Hastie Group subsidiary sold a week after collapse saving 134 jobs

By Business editor Peter Ryan

Administrators sifting through the collapse of the Hastie Group have announced the sale of a company which will save 134 jobs.

A week after Hastie Group failed putting 2,700 jobs in jeopardy, the administrators PPB Advisory have finalised the sale of the plumbing and hydraulics business, Cook & Carrick.

Hastie Group bought the Tullamarine-based Cook & Carrick in July 2007 for $18 million in an early phase of its expansion. A spokesman for PBB was unable to confirm a sale price or the name of the buyer.

However, the current sharemarket volatility and investor caution about a global downturn is making the sale of assets under the Hastie Group umbrella difficult.

At the time of the purchase in 2007, Hastie billed the acquisition as “another significant step in Hastie’s growth as a major building services group.”

Hastie and its 44 subsidiaries were placed in administration last week after a $20 million “accounting irregularity” derailed negotiations with banks to recapitalise the company.

Hastie posted a loss of $149 million in the six months to December and its share price tumbled from $9 last year to 16 cents before shares were suspended in April.

Administrators also dealing with the potential sale of Hastie’s overseas assets, including those in the United Arab Emirates where 1,500 staff are yet to receive termination entitlements.

The ABC reported last week that Hastie’s top three executives in the UAE last the country on 28 May after A$3 million was transferred from Dubai to Sydney.

Twitter: @peter_f_ryan

US jobs gloom, Eurozone fears, China slowdown: investors strap in for a rough ride



This morning's opening dive for the All Ordinaries Index  source: Bloomberg

 Some economic figures come and go with little effect but the jobless statistics out of the US at the weekend have had serious economic ramifications.

The dismal employment outlook in the US is adding to fears that the world could be on the brink of a sharp economic slowdown.

US employers added only 69,000 jobs last month and even the US President says that's not enough.

Australia wasn't able to avoid the fallout from the US, with the All Ordinaries Index diving as much as 1.85 per cent this morning.

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

Last month, the theme was "sell in May and go away."

Now the race could well be in for a new saying in June given the gloomy global outlook.

As a measure of fear, money continues to pour into US Treasury bills (now at their lowest yield in around 200 years) and gold was higher at US$1625 an ounce earlier this morning.

The growing concerns about the US, Europe, China and parts of emerging Asia are likely to combine to prompt a cash rate cut when the Reserve Bank board meets tomorrow.

Some economists are tipping rates to stay on hold at 3.25 percent, but the bets are centering on a 0.25 percentage point cut with JP Morgan revising its cash rate prediction early this morning.

Hastie transfers millions from Middle East, top bosses leave, workers' entitlements in jeopardy

The ABC has learned that as many as 1,500 Hastie Group workers in the United Arab Emirates may have lost not only their jobs but also their entitlements in the company's collapse late last week.

Listen to the story which I broke for the ABC on The World Today.

Read the story on ABC News Online.

Their termination entitlements are in jeopardy because more than $3 million was transferred from Dubai to Australia in the days before administrators and receivers were brought in.

The company's top three executives, who signed off on the money transfer, then left Dubai on fears they may be detained.

On May 20, as Hastie Group executives tried to negotiate a new deal with their banking partners, Hastie International electronically transferred 11 million dirhams - more than $3 million - from their local bank in Dubai to ANZ Bank in Sydney.

The transfer document shows the move was signed off by Hastie's regional finance manager Nathan Davidson and Gary Allen, the regional human resources manager.

It is understood that the transfer was ordered by Hastie's head office in Sydney because of the fragile nature of the company and rapidly evaporating cash flow.

This has left Hastie's head office in Dubai with little or no money to cover the entitlements of around 1,500 workers, some of whom are expatriate Australians.

There is no suggestion of unlawful activity, however Mr Davidson and Mr Allen left Dubai on Monday, when administrators were officially appointed in Australia.

Another top executive, Robert Kirkham, who has had a long history with Hastie, also departed, because of the very real risk that once word of the Hastie collapse hit, those managers faced the prospect of being detained under strict laws in the United Arab Emirates about the need to cover worker entitlements.

Hastie Group collapse puts 2,700 jobs in jeopardy

Facebook and banks sued over alleged selective briefings before listing

“We think that people’s lives are going to be better and really that the whole world will function better when there’s more information and understanding out there”.

That's a direct quote from Facebook founder and chief executive Mark Zuckerberg in a marketing spiel leading up to the social networking company's sharemarket listing. 

