one

and only offer was $1 billion

less than Barrick Gold was

prepared to pay. In the past,

it was if I bid for something I

have to follow it through,

otherwise I've lost face. Now

it is also if I bid I want to

be successful, but I'm not

going to bid to the point that

I destroy value. That is also

a loss of face and I think that's a very important notion

to have. There's also a stratum

of younger Chinese executives

in the state-owned sector that

have returned to China after

education in the United States

or elsewhere, and who have much

more analytical approaches to

these acquisition propositions.

The old days of a big

chequebook being open and a big

cheque being written for a

project that was simply big,

regardless of its quality, I

think those days are

over. Ultimately, though,

whether a cached up and

acquisitive China leads to a

dramatic rise in the value of

assets depends on one thing.

Certainly asset processes in

the resources sector will be

strong so long as China's

demand is strong. China is increasing its investment in these strategic sectors as you

mptioned, mining, right up the

top there of the strategic

sectors, and obviously if

there's more demand from the

Chinese side on top of the

existing level of demand on the international stage that will

bid up asset prices. While the Chinese may be confident about

their prospects at home, they

still need the rest of the

global economy in a healthy

state to finance the operation.

That's far from a done deal.

Fsh We've just finished the

annual profit reporting ritual

remember the Watt market is

swamped by companies tabling

their full and half year

results. It also coincided

with a period of remarkable

turbulence on global markets.

What have we learned this time

around? For his assessment I

caught up with UBS's chief equities strategist David

Cassidy. David Cassidy, we saw

some record-breaking results

this reporting season, in

particular, from BHP Billiton

and Rio Tinto. Overall, how

did you think Australian

companies fared? Earnings

growth overall was quite solid,

around about 11% growth for the

year, but there was a very

stark dichotomy between the

resource sector, that delivered

over 30% in growth and the rest

of the market where we saw a

fairly small 3% growth for

FY11. What do you think were

the reasons for those

lacklustre results outside of

the resources sector? There

are two related factors there.

There's the strength of the

currency that we've seen

particularly over the last 12

months or so and related issue

very much the two-speed economy

where anything outside the

resources and resource related

areas is quite subdued at the

moment. Does it look like it

will be a difficult year ahead

to achieve any sort of decent

earnings growth? I think those

two headwinds are still very

much in place, the currency is

still high and looking like it

even wants to go higher, and

the resources economy is quite

subdued. It is going to be a

pretty tough slog. One thing

that stood out this reporting

seasons with the number of companies announcing cost

cutting drives. Do you think

that will be a feature of

corporate Australia in the year

ahead? I think it is

inevitable. Corporate

Australia's really been positioned for a broad based

boom that really hasn't

arrived. I think the reality

is that things are very two

tiered and quite subdued

outside the resources sector.

I think cost cutting

restructuring is a fact of life

for much of the market. Is

there a risk of a feedback loop

developing if companies are

cutting their costs, that will

slow the economy and make it

harder to achieve any earnings

growth again in the year ahead?

I think it is a bit of a

double edged sword. I think it

has to happen. I think we've

seen a lot of this sort of

activity in markets and

economies like the US and I

think it has been good for

profitability, but obviously

does have feedback loops into

the economy in terms of employment in particular. I

don't think it's going to be a

and therefore, don't think it dramatic story at this stage

is going to have a dramatic

depressing effect on the

economy. The silver lining may

be that it may be enough to

induce the RBA to lower

interest rates at some point

over the next three to six

months which would be a good

thing for activity down the

track. How do you see

valuations if he moment? Do

you think the Australian market

has been oversold? We tend to

see valuations as attractive.

The overall market is trading

under 11 times one year forward earnings expectations on a

price earnings ratio basis.

That is very attractive based

on historical benchmarks. We

think the valuation picture

looks attractive. There are

risks out there in relation to

the US economy, the European

banking sector, but on a risk

return basis we think that the

market looks attractive. Does

this mean, then, it is a good

time to be buying shares and

would you be buying with any

great enthusiasm? I would

certainly be accumulating the

market here. As I said, there

are risks in relation to the US

and Europe, but I think looking

at it on a risk return basis,

it is a good time to be

accumulating exposure to the Australian sharemarket definitely. What do you think

are the most attractive areas

to be investing in right now?

