Thursday, April 12, 2012

Budget surplus pursuit could spark recession and jeopardise prized AAA rating, strategist warns

By Business editor Peter Ryan

A top financial strategist has warned the government's pursuit of a budget surplus could spark a recession and ultimately jeopardise Australia's AAA credit rating.

Christian Carrillo, head of fixed income strategy at Societe Generale in Tokyo, has backed concerns from Australian business leaders that deep spending cuts to achieve a surplus could damage the economy.

Listen to my extended interview with Christian Carrillo.

Read the ABC News Online story here

"In the effort of achieving the budget surplus there is going to be so much money withdrawn from the economy that demand will weaken again and therefore the economy will potentially even dip over into a recession," Mr Carrillo told AM.

"This actually could be magnified if they slow down in demand and potentially in employment causes a downturn in the housing market even more than what we are already observing."

Mr Carrillo told AM that although global ratings agencies will initially applaud the budget cuts, the economic fallout could eventually prompt a review of Australia's prized AAA credit rating.

He pointed to savage austerity programs in Britain and recent warnings that its AAA rating could be downgraded because of the economic impact.

"If Wayne Swan went into a similar type of a strategy and the economy were to slow down significantly because of the pursuit of a surplus the ratings agencies will stab him in the back at the first sign that the economy is losing momentum," Mr Carrillo said.

"You can actually do something like an own goal in which because you tighten fiscal policy so much, you find that perhaps interest rates are biting a little bit, then you could actually cause a downturn in the economy that could in turn, in the future, risk your own sovereign rating."

Mr Carrillo said the Treasurer should heed calls from prominent business leaders that a budget surplus at all costs was a dangerous strategy.

"They are seeing the situation on the ground which is why we are concerned."

Mr Carrillo told AM that reduced demand in the economy resulting in a recession could also harm the already soft housing market.

"The housing market is wobbly at best. Let's just say that demand weakens so much that housing takes a turn for the worst and more seriously. You cannot just say okay, we will achieve the surplus no matter what," Mr Carrillo said.

"The housing market has been looking very poorly for a while in places like Western Australia which was supposed to be the main beneficiaries of the mining boom. Other states in Australia that are arguably in recession and that if you squeeze further from them, I think recession is a realistic possibility."

Tuesday, April 10, 2012

Foxtel banned from negotiating exclusive internet rights deals in ACCC's Austar merger ruling

The pay TV company Foxtel has been given the go ahead to swallow its regional rival Austar but only after agreeing to strict conditions imposed by the competition regulator.

The Australian Competition and Consumer Commission has banned Foxtel from negotiating exclusive content deals for internet television which had the potential to lock out fledgling IPTV companies such as Fetch TV and Quickflix.

The regulator's concerns centred on Telstra's 50 per cent ownership of Foxtel and the telco's much greater market dominance if the $2 billion deal went unchallenged, particularly in rural and regional Australia where choice is limited.

Listen to my interview with the ACCC's chairman Rod Sims who seems confident the pay TV sector can remain competitive given Foxtel's new dominance.

Read the ACCC's reasons for not opposing Foxtel's merger with Austar.

Here's Foxtel's response to the long awaited ruling from the ACCC.


Monday, April 9, 2012

CBS 60 Minutes legend Mike Wallace dies aged 93

As a founding reporter on CBS 60 Minutes, Mike Wallace asked the big prime time questions in the big days of US network television news.

Watch the CBS tribute.

Here's how CNN reported his death at the age of 93.

Check out Mike Wallace's grilling of General William Westmoreland on how much truth was being told about the war in Vietnam.

Mike Wallace was also portrayed by Christopher Plummer in "The Insider" which was based on the 60 Minutes pursuit of "big tobacco".