But the meaning of "more information and better understanding" could be crucial as burned shareholders accuse Facebook and its lead underwriter Morgan Stanley of hiding weakened growth forecasts before the US$16 billion public offering.

In the lawsuit, Morgan Stanley, Goldman Sachs and JP Morgan Chase are accused of disclosing the new forecasts to "preferred" investors rather than the entire sharemarket.

There are also claims, yet to be proven, the Facebook's underwriters provided verbal advice of downgraded forecasts in pre-IPO roadshows.

Facebook has only be trading on the tech heavy Nasdaq exchange for four days, but its reputation is sinking as fast as its share price which ended higher today at US$32 but 18 percent lower than the $38 listing price.

The lawsuit, which could easily turn into a class action, has been referred to the Securities & Exchange Commission and is certain to be scrutinised by the US Senate Banking Committee which is primed to jump on any perceived misbehaviour on Wall Street.

The question now is whether selective verbal briefings from underwriters or advisers amounts to illegal behaviour that borders on insider trading.

John Coffey, Professor of Law at Columbia University in New York says despite the difficulty of proving illegal or unethical behaviour, US regulators have a lot to work with.

"There is something strange and probably inappropriate about allowing selective disclosure in public offerings," Professor Coffey told the BBC this morning.

"What is curious here and what has the SEC offended is that there may have been this special discrimination even within the class of institutional investors under which some got better information than others and they have sued on that recently in the case of Goldman Sachs.

"I think that probably Morgan Stanley is going to seek a quick settlement because this is relatively embarrassing for it."

Some analysts have pointed to "guilt by association" issues for competitors but today the social media success story Linkin was 2.2 percent higher and others like Pandora and Groupon also closed in positive territory.

Thomson Reuters has summed up the value proposition for social media investments, tracking an investment of US$1,000 from listing day to their closing price on 21 May.

Litigation to one side, the Facebook listing reminds investors to avoid hype from commentators and to pay attention to risk factors outlines in prospectuses.

Australia a growth leader, but Eurozone worries a potential shock: OECD

Australia's economy is predicted to outperform most of the developed world over the next two years, despite growing tremors from Europe.

The Organisation for Economic Cooperation and Development has also welcomed the government's committment to a budget surplus.

But the OECD's latest report paints a gloomy picture for Eurozone with warnings that the debt crisis still has the potential for an economic shock.

I took a close look at the latest report card on this morning's edition of AM.

Read the report here.

The OECD says Australia's fundamentals are strong that that the economy will outpace much of the developed world at 3.1 percent in 2012 and 3.7 percent in 2013.

However, the top growth performers in 2013 are forecast to be Chile (5.1 percent), Turkey (4.6 percent),  Korea (4 percent), Mexico (3.8 percent) and Israel (3.6 percent).

Not surprisingly, there is a negative growth outlook for the original PIG economies of Portugal, Italy, Greece and Spain. Ireland (which became a second I in PIIGS) is tipped to grow by 2.1 percent in 2013.

Facebook fizzer? Shares close underwater as investors unfriend The Social Network

Facebook has only been trading on Wall Street for two days, but already investors appear to have hit the "unfriend" button.

Shares in the social networking company have closed well below the issue price of US$38 amid concerns that Facebook might initially struggle to make much money.

Facebook shares sank as much as 14 percent at one point to US$33 before closing a little better at US$34.03.

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

Unfriended: Facebook shares over first two trading days


So it is too early to say the Facebook float is more sizzle than sausage? Probably.

However, some commentators had been talking up a "stag" listing for Facebook, fuelling expectations that technology company surges last seen in the dotcom boom might return.

The reality was that Facebook's underwriters had to step in a buy on when trading opened on day one to keep shares above the US$38 listing price.

Today's selling wiped an estimated US$19 billion off Facebook's market value, leaving red faces on Wall Street and retail investors with burnt fingers.

The challenge now is to promote Facebook's long term value and attraction to advertisers as the dreaded "monetise" word takes on a new meaning for social networking.

High noon: Qantas competes with Craig Thomson as it announces 500 job cuts

The announcement hit the Australian Stock Exchange at 11.58am as political, business and aviation writers waited for the embattled and exiled Labor MP Craig Thomson to address the House of Representatives in Canberra.


As Mr Thomson began his defence of the various allegations before him, news flashed in red over the financial wires that Qantas had decided to consolidate its heavy maintenance operations - and that Tullaramarine and Avalon in Melbourne were the biggest losers.

Listen to my analysis on The World Today broadcast shortly after the announcement to the ASX.