We still have a preference for

the mining and resource

services areas, we're still

playing that broad resource

thematic. I yes beyond there,

it really comes down to more of

a stock picking situation.

There's plenty of good dividend

yields offer. There's plenty

of stuff that looks good buying

at the moment. Thanks for

joining us David Cassidy. Thank

you. Solar panel are becoming

a familiar sight in the suburbs

evidence it is really been all

shine for Australia's solar

energy industry for the past

five years. There are dark

skies looming. The Victorian

Government has become the

latest state to announce it's

cutting its solar Dubbo subsidies prompting one

national provider to call for a

uniform approach to payments

before the bottom drops out of

the market. I think in the

last year the industry grew at

a think it was about 500%.

Energy Matters is a $100

million turnover business and

growing. We have over 100

staff. Everywhere in Australia, even Tasmania. It is

an impressive start for the

solar power company established

by four self-confessed naive

greenies at a kitchen table in

2005 despite the lack of experience, Energy Matters was a 21st century business from

the beginning embracing the internet as integral to the

business. We definitely

strategically set out to make

the website our primary tool

because we feel a website can

make solar more affordable for

all Australians. For example,

we have this high-tech mapping

technology that we used that

enables us not to have to do site visits in most cases and that's really cutting down the

cost for the consumer. Jeremy

Rich says the price of solar

system has dropped about 60%

since Energy Matters began. The

cost of solar has come down

because of economies of scale.

You're seeing a lot of

competition in the marketplace

amongst the manufacturers

globally and then on cop top of

that you're seeing technology improvements. Those economies

of scale have also been

bolstered by some substantial

Government subsidies to

encourage a greater take up of

renewable energy. Still today

we have great upfront subsidies

support from the Federal

Government. When you install

solar power system on your home

or business you generate carbon

offsets and that provides

upfront discount on the cost of

the system to the consumer. It

equates to a $3,500 discount

rebate off the cost of the

system. At a state level, feed

in tariffs provide an important

ongoing incentive to turn

solar. Excess electricity that

you're not consume ing inyour

home or business from the solar

cells on your roof is fed into

the electricity grid and you

receive the feeding tariff. It

is not a subsidy in any shape

or form. It is a fair price

for solar fed into the grid

that Australians need. Now some

State Governments are either

suspending or cutting their

solar schemes with devastating

consequences for solar

businesses. It was a boom or

bust policy in NSW and

overnight the NSW Government

cut their solar feed in tariff

with no plan for the future and

as a result, having no

consistency in policy, you're

seeing in NSW basically a solar

company closing down their

doors every day. One survey

conducted by an industry group

found there's been a 90% fall

in sales inquiries since November. If you don't pay a

fair price for anything, of

course it is going to reduce

the market. We're seeing

different feed in tariffs in different States throughout

Australia. That's why a

national feeding tariff that

can be consistent and stable is

really urgently

required. Jeremy Rich says

there's also been a failure to

take advantage of advances in

solar technologies developed

here in Australia. We have been

doing really good things. At

the university level we sold

technology but not so much I

guess in commercialising that

technology because of the lack

of a Federal assistance scheme

in relation to feed in tariffs

and so forth that have created

the boom and bust like we saw

in NSW. It wouldn't only be the solar industry that would

more investment in benefit. We would see a lot

manufacturing and so

forthcoming onshore here in Australia instead of growing

offshore to places like China. Rebecca Nash reporting there.

there's anything you would like That's it for the program. If

to see again all of our

interviews and stories will be

posted on our website a bit

later. Alan Kohler will be

back but next week. For This Program is Captioned Live. Hello again, welcome to

offsiders. After some

disappointments along the way

Australia has finally won a

gold medal at the world championships. Sally Pearson

smashed her Australian record

and run the 5th fastest time in

shisry when he swon the

semifinals and smashed it again

and ran the 4th fastest time in

history when she easily won the

final. Sally's away well, she's

in the lead and over the first


Literally just blitzed away.

This is a wonderful


So an amazing effort. Put

that in perspective for us . It