Corporate watchdog in crackdown on disclosure rule breaches as Leighton is fined $300,000

The corporate watchdog has put Australian companies on notice about their obligations to quickly disclose both good and bad news to the stock exchange.

The warning comes after the construction company Leighton Holdings was fined $300,000 for failing to promptly update investors about costly delays on Brisbane's Airport Link toll road, Victoria's desalination plant and the company's Middle East operations, Al Habtoor Leighton Group.

The delays caused a $900 million profit downgrade but the market was only given the bad news in April last year, three weeks after Leighton became aware of the losses.

The shock downgrade and an associated $757 million capital raising sent Leighton shares into a 12 percent free fall after a trading halt was lifted.

While making no admission of guilt, Leighton agreed to fines of $100,000 for each of the three disclosure breaches and will engage a consultant to overhaul the company's disclosure policies.

The chairman of the Australian Securities & Investments Commission Greg Medcraft told the AM program that the Leighton fines should remind all list companies about their obligations to keep investors fully informed.

Listen to my interview with Greg Medcraft here.

"What we have is an outcome that sends a very clear message to the directors of listed companies that they need to have a close look at what happened at Leightons and make sure that their own governance policies around continuous disclosure are adequate," Mr Medcraft said.

"A company has to immediately notify the exchange of any information that a reasonable person would expect to have a material effect on its price or value of it's securities. It's actually very clear."

Signalling a push for tougher penalties on disclosure breaches, Mr Medcraft said companies were required to disclose bad news material to a share price in the same way favourable developments would be reported.

"You can't just disclose the upside. You must also disclose the downside," Mr Medcraft told AM.

"We have the systems, we have the people and we have the power and where we identify unexplained price movements then the ASX or ourselves will satisfy ourselves as to those unexplained price movements."

Read the background to ASIC's action against Leighton Holdings here.

Leighton chairman Stephen Johns confirmed that as part of accepting the infringement notices the company would implement a formal review of its continuous disclosure policies and procedures.

Read Leighton's response, released to the ASX on Friday evening, here.

"We take our continuous disclosure obligations very seriously and have undertaken to ASIC to implement an independent review of our systems," he said in a statement.

"We recognise that continuous disclosure is extremely important for the efficient operation of the market and will use the review as part of our program to improve the systems that support our business."

Leighton has explained the delay in disclosure by saying it didn't have enough certainty on the scale of the downgrade until a review of its operations was formally concluded with a board meeting on the morning of April 11.

The delay prompted a class action against the company by shareholders who invested between November 2010 and April 2011.

Analysis: Future Fund fallout damages multiple reputations

By Business editor Peter Ryan - analysis

There are plenty of lessons to be learned from this week's ugly stoush over the appointment of the Future Fund's next chairman.

The obvious one goes to the first rule of issues management especially when they involve tens of billions of dollars and big egos - when you're in a hole, stop digging.

First to the personalities.

No one doubts David Gonski's credentials to lead the $73 billion sovereign wealth fund.

But how he unexpectedly won the job is a multi-level case study in how not to manage reputations nurtured and built over years.

The highly regarded Mr Gonski was undoubtedly a clear contender for the role given his multiple chairmanships of listed companies and his status as an honest broker "go-to guy" in business, government and philanthropic circles.

But instead of putting Mr Gonski on a short list of candidates, Finance Minister Penny Wong commissioned him to assess the views of Future Fund guardians on who might be the best successor to David Murray.

It's understood Mr Gonski was told the government's preference was for an internal candidate who could make a smooth transition.

After winning the confidence of guardians, Mr Gonski was given a majority view that the former Treasurer and Fund founder Peter Costello should get the chairman's job.

That "view" rather than a recommendation was relayed to Senator Wong last November. But the Peter Costello's nomination gradually saw the goal posts move and the beginning of damaging speculation.

Mr Gonski makes the point that he was not asked to be a headhunter for the Future Fund role and further, that he wouldn't have accepted such a brief because he might have considered himself as a candidate.

The issue of a perceived or actual conflict of interest was created not by Mr Gonski but by the government's confusing and inconsistent approach to filling a role critical to the superannuation expectations of millions of Australians.

The absence of a clear succession planning strategy has infuriuated Future Fund guardians, in particular the outgoing chairman David Murray who was reappointed last year for a fixed twelve months only days before his term expired.

Mr Murray was choosing his words carefully yesterday when he told me: "the appointment process could have been handled in a more timely manner to prevent speculation about potential candidates."

While describing David Gonski as "a person of stature", Mr Murray would only say he was "a good appointment".

But Mr Murray would not be drawn on whether he thought Mr Gonski was the best man for the job.

The effect of Mr Murray's measured comments and Peter Costello's suggestion that the succession process was a "shemozzle" have the effect of damning Mr Gonski with faint praise.

The fallout from the poorly managed process also makes Mr Gonski's entry as Future Fund chairman far from smooth as his immediate task will be to implement damage control and soothe some bruised egos.

While the Fund's mandate of covering $140 billion of public sector superannuation liabilies by 2020 is been steaming ahead behind the scenes, it has done so despite a high level of instabilty and uncertainty that has the potential to damage Australia's international reputation.

The government's reaction to criticism created by the selection process debacle has also been unnecessarily politicised given that the Fund has built up a reputation for independence and forthright commentary, much of it from the ever dry and direct chairman David Murray.

Rather than maintaining the line that Mr Gonski was "the best man for the job", Communications Minister Stephen Conroy was in attack dog mode yesterday pointing to Peter Costello's political past as a failed contender to replace John Howard as Prime Minister.

And Penny Wong's comment that unlike Mr Gonski, Mr Costello had not been asked to chair any Australian listed companies appears to undermine the status, power and influence of a Treasurer who served for more than a decade.

The public questioning of Mr Costello's credentials also puts the government in the position of undermining one of its key Future Fund guardians who was presumably made a guardian on the basis of his significant background.

Mr Costello has also been damaged by the fallout from his rejection.