It may well have been a coincidence, but the timing had the potential to create the perception that it was a classic diversion spin strategy to minimise fallout from the latest chapter in the survival of Qantas.

Responding to questions about the timing of the announcement, Qantas chief executive Alan Joyce said because of the market sensitive nature staff and unions were briefed simultaneously. 

Not surprisingly, the Transport Workers Union has accused Qantas of attempting to deflect attention by announcing the job cuts as Mr Thomson spoke.

"Their spin doctors are again working overtime to avoid responsibility of downsizing and outsourcing a very successful airline," according to TWU national secretary Tony Sheldon.

Qantas shares closed flat at $1,43 after briefly rising to $1.45 on the news of the sackings.

The share price is a fare cry from the $5.34 reached in November 2007 after Airline Partners Australia made its failed bid.

Status update: Facebook an "unlike" on first trading day

In the dotcom boom more than a decade ago, technology companies became known for their "stag" listings when they hit the sharemarket on day one.

Investors who took big allocations in the floats bet large, driving share prices exponentially higher before eventually cashing out at the top.

A few pundits thought Facebook might repeat history.

But it was not to be.

The social network closed US$0.23 above its listing price of US$38 per share after hitting a brief high of around US$45 per share.

Facebook dragged along the bottom towards the close and was perilously close to going underwater at one point.

So is there a wealth building future for Facebook, and can it convince investors that it can monetise the product beyond a fad?

One shouldn't forget a Nasdaq computer glitch that delayed orders and degassed the fizz, but Nasdaq's boss says it made little or no difference to the share price performance.

Investors want to know if Facebook is more sizzle than sausage.

Europe Central Bank cuts Greek financial lifeline as fears of Eurozone exit loom

Global stocks have taken another fall on the increasingly likelihood that Greece will be forced to exit the Eurozone.

The European Central Bank has decided to temporarily stop lending to Greek banks to limit its exposure.

The currently jitters are set to worsen in the countdown to fresh Greek elections in mid-June.

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

Corporate watchdog reveals more cases of insider trading

The Australian Securities and Investments Commission says there have been more breaches of insider trading in the past three years than in the entire preceding decade.

Listen to my interview with ASIC deputy chairman Belinda Gibson broadcast on this morning's edition of AM.

In the three years to December last year, ASIC won 11 convictions for insider trading, with another seven cases yet to be decided.

In the prior decade to 2008, ASIC won 10 insider trading cases and lost five.

In a sign of a rise in illegal trading, ASIC says it is receiving around 200 alerts a day in relation to suspicious trading activity regarding the use of privileged information unavailable to the general market.

ASIC deputy chairman Belinda Gibson told AM and ABC News 24that the rise in prosecutions can be put down to greater surveillance by the regulator and in some cases greater temptations for investors.

"We're much better at looking for those cases and prosecuting them. What we have done since 2008 is really focus on the integrity of the markets and focus on detecting bad conduct and bringing the perpetrators to account," Ms Gibson said.

"I think that there is more opportunity as the market deepens. There is more opportunity where transactions become more sophisticated and more of the people we call gatekeepers have access to otherwise confidential information.

"Many of the cases we've brought are against employees of gatekeepers who are seeing other people's information and trading on it. are accountants, There are the investment advisors, there are the stock market registry providers - all those people that are intermediaries in bringing a corporation to the market."

Ms Gibson refused to rule out the use of telephone taps to trap insider traders under new powers given to the corporate watchdog in 2010.

Heads begin to roll at JP Morgan after US$2 billion trading loss

Heads have started to roll at the Wall Street banking giant JP Morgan Chase after revelations that it lost two billion US dollars in a failed trading strategy.

One of the bank's most senior executives is retiring after the London-based division she oversaw took bets that went horribly wrong.

Listen to my story broadcast on The World Today.

The heavy losses have raised serious concerns about excessive risk taking by banks and whether greater regulation is needed.

President Obama has also weighed in and he urged Wall Street to impose tighter regulations on risk.

Australian dollar heading back to earth, but dramatic correction not expected

The Australian dollar has dropped to its lowest level against the US currency this year as investors return their money to safe-haven currencies amid fears that Greece will exit the eurozone.

Here's my analysis from this morning's edition of AM, and I took a closer look at the various factors on The World Today.


Source: Bloomberg

Financial markets and European banks are preparing for Greece to leave the 17-member currency bloc as its struggles to form a coalition government weigh on global equity and currency markets.

The Australian dollar is trading just above parity with the greenback, and at 9:50am (AEST) was worth 100.2 US cents.

It was last below parity in December, when the collapse of the eurozone appeared likely.

Although the dollar is weakening, Thomson Reuters senior currency analyst John Noonan says he does not expect it to fall below 98 US cents.

JP Morgan loses US$2 billion bet as risky trades unwind

The Wall Street banking giant JP Morgan Chase has revealed a shock US$2 billion dollar loss caused by a financially disastrous hedging strategy.

Listen to my analysis broadcast on The World Today.

The surprise losses have been linked to risky bets made by a trader in London that, according to insiders, became too big to unwind without rocking financial markets.

In a humiliating admission, JP Morgan chief executive Jamie Dimon has described the errors as "egregious" and "self-inflicted".

The scandal comes as US banks rebuild their shattered reputations after speculative bets on the US housing market sparked the global financial crisis.

As recently as last month, JPMorgan executives told investors they were "very comfortable" with positions held by the bank, raising questions about how much was known by senior management - and when.

The revelations are also likely to fuel debate about president Barack Obama's sweeping reforms of Wall Street.

From the news blooper vault - a recovery that deserves a gold medal

Business slams scrapping of company tax cut

The Government's decision to scrap the one percentage point cut to the company tax rate has not surprisingly angered business groups.

The anticipated relief for 700,000 businesses was flagged in the Henry Tax Review and was an original trade-off for the mining tax.

But the Treasurer has told the business lobby to blame the Coalition and the Greens for threatening to block the lower 29 percent.

Here's my initial assessment from ABC News 24's budget night coverage.

This morning, I interviewed Peter Anderson, the chief executive of the Australian Chamber of Commerce & Industry, about the company tax backdown and asked whether he blamed the Coalition for threatening to block the legislation.

Reserve Bank cuts growth forecasts as economy softens

Bu Business editor Peter Ryan

The Reserve Bank of Australia has cut its growth and inflation forecasts as non-mining sectors struggle under the weight of a high Australian dollar.

In forecasting marginally lower growth rate of 3 per cent for 2012 and 2013, the RBA has signalled that earlier predictions were overly optimistic.

Listen to my analyis from The World Today broadcast shortly after the revision was made public.

Read the Reserve Bank's quarterly monetary policy statement here.

The central bank's latest quarterly statement on monetary policy comes three days after it cut the official cash rate by 50 basis points because of lower inflation and the need to stimulate parts of the economy.

"Although three months ago a range of indicators were suggesting that economic growth was close to trend, the outcome for 2011 as now reported was, in fact, somewhat weaker than that," the statement said.

In the previous statement, issued in February, the economy had been forecast to grow at 3 to 3.5 per cent.

The Reserve Bank also expects employment growth to "remain subdued" in the near term and has cited the high Australian dollar as a key pressure.

"There is the possibility that in the near term, labour shedding across a range of industries outside of the mining sector accelerates as firms continue to adjust to the high exchange rate, weaknesses in the property market and the effects of weaker public demand."

The Reserve Bank has also pointed to a subdued housing market and says "a recovery in housing construction is unlikely in the near term".

"What remains is for buyers to reach a point where they have sufficient confidence to commit to contracts for construction of new dwellings and for the supply side of the housing market to be responsive to demand," the RBA said.

The RBA says those conditions are needed to underpin a sound recovery in construction.

The central bank has also revised its inflation outlook to 2.5 to 3.5 per cent in the next year, with underlying inflation down to just 2 per cent from its previous forecast of 2.5 per cent, while noting the sharp fall in CPI inflation to 1.6 per cent.

The RBA expects the introduction of the carbon price in July to boost headline inflation by 0.7 percentage points in the year to July 2013.

"A key assumption made here is that there are no second-round effects owing to higher margins or wage claims," the statement says.

Backing the banks

The RBA has also confirmed claims by commercial banks that funding costs remain high.

"They remain higher than in mid-2011. At the same time, elevated competitive pressures have kept deposit rates in Australia high relative to the cash rate."

The RBA says a significant external risk to its outlook is the chance that the sovereign debt crisis in Europe could intensify and derail the global economic recovery.

"A substantial deterioration of conditions in Europe would be likely to have flow-on effects to the rest of the world," the statement said.

"A major flight from risk in global capital markets would see a marked deterioration in credit conditions and
confidence."

The Reserve Bank holds its next board meeting on June 5, and some economists are tipping a further reduction in the cash rate to 3.50 per cent.

James Hardie directors breached duties, High Court rules

The High Court has ruled that seven former James Hardie non-executive directors breached corporate law by making a misleading statement about the company's asbestos compensation fund.