Now instead of continuing a corporate life after politics, albeit as a Liberal party elder stateman,

Mr Costello has returned as a partison player who has rejoined the political slanging match to defend his reputation.

The stoush is likely to make current and future governments reluctant to appoint politicians from either side of politics given the "ticking timebomb" factor and in Peter Costello's case on how easily partison poltics can re-emerge.

The unseemly debate also creates boardroom governance issues and whether the Future Fund's integrity can be better preserved through the use of independent selection panels.

The boardroom advisor Nicholas Barnett said the government could consider a process used by BHP Billiton where the board voted on a new chairman and the process was overseen by the accounting firm KPMG.
　
"In an ideal world, the potential future board chair is sitting on the board and doesn't need to be parachuted in and people are getting a good feel for that and well before the due date, six months out." Mr Barnett told me before Mr Gonski was appointed.
　
Mr Barnett also flagged some of the boardroom issues Mr Gonski will be facing in relation to the selection process.
　
"You certainly don't want to be on a board where you do have a conflict and the question is when does that conflict start and stop. Also the perceptions of people in the marketplace are pretty important to take into account."
　
The media storm over the flawed decision making goes to the heart of how big decisions are debated and resolved in Cabinet meaning the next major appointment will be scrutinised to see if lessons have been learned or are doomed to be repeated.
　
Peter Ryan is the ABC's Business editor
Twitter: @peter_f_ryan
www.mainstreetwiththeabcspeterryan.blogspot.com　　

Future Fund appointment process raises questions about succession planning

A boardroom governance expert has criticised the selection process use to appoint David Gonski as the next chairman of the Future Fund.

Speaking before Mr Gonski's appointment was confirmed, Nicholas Barnett said the process raised serious questions about succession planning at the $73 billion sovereign wealth fund.

Listen to the interview here.

Future Fund boss David Murray criticises selection process of successor

The retiring chairman of the Future Fund David Murray has described his successor David Gonski as "a good appointment" and "a person of stature".

Mr Gonski has become embroiled in a political row over his appointment as Future Fund chair after Cabinet rejected the candicacy of the former Treasurer Peter Costello.


Mr Gonski had relayed the view of Future Fund guardians that Mr Costello was the preferred internal candidate.


While welcoming Mr Gonski as "good appointment", Mr Murray stopped short of a full endorsement.


Asked if he agreed that Mr Gonski was the best person for the Fund's top job, Mr Murray said: "I didn't say that. I said he was a good appointment."


Listen to my analysis of the Future Fund row broadcast this morning on AM.


The founding chairman of the Future Fund is known to be frustrated over the appointment of his successor, having agreed to a fixed twelve month appointment a year ago days before his term expired.


"The appointment process could have been handled in a more timely manner to prevent speculation," Mr Murray told me.


Mr Murray was not critical of Mr Gonski and stressed he was highly regarded in the business community.


However, Mr Murray's comments add to criticism about the process of the appointment, poor succession planning and perceptions that Cabinet's rejection of Peter Costello as the Fund's next chairman smacks of poltiical payback.

Surprise jobs fall put rates cut back on agenda

The number of Australians in jobs fell unexpectedly last month, putting new pressure on the Reserve Bank to cut interest rates.

More than 15,000 jobs disappeared in February, pushing the unemployment rate up to 5.2 percent.

Full time employment was flat, despite expectations  that the economy was picking up.

Listen to my analysis broadcast on The World Today.

Here's the breakdown from the Australian Bureau of Statistics.

Bureau of Statistics figures show 15,400 part-time jobs disappeared last month, while the number of full-time jobs remained steady at 8.1 million, taking the total number of people employed to 11.4 million.

Economists had expected 5,000 jobs to be created in the month.

The participation rate - which is the number of people at work or seeking work - fell to 65.2 per cent, from a rate of 65.3 per cent in January, yet the amount of time people spent at work increased by 21.6 million hours.

The male unemployment rate rose 0.2 per cent to 5.1 per cent, while the female jobless rate edged 0.1 per cent higher to 5.4 per cent.

Around the country, Western Australia was the only state to see a fall in the jobless rate, down 0.1 per cent to 4 per cent.

Unemployment rose sharply in Queensland (from 5.4 per cent to 5.7 per cent) and Tasmania (up 0.3 per cent to 7 per cent in trend terms), while it also rose in Victoria (up 0.2 per cent to 5.4 per cent), South Australia (5.2 per cent) and the Northern Territory (4.3 per cent).

And it was steady in the ACT (3.6 per cent in trend terms) and New South Wales (5.2 per cent).

Disappointing growth puts pressure on surplus projections and raises prospect of more rate cuts

The Australian economy grew at a slower pace than expected last year, national accounts figures show.

Listen to my analysis from The World Today.

Australian Bureau of Statistics figures show gross domestic product growth of 2.3 per cent last year on a seasonally adjusted basis, which was slightly less than expected.

Federal Treasurer Wayne Swan acknowledged the result was "somewhat softer" than anticipated and reflected "patchiness" in an economy that was going through structural change.

In the final quarter of the year the economy expanded 0.4 per cent, following expansion of 0.8 per cent in the previous quarter, downwardly revised.

Economists had been expecting much stronger growth of 0.8 per cent for the period.

Global stocks fall as Greece bailout threatens to unravel

Global stocks have fallen on renewed concerns that the latest bailout plan for Greece could unravel by the end of the week.

European markets ended around three percent lower and Wall Street closed 1.5 percent weaker.

The Australian sharemarket followed the lead with the All Ordinaries Index opening one percent in the red.

Investors are also on edge about falling commodity prices and wider evidence that the world's economy is slowing.

Here's my analysis from this morning's edition of AM.

China growth cut unlikely to hurt mining boom - yet

Economists say China's revised growth forecast of 7.5 per cent is unlikely to hurt commodity prices or tame the resources boom.

However, there are concerns that a more acute slowdown could add to concerns about the global economy

Analysts are watching the calibration of China's economy closely, but the government is sending the message that resources boom mark 2 is still on track.

Here's my analysis broadcast on The World Today.

.

Reserve Bank holds rates at 4.25 percent; stays on the sidelines, more optimistic about Eurozone

Corporate criminals target mining sector assets

Corporate criminals are prospering amid tight economic times, a survey on global fraud has found.

The report by accounting firm Pricewaterhouse Coopers found white-collar crime was a growing threat, and the mining sector was a particular target.

Half of Australian businesses reported at least one case of economic crime in the past year - a much higher rate than recorded in the Asia Pacific overall - with some suffering losses of more than $5 million, according to the survey. 

Listen to my interview with PWC forensic partner Malcolm Shackell who told The World Today there had been a large rise in expense fraud and false invoicing.

"The typical business criminal is an employee, typically they're male and they've been employed between three and five years in the organisation and usually have a managerial role," Mr Shackell said.

"Most of them are after financial gain, and they will seek that through the theft of assets and funds.

The report found cybercrime was the second most reported economic crime, as individuals have more ways to access information in an organisation.

"Interestingly what we are seeing more of now is of course the cyber criminal, and the cyber criminal is after information because information these days has value," he said.

And Mr Shackell says the criminals also are selling disused equipment, which can be very valuable, particularly in the mining sector.

"Also, interestingly, there is a thriving black market around old assets, particularly in industries
such as mining and also construction," Mr Shackell said.

"So what we are seeing is the fraudulent writedown of assets, and these things are then being on-sold in the black market or through auction sites."

Investors push to de-Murdoch News Corporation board

James Murdoch's resignation as executive chairman of News International is the latest chapter in damage control stemming from phone hacking at The News of The World.

The decision also takes James Murdoch another step away from succeeding his father Rupert as chairman and chief executive of News Corporation.

But the news could be worse the James Murdoch.

News Corporation shareholders are increasingly angry about the damage the scandal is doing to the company's reputation and share price.

London's Guardian newspaper has reported that some are already drafting resolutions for this year's annual general meeting to remove James Murdoch from the News Corporation board.

The moves add to speculation that when Rupert Murdoch finally retires or dies, his successor is unlikely to be a Murdoch but News Corporation's president and chief operating officer, Chase Caret.

Listen to my analyisis from AM, and see below for coverage on ABC News Breakfast.

Business wants to get back to business now the Labor leadership is resolved

The Business Council of Australia has welcomed Julia Gillard's overwhelming victory in Monday's labor leadership ballot.


BCA president Tony Shepherd hopes the clear outcome in favour of the Prime Minister will end a period of uncertainty for business and kickstart the debate of major policy.


Mr Shepherd  says while Australia's economy remains solid, its reputation has taken a mild hit because of the instability.


I interviewed Mr Shepherd for The World Today shortly after the vote was made public.

RBA chief says big banks "not excessively profitable"; thinks stellar rise of Australian dollar "a bit odd"

The governor of the Reserve Bank says the Australian banking sector is not too profitable.

Listen to my analysis broadcast on The World Today.

Appearing before the House of Representatives Standing Committee on Economics, RBA governor Glenn Stevens said that if he had to choose between unprofitable and profitable banks he would chose the latter.

"You only have to look at the dimension of the banking problems in Europe to see we don't want banks that can't earn a good return," Mr Stevens said.

"Are they too profitable? Our assessment is if you look at the rates of return on equity at our banks over a lengthy period of time they're actually broadly in line with the listed company sector in general."

The big four banks have recently come under scrutiny for raising their variable mortgage rates outside the Reserve Bank's official cycle while at the same time posting record profits.

The banks have blamed weak lending growth and rising funding costs for their rate rises as the eurozone's sovereign debt problems slow economic growth around the world.

Mr Stevens also told the committee he had no plans to intervene in currency markets to reduce the strength of the Australian dollar.

The manufacturing and export sectors have come under pressure as the dollar holds at historically high levels.

Thousands of jobs have been slashed in those industries as a result, but Mr Stevens does not believe intervention would be effective at this stage.

He said Australia's natural resources and its proximity to Asia were behind the currency's strong rise.

"I'm not saying we'd never do it, but we have not done so to date," Mr Stevens said.

"We do continue to ask ourselves whether what's happening in the currency markets makes sense.

"The most recent bout of strength is happening at a time when the terms of trade have actually peaked and started to come down. That is a bit odd, but we'll see what happens."

Business heavyweight Graham Bradley warns labor leadership stoush is damaging economy

One of Australia's most powerful business leaders has warned that the battle for the Labor leadership is damaging confidence in the Australian economy.

The chairman of HSBC bank and Stockland property group, Graham Bradley, told AM that important policy debate was being sidelined by the showdown between Prime Minister Julia Gillard and Kevin Rudd.

Read the story on ABC News Online here.

"Changes of leadership are destabilising - they affect consumer confidence and they affect business confidence - and the fact that there's going to be a lot of distraction with federal ministers over the coming months can't be helpful," Mr Bradley said.

Mr Bradley said the Government's relationship with the business community had deteriorated in the past year, but he would not be drawn into the debate about who should lead the Labor party.

"We'd welcome any leader, as we welcome Julia Gillard's commitment to better consultation with business around business regulation and a better understanding of the challenges of business," he said.

Mr Bradley also called for the carbon tax to be reviewed.

Ombudsman says some insurance company sales staff don't understand the policies they sell; customers not the only ones confused

The General Insurance Ombudsman has expressed concern that workers in the industry do not always understand the policies they sell.

Read the story on ABC News Online.

The fears have been raised as the insurance industry tries to rebuild its reputation, which was tarnished by its handling of last year's cyclones, floods and bushfires.

In all there were eight official disasters, 275,000 claims and losses of $5 billion.

Ombudsman John Price told AM there must be a greater focus on training and communication in the industry to ensure frontline staff provide customers with clear information.

"Policies do not clearly inform individuals, and it's not only the consumer that's confused - it's also the salespeople that are confused," Mr Price said.

"And if the salespeople trained by the industry are confused as to what the cover offers then how do you expect the consumer to understand?"

The industry is trying to head off tougher regulation of policies and payouts after complaints that some claims were either unpaid or unresolved.

Reserve Bank defends bank claims on higher funding costs

The Reserve Bank has backed claims by major commercial lenders that higher funding costs are forcing them to pass on new costs to borrowers through independent interest rate increases.

In the minutes from its board meeting on February 7, the RBA confirmed that funding costs were "significantly higher" than in the middle of 2011 because of a dislocation of bank debt markets.

"The cost of swapping funds raised in offshore markets into Australian dollars has increased in recent months," the RBA noted. 

Listen to my analysis broadcast on The World Today shortly after the RBA minutes were released.

The minutes say that at the same time, banks continued to compete for deposits, meaning reductions in deposit rates had not fully matched the cumulative 0.5 per cent cash rate cuts in November and December.

"Collectively, these developments had increased banks' overall cost of funding relative to the cash rate and had narrowed the difference between banks' lending rates and funding costs," the board noted.

The Reserve Bank surprised most economists a fortnight ago by leaving the cash rate on hold at 4.25 per cent.

According to the minutes, the RBA board judged the current setting to be "appropriate" given the overall economic outlook.

Major banks responded with independent increases in their standard variable rates, fuelling anger from Federal Treasurer Wayne Swan, borrowers and consumer groups.

The RBA's defence of the higher funding cost argument counters claims by Societe Generale's head of strategy in Asia, Christian Carrillo, that banks were wrong to claim funding costs on global markets were higher.

"What we have seen over the last six months is that overall funding costs for Australian banks have absolutely come down," Mr Carrillo told AM.

"Research suggests that effectively pretty much every source of funding that they use - in terms of domestic deposits, short-term funding onshore, long-term funding onshore - has actually gone down. "

Bluescope boss calls company "bipolar" as he posts a $530 million half year loss

Bluescope Steel has reported a loss of $530 million for the first half of the financial year due to restructuring costs and weak trading conditions.

The result was nearly 10 times the $55 million loss posted in the same period last year, bu
t includes $260 million for restructuring.

Here's my analysis broadcast on The World Today.

Read the story on ABC News Online.

Last August, the steelmaker posted a full-year loss of $1 billion and slashed a total of 1,000 jobs at its Port Kembla steelworks in New South Wales and its Western Port steel mill in Victoria.

Chief executive Paul O'Malley says the company expects to record a much smaller loss this half as the benefits of the restructure flow through to the bottom line.

"Really the story is of a bipolar company in many respects," Mr O'Malley said.

"The Australian business is really challenged but we have taken significant steps to restructure and improve that performance, and as I mentioned we'll start to see improvements - material improvements - in that business performance in the coming months."

Bluescope Steel shares fell as much as eight percent at one point.

Business warns Labor leadership war is damaging confidence, demands swift resolution for "good of the country"

One of Australia's biggest business lobby groups has denied reports it has been approached by Kevin Rudd or his backers to rebuild bridges with business.

Read my coverage on ABC News Online.

Labor's leadership crisis appears to be near breaking point, with supporters on both sides telling the ABC the brawl could be resolved as early as this time next week.

The Labor caucus is due to meet next Tuesday, February 28 unless a special meeting is called to put the party leadership, and therefore the prime ministership, to a vote.

This morning the Australian Chamber of Commerce and Industry (ACCI) called on the Labor caucus to resolve the leadership debate for the good of the country.

ACCI chief executive Peter Anderson said he was agnostic about who should be Labor leader, but speaking to me on AM, warned the matter needed to be resolved "for the good of the country."

Air Australia grounded stranding 4,000 passengers. Unable to buy fuel at Phuket International Airport

Creditors of Air Australia and thousands of stranded passengers face a nervous wait to see if they will be left out of pocket by the budget airline's collapse.

After just four months of operation, Air Australia's entire fleet was grounded on Friday morning after administrators discovered there was no money to meet basic operational expenses.

As first reported on Friday's AM program,  Air Australia was unable to purchase fuel at Phuket International Airport.

The Brisbane-based airline employed 300 staff and flies to Hawaii, Bali and Thailand, where many passengers have be told to make alternative arrangements.



ABC Business editor Peter Ryan on speculation about Qantas job cuts

Qantas axes 500 jobs and warns more to come as heavy maintenance operations are reviewed

Qantas chief executive Alan Joyce today confirmed the the airline is sacking at least 500 workers and reviewing hundreds of maintenance positions after reporting a sharp fall in first-half profit.

The airline made $42 million in the six months to the end of December, down 83 per cent on the $241 million it made a year earlier.

I interviewed Alan Joyce shortly after the sackings were revealed in Sydney this morning.

Listen to it here.

Mr Joyce said the fall was due to industrial action, which led him to decide to ground the airline's entire fleet last year. Qantas says the bill for last year's action cost the airline $194 million.

He announced a five-year plan involving changes in engineering, maintenance and ground handling services to make the airline more globally competitive.

Earlier, there was speculation that as many as 1500 sackings would be announced.

However, Mr Joyce said there would be a 60 consultation period with staff and unions.

Commonwealth Bank boss holds out hope of lending rate cut if global conditions improve.

The chief executive of the Commonwealth Bank has held out the possibility of an independent cut to its lending rates if global financial conditions improve.

Ian Narev, who succeeded Ralph Norris as the CBA's boss late last year, says the bank will cut rates if funding conditions are "appropriate" but warned that any move in the short term was unlikely.

Listen to my interview with Mr Narev broadcast on this morning's edition of AM.

Here's the story on ABC News Online.

Australia's biggest home lender yesterday announced a 19 per cent rise in first half profit to $3.62 billion as the political debate about independent rate increases continued to flare.

Mr Narev told AM, however, that if conditions such as funding costs on global markets improved he would consider giving borrowers relief with a cut to lending rates.

"We certainly would consider that, I mean we're in a competitive market and therefore fundamentally we're making an assessment of both the competitive dynamic and the funding costs and in the appropriate circumstances we certainly would be willing to cut our rates," Mr Narev said.

But Mr Narev responded cautiously when pressed on when any cut could come and he ruled out a move the coming year.

"I can't see it coming, quite candidly, in the near future, but I've said a number of times that even the near future is difficult to predict so we really can't rule anything out," he said.

Commonwealth Bank delivers $3.6 billion profit but repeats that funding costs have increased. Says there are no "major" plans for job cuts or offshoring

Commonwealth Bank has defied analysts' estimates and recorded a net profit of $3.62 billion, up 19 per cent on the same period last year.

The bank's preferred measure, cash profit, came in at $3.58 billion for the six months to the end of December.

Speaking to analysis this morning, chief executive Ian Narev said the bank was committed to its 52,000 staff and had no plans for major job cuts or offhshoring.

Here's my analysis from The World Today.

The bank says it is becoming increasingly hard to make money from home loans.

In his first results announcement, Mr Narev said it was becoming harder for the bank to make money from home loans but he had seen no sign of customers leaving after the bank's recent increase in its variable mortgage rates.

China signals it might assist in Eurozone bailout - but not just yet.

China has signalled that it's willing to get more deeply involved in resolving Europe's debt crisis.

However, Beijing is being cautious and wants to see more evidence of how Europe is working to resolve its financial woes before putting its hand in its pocket.

So far China has been investing in sovereign bonds and has been supporting the European Financial Stability Facility, but China is wary given that it's already holding US$1.5 trillion of debt from the United States.

China's premier Wen Jiabao has been meeting in Beijing with EU president Herman Van Rompuy, who was doing his diplomatic best to convince China to take on a new customer.

Listen to my analysis from this morning's edition of AM.

Reserve Bank fights back on interest rates; says it still pulls the levers on monetary policy

The Reserve Bank has downplayed suggestions that commercial banks are pulling the levers on interest rates.

RBA assistant governor Guy Debelle told a business function in Sydney that moves by the big four banks to lift their mortgage rates outside the central bank's cycle would not alter the influence of monetary policy on the economy.

Listen to my analysis from The World Today and see the story on ABC News Online.

There was an element of fight back in Mr Debelle's speech this morning, given suggestions that the banks were thumbing their nose at both the RBA and the Federal Government, with Federal Treasurer Wayne Swan pressuring banks for months not to lift their rates independently.

RBA says inflation outlook leaves scope for rate cut; agrees funding costs are higher for banks but that lending rates are at medium term averages

The Reserve Bank has signalled that it may move to ease interest rates again if inflation continues to soften. 

Listen to my analysis broadcast on The World Today.

In its quarterly statement on monetary policy released today, the RBA said the combined 0.5 percentage point cuts in the official cash rate in November and December were driven by the improved inflation outlook.

The central bank also defended its decision to leave the cash rate on hold at 4.25 per cent earlier this week, given that prior cuts largely had been passed on to borrowers and lending rates were close to average. 

The RBA sees underlying inflation hovering at around 2.5 per cent, which would "provide scope for easing monetary policy should demand conditions weaken materially".

The central bank said it would adjust the cash rate "as necessary to foster sustainable growth and low inflation".

The RBA also confirmed that banks were facing higher costs to source money – the key reason why the banks are warning that they may not pass on future official rate cuts in full. 

Greek politicians agree on austerity terms for bailout deal. But European leaders have seen it before and are waiting on the fine print.

Greek political leaders appear to have clinched a long-awaited deal to secure a second bailout that could prevent a much feared debt default.

Here's my analysis from this morning's edition of AM.

While the breakthrough has been welcomed, EU finance ministers arriving for talks in Brussels this morning have warned that Greece still needs to prove itself by enforcing the strict austerity measures attached to the deal.

Greek taxpayers are bracing for more pain with a cut to the minimum wage and deeper cuts to the public services. However, a much feared increase in the retirement age has been spared.

European stocks closed slightly higher underscoring the scepticism of investors who've had their hopes dashed before.

News Corporation posts a billion dollar quarterly profit but phone hacking charges hit bottom line

News Corporation has this morning posted a quarterly profit of just over a billion US dollars.

The 65 percent profit increase has been fed by growth in cable television and film production from Hollywood.

Here's my analysis of the results broadcast in this morning's edition of AM.

But News Corporation's bottom line has been hurt by surging costs from the contining phone hacking scandal that resulted in the closure of The News of the World.

News says the profit was hit by a US$87 million charge for costs relating to the scandal.

The company has also confirmed that its profit guidance has been swept up in the pipelne of costs relating to phone hacking investigations.

BHP Billiton posts another monster profit of US$9.9 billion - the first profit fall in three years.

BHP Billiton has posted a drop in net profit for the first half of the financial year, the first time profits have fallen in three years.

Here's my analysis broadcast on the Perth Edition of AM.

The world's largest miner says profit for the six months to December totalled $9.94 billion, a 5.5 per cent fall compared with the same time a year earlier.

The company's short-term outlook was mixed, but chief executive Marius Kloppers said Australia's economic stability should offer protection in the long term.

BHP has also warned that markets are set to remain volatile because of the woes in Europe and sluggish global growth.

Banks poised to raise mortgage rates independently of the Reserve Bank. Is it now a question of how much and when?

Australia's big banks could take yesterday's Reserve Bank decision on interest rates as a green light to raise the cost of borrowing, despite Treasurer Wayne Swan's "jawboning", an economist has warned.

The RBA left the official cash rate on hold yesterday, saying the decision was based on observations of growth in China and the United States, decreasing concerns over Europe, and strength in the local economy.

Economist Stephen Koukoulas has told AM the banks might see now as a good time to claw back some of the costs they incur from sourcing funds on global markets.

Listen to the interview here.

Reserve Bank wrongfoots economists by leaving the cash rate on hold

Banking chiefs mobilise to defend monster profits; Future Fund boss David Murray calls the Treasurer's bank bashing campaign "simplistic"

The debate over what, if anything, will be passed on from today's anticipated rate cut has deepened the stoush between banks and the federal government.

Throughout the morning the Treasurer and banking chiefs have been duelling in public about the impact of higher funding costs on multi billion dollar bank profits.

Most economists expect the Reserve Bank to cut the cash rate by a quarter of a percentage point when makes its decision known later this afternoon

The chairman of the Future Fund David Murray - himself a former chief executive of the Commonwealth Bank - said the government's campaign amount to political pressure.

And he told me on the AM  program that Wayne Swan's call for banks to pass on any rate cut in full was "simplistic".

Listen to the interview and my analysis here.

Softer inflation, negative retail sales add to case for interest rate cut. But still a close call.

A better outlook for inflation and bleak retail sales in the leadup to Christmas should combine to push the Reserve Bank board to cut interest rates tomorrow.

Listen to my analysis from today's edition of The World Today.

Join me on ABC News 24 tomorrow at 2.30pm AEST for live coverage of the interest rate decision.


The closely-watched inflation gauge from TD Securities and the Melbourne Institute posted a modest rise of 0.2 percent in January making an annual rate of 2.2 percent.


The soft result is in line with the RBA's forecasts which sees inflation heading to the bottom of the two to three percent target band.


Retail turnover went negative in December, according to the Bureau of Statistics, falling 0.1 percent - well below expectations for a positive result.


The one piece of conflicting data came from the ANZ job advertisements series, which showed advertisements in newspapers and on the Internet rose six percent in January.


ANZ says the result dampens expectations that the jobless rate could hit 5.5 percent this year.


The positive news underpins the ANZ's tip that interest rates could stay on hold at 4.25 percent tomorrow.

RBA poised to cut rates for third month but it will be a close call

The board of the Reserve Bank holds its first meeting of the year tomorrow and bets are firming for another rate cut.

Here's my analysis from this morning's edition of AM.

More coverage on ABC News Online.

Tomorrow's meeting takes place in a slightly less fragile world than the final meeting of last year, amid positive economic news from the United States and a moderate easing of the eurozone's debt woes.

Just before Christmas, a catastrophic meltdown of the eurozone was looking likely, and that prompted rate cuts in November and December.

Now Europe is pulling back from the precipice, even though a deal to prevent a disorderly debt default in Greece remains elusive.

On the weekend the jobless rate in the United States fell to 8.3 per cent, with an unexpected 240,000 new jobs created.

And the RBA board will be heartened by falling inflation in Australia, which could be the trigger for an additional rate cut.

Most economists are tipping a rate cut down to 4 per cent, but it is a close call.

The RBA is on record as saying it calibrates the cash rate to ensure mortgage rates are at the right level.

So there has been some speculation that the board might provide a larger rate cut to ensure any reduction is passed on to borrowers.

But rate watchers such as Rob Henderson, chief markets economist at National Australia Bank, say that seems unlikely.

"There have been some people in the market saying that the Reserve Bank might actually cut by 50 basis points to make sure that there is a significant drop in borrowing costs, but I think that is just a little bit too cute," Mr Henderson said.

"I think that actually the Reserve Bank won't try and second-guess the market; they will do their 25 basis points if they think another cut is appropriate.

"They'll see what the banks do and if it is not all passed on, of course they can come back later and do one more rate cut after that."

Westpac boss Gail Kelly refuses to rule out further sackings; says St George Bank duplicatation related to job cuts; won't commit to passing on further rate cuts in full.

The chief executive of Westpac has defended the bank's decision to axe up to 560 jobs to protect its big profits which she says are being threatened by a slowing global and local economy.

Here's my interview with Gail Kelly broadcast on this morning's edition of AM.

Full coverage on ABC News Online.

Gail Kelly, who's been running Westpac since 2008, is dealing with a squeeze on last year's six billion dollar profit as fewer people take out loans and cautious households pay down debt.

Mrs Kelly refused to rule out further job cuts and said the sackings were related to duplications caused by the merger with St George Bank in 2008.

While the news isn't good for some Westpac staff, it's also uncertain for bank customers with Mrs Kelly refusing to commit to passing on future interest rate cuts in full.

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National Australia Bank signals it could "nab" future rate cuts

The National Australia Bank has indicated that future interest rate cuts might not be passed on in full.

At its annual general meeting in Adelaide today, NAB chairman Michael Chaney was the latest bank chief to warn that the debt crisis in Europe was pushing up the cost of sourcing money on global markets.

At a press conference after the meeting, chief executive Cameron Clyne said funding costs were a "major driver" of interest rate decisions.

"What we pay our depositors and what we pay to source offshore funds is a very important determinant of costs, and those costs are rising," Mr Clyne said.

Read my coverage on ABC News Online and my analysis broadcast on The World Today.

Mr Chaney was forced to justify the NAB's use of the government's guarantee on bank deposits in light of multi billion dollar profits.

James Packer says "no" to buying back into television - for now

The proposed shake-up of Australia's media ownership rules could herald a new era of opportunities for media companies, both old and new.

But the one time media magnate, James Packer, has signalled that he's not yet ready to jump back into the game.

Listen to James Packer's hesitation about buying back the traditional Packer farm broadcast on this morning's edition of AM.

Mr Packer, whose majority interests are now in gaming,  was speaking before the release of an interim review into Australia's media regulation which recommends abolishing cross media ownership rules.

The Government commissioned review was set up to work out how Australia's media regulations should adapt in the digital and media fractured age.

Britain's veto of EU fiscal pact heralds dangerous era of isolationism and protectionism

The European Union has been seriously fractured after Britain opted out of a critical treaty that will change the way the single market is regulated.

Britain's Prime Minister, David Cameron told reporters that he went to the European Summit looking for safeguards for companies in Britain but didn't get them. It was therefore not in Britain's interests, he said, to sign the new treaty.

But France and Germany are adamant that the other 26 members countries of the EU will push ahead with an agreement that now threatens to isolate Britain.

Read the special coverage on ABC News Online.

Here's my analysis of the fallout.

Banks finally pass on official rate cut; but RBA governor frustrated at rewriting of history of cash rate link to what commercial banks end up doing

The governor of the Reserve Bank Glenn Stevens is exasperated at how history has been rewritten on the link between official cash rate movements and what banks do with mortgage rates.

Mr Stevens was speaking in Sydney last night shortly before Westpac became the last of the big four banks to pass on Tuesday's 0.25 percent rate cut in full.

Mr Stevens says over history, banks have not moved in lockstep with the Reserve Bank despite perceptions in the media and from the Treasurer Wayne Swan that rate cuts or increases are always passed on.

Rather than expecting commercial banks to shadow the RBA, Mr Stevens said the central bank considered where it would like to see mortgage rates before deciding on a level to move.

And he said that without that strategy, the standard variable rate used by banks might be around one percentage point higher than they are today.

Listen to Glenn Stevens' comments and my analysis broadcast on this morning's edition of AM.

In a wide ranging speech, Mr Stevens also warned there could be a high price to be paid by western developed nations if China is called upon to bail out debt-laden Eurozone nations.

Listen to my report and the views of economist Stephen Koukoulas broadcast on The World Today. 

Big four banks remain silent on handing over rate cut as Europe crisis simmers

The big four banks boast about their individuality, their market competition and care for customers yet so far all have decided not to react to Tuesday's Reserve Bank cut to official interest rates.

Instead they're sitting on their hands and not announcing whether they will pass on all or even part of the rate reduction.

The last rate cut came on Melbourne Cup day and it saw the banks react within minutes.

But the latest announcement of a 0.25 percent fall in the cash rate was followed by silence.

Bank customers have been left in the dark. Someone with a $200,000 mortgage stands to save $32 a month if the reduction is delivered in full.

The AM program hit Sydney's Martin Place to gauge the view of borrowers and I put the local anger in context with the looming debt crisis in Europe.

Listen to it here.

As the banks remain in damage control, there's been surprisingly good news on the strength of the Australian economy.

According to the Bureau of Statistics, September quarter growth rose one percent and 2.5 percent year on year.

The gains were fuelled by mining, construction and a rise in consumer spending.

Here's my analysis from The World Today.

Reserve Bank cuts again as Europe crisis escalates and inflation softens

The Reserve Bank has cut interest rates for the second consecutive month as Europe's debt crisis escalates and local inflation softens.


 In a statement, the RBA governor Glenn Stevens said the board had cut the cash rate by 0.25 percent to 4.25 percent - the lowest level since April 2010.

Here's my analysis from ABC News Online.

In outlining its reasons, the RBA board said:


* the inflation outlook "afforded scope for a modest reduction in the cash rate"
* growth in the global economy had moderated
* growth in China was slowing as policymakers had intended
* trade in Asia was seeing the effects of a significant slowing in Europe
* sovereign credit and banking problems in Europe were likely to weigh on economic activity
* financial markets had experienced considerable turbulence and financing conditions had become more difficult


Read the RBA statement here.

The RBA's decision comes as Eurozone leaders prepare to meet in Brussels to find a solution on containing Europe's debt crisis.

But there is an even more disturbing backdrop courtesy of a stark warning from Standard & Poor's.

S&P has put 15 Eurozone nations on "credit watch negative", warning that six could lose their AAA status.

Two nations are spared.

Cyprus because it was already on negative watch, and Greece is already at junk status with S&P reconfirming its view that a Greek default is a high likelihood.

Here's the full statement from Standard & Poor's.

Inflation continues to head south according to private gauge - another reason for the RBA to cut rates?

A private gauge on inflation released on Monday would have given the Reserve Bank another reason to cut interest rates.

A closely watched private measure by TD Securities and the Melbourne Institute put annualised inflation at 2.1 percent - right at the bottom of the central bank's target band of two to three percent over time.

In addition to the deteriorating situation in Europe, more comfort about inflation could be a rate cut trigger.

Here's my analysis from Monday's edition of The World Today.

Reserve Bank poised to cut interest rates as buffer against Europe crisis

I reported on Monday that the board of the Reserve Bank was preparing to hold its final meeting against the backdrop of a deepening crisis in Europe.

However, at the time economists were split on whether another interest rate cut was likely to provide a buffer against a potential breakup of the Eurozone next year.

As the situation looms from bad to worse, 13 of 25 economists polled by Bloomberg predicted the Reserve Bank would decide on another rate cut to 4.25 percent.

Meanwhile, the "big four" banks have combined to assist borrowers who could come under mortgage stress, given the outlook for rising unemployment.

Here's my analysis from Monday's edition of AM.

Australia's "big four" banks downgraded as ratings agencies rebuild reputations and brace for Europe fallout

As the Europe's debt crisis deepens, Australia's big four banks have been hit with a ratings downgrade.

The revisions come as ratings agencies tighten up their definition of risk after the collapse of Lehman Brothers more than three years ago.

Here's my analysis form this morning's edition of AM.

While the downgrades had been flagged for more than a year, it's more evidence - if more was needed - that banks are operating in an increasingly risky and uncertain world

The moves comes after this week's decision by Standard & Poor's to cut the ratings of 15 banks in Europe and the United States

For Westpac, the Commonwealth, ANZ and the NAB it's down one notch from AA to AA-minus  - that's the fourth highest rating on the S&P scale.

Even so, the "big four" remain among a handful of highly rated banks in the world and S&P made the point that Australian banks are underpinned by "conservative and comprehensive regulation, and the banking sector's very low risk appetite".

Global central banks take emergency action to ease Europe crisis woes as credit freeze threatens

The world's top central banks have taken emergency action to ease Europe's debt crisis.


Six central banks led by the US Federal Reserve will provide cheaper funding to European banks in a bid to restore confidence and to prevent a new credit freeze.


The intervention created a surge on global sharemarkets and the Australian dollar rocketed from below parity to as high as 103.34 US cents.


Markets in Paris, France, London and Madrid surged between three and almost five percent as investors grasped a ray of optimism.


But this is not a gamechanger - instead a new mechanism to buy time in a world where time is running out.

Here's my analysis from this morning's edition of AM and I discussed the intervention with Virginia Trioli on ABC News Breakfast.

Commonwealth Bank boss Ralph Norris signs off after five years; regrets Storm Financial links; says Australians will always think "banks are bastards"

He's been one of the most controversial and fiesty banking bosses Australia has seen - the man borrowers and politicians love to hate.

But today Ralph Norris ends his five year reign as the Commonwealth Bank's chief executive.

Read my feature on ABC News Online. Listen to the interview here.

Mr Norris is perhaps best known for last year's Melbourne Cup day interest rate hike which almost doubled the Reserve Bank's official move.

But he's also been praised for steering the Commonwealth through the still unfolding global financial crisis and delivering multi billion dollar profits.

On his final day in the job, Mr Norris defended his tough decisions and cited the bank's role in the Storm Financial group as his main regret.

Mr Norris also said he wouldn't put his house on the Treasurer's commitment to return the federal budget to surplus.

Will Australians always believe "banks are bastards"? He doesn't think he's convinced any borrower otherwise.

But he thinks there may be bigger things to worry about very soon, considering the global risks being posed by Europe.

OECD says Eurozone muddling risks "highly devastating outcomes"

The Organisation for Economic Cooperation and Development - or the OEDC - is now warning that a breakup of the single euro currency can no longer be ruled out.

It says the Eurozone is already in a mild recession and has downgraded global growth forecasts as a result.

The OECD has also put renewed pressure on the European Central Bank should play a bigger role is defusing the crisis.

Here's my analysis from Tuesday's edition of AM and a longer version broadcast on The World Today.

Qantas boss denies claims that Asian expansion is dead because of Euro crisis fears

Qantas chief executive Alan Joyce has rejected reports that he is dumping plans to establish a full-service airline in Asia in favour of a deeper alliance with Malaysian Airlines.

Mr Joyce insists Qantas management is still in talks with Singapore and Malaysia to establish an airline to service the business market in the region.

He says a new premium airline in the Asian market remains a key part of the airline's strategy, which also includes the launch of the budget Jetstar Japan carrier and other ventures in the region.

"We believe that a new premium airline in Asia is important for us," Mr Joyce told me in an interview broadcast on The World Today.

"And the timing of that airline and how it works with partners is still part of the discussions we are having with both Singapore and with Malaysia, and no final decision has been made on what we are going to do."

But Mr Joyce would not be drawn on the outcome of meetings with regulators and government officials in Singapore and Malaysia in the last week. 

"We are still continuing to dialogue with them and it is inappropriate for me to comment on that dialogue," he said.

RBA chief says Eurozone crisis risks "unacceptable damage" to the world

Australia's Reserve Bank governor Glenn Stevens has urged European leaders to sort out the region's debt problems quickly, saying the threat to Australia and the rest of the world is rising.

Speaking at a conference in Sydney last night, Mr Stevens said he could not put a figure on the probability of severe damage to Australia from Europe's financial woes.

But he said time was running out for the problems to be fixed.

"I think we are fast coming to the point where all the parties who have a role to play in getting to the solution there really have to hurry up and do it," he said.

"Otherwise the probability of damage to not just us but everyone, will be unacceptably high."

Here's my analysis from this morning's edition of "AM".

Germany thrust into debt crisis focus after "disastrous" bond auction raises fear factor

There are disturbing signs this morning that Germany is being dragged into the Europe's worsening debt crisis.

The economic powerhouse has failed to convince some global investors that unlike other parts of the Eurozone, German government debt is a safe enough bet.

Today's auction of ten year German bonds left risk takers cold and since has been described as "disastrous" after 35 percent was left unsold.

The fear factor relating to all things European means that even quality German debt now has a guilt by association with struggling economies like Portugal, Italy, Ireland, Greece, Spain - the much feared PIIGS.

Not surprisingly, Investors are acting first and asking questions later. Right now, it's looking like much later.

And one big albeit distance question is whether the PIIGS acronym might soon be joined by another "g".

Here's my take from this morning's edition of "AM".

Read my piece on The Drum and debate Europe continues to provoke.

Gunns insider case a test for corporate cop

By Business editor Peter Ryan - analysis

Former Gunns chairman John Gay is due to face court in Launceston next month on charges of insider trading.

The allegations - if proven - would be an important victory for the corporate regulator as watchdogs around the world crack down on white-collar crime.

The Australian Securities and Investments Commission (ASIC) is alleging that Mr Gay, while chairman of Gunns, used insider information to profit from a personal share transaction - information that he knew was not available to the general public.

But insider trading cases are notoriously difficult to proven and Mr Gay is certain to mount a vigorous defence.

Here's my analysis broadcast on "The World Today" and read it on ABC News Online.

Qantas dispute goes to industrial umpire, but Alan Joyce denies "mission accomplished".

The industrial umpire will impose a final solution in the dispute between Qantas and three key unions after negotiations broke down well ahead of the deadline for a peace deal.

The impasse has been referred to Fair Work Australia but an outcome could be months away, perhaps well into the new year.

But despite a narrowing of the issues, deep divisions and bitterness remains.

The Transport Workers Union, which represents baggage handlers, has accused Qantas of wrecking the negotiations in order to force the dispute to binding arbitration.

But Qantas denies it stonewalled negotiations to get the result it wanted all along.

Listen to both sides - Mick Pieri from the TWU and Qantas chief executive Alan Joyce.

Here's the extended version of my interview with Alan Joyce.