In a major victory for the corporate regulator, the High Court upheld a landmark 2009 New South Wales court decision that the former board members, including high-profile former chairwoman Meredith Hellicar, breached their duties as company directors when they approved a misleading draft announcement to the stock exchange in 2001.

Listen to my interview with the chairman of the Australian Securities & Investments Commission, Greg Medcraft, broadcast on The World Today.

Read a summary of the High Court ruling here.

The statement said the company had established a fully funded compensation plan, the Medical Research and Compensation Foundation, to pay claims from people suffering asbestos diseases.

But the foundation was underfunded by more than $1.5 billion and faced bankruptcy.
The Australian Securities and Investments Commission (ASIC) won the first round in the New South Wales Supreme Court, when the directors were fined and banned from serving on boards for five years.

That ruling was then overturned by the New South Wales Court of Appeal in 2010.

But today the High Court ruled against the directors and ordered the case be returned to the appeal court to decide outstanding matters, including penalties.

In a statement, James Hardie took note of today's decision, but said it was too early to know how much the ruling would cost the company.

Reserve Bank surprises with aggressive 0.5 percentage point cash rate cut. But how much will commercial banks deliver to borrowers?



Reserve Bank certain to cut cash rate today. But how deeply will the RBA cut and what if anything will commercial banks pass on?

Paul Hogan settles with the Tax Office as Operation Wickenby pursuit ends

One of the country's longest running and most bitter tax disputes is finally over with Paul Hogan and John Cornell striking a confidential deal with the Australian Tax Office.

Listen to my interview with Paul Hogan's lawyer, Andrew Robinson, broadcast this morning on the ABC's AM.

The pair had been targeted by the ATO's Operation Wickenby which has been pursuing high wealth tax evaders.

The confidential settlement, reached on a "without admission" basis before a former High Court judge, lifts an order prohibiting Mr Hogan to travel outside Australia.

Mr Hogan was controversially banned from leaving the country at the request of the ATO after attending his mother's funeral during a two-week stand-off in September 2010.

The ATO pursued Mr Hogan for almost a decade over $150 million in unpaid tax, penalties and interest, and had alleged he used offshore tax havens.

No charges were ever laid and Mr Hogan consistently denied any wrongdoing.

The $300 million operation investigated high-profile Australians over fraud claims, and had been circling Hogan for years.

The operation has led to more than 60 charges, but the Australian Crime Commission (ACC) discontinued its criminal investigation of Mr Hogan and Mr Cornell last year.

NAB to slash 1,400 jobs as it restructures ailing UK business

National Australia Bank has announced a restructure of its loss-making business in the United Kingdom to focus on retail operations and small business lending.

The bank will cut 1,400 jobs from its UK operations - including Clydesdale Bank and Yorkshire Bank - by 2015, and restructure its balance sheet by transferring most of its commercial real estate assets to NAB Group from next financial year.

Here's my analysis broadcast on The World Today.

NAB group chief executive Cameron Clyne says the group cannot find a buyer its for its British banks.

The UK business posted a $39 million loss for the six months to the end of March due to bad debts and higher funding costs.

"It's not as though we've been walking past deals in the last three-and-a-half years, but there has been speculation over the asset - we have received informal and speculative expressions of interest, all of which are at very low valuations," Mr Clyne said.

"So I think as long as UK banks are trading at this sort of valuation ... the option we're taking is a better option."

Mr Clyne says the problems in the UK will not stop it from passing on any interest rate cuts.

"There is no correlation between what we have announced today and anything that we do in our Australian business," he said.

Analysis: Rupert Murdoch's regret over phone hacking coverup at News International

Britain back in recession as austerity bites deeper than planned

Official data shows Britain's economy has sunk back into recession amid ongoing state austerity and the eurozone debt crisis.

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

The Office for National Statistics says Britain's economy has returned to technical recession - defined as two successive quarters of contraction - after shrinking by 0.3 per cent in the previous three months.

The data confounded most analysts' expectations that gross domestic product (GDP) would grow by 0.1 per cent in the quarter from January to March, compared with the final quarter of last year.

The ONS added in a statement that the decline in first-quarter GDP - the value of all goods and services produced by the economy - was driven by a poor performance by the construction and manufacturing sectors.

Britain's economy had clawed its way out of a record-length recession in the third quarter of 2009 following a downturn sparked by the global financial crisis.

But it has now returned to recession amid painful government spending cutbacks and fallout from the debt crisis in the neighbouring eurozone, which is a key trading partner.

Cash rate cut almost certain after consumer inflation slows dramatically

Official interest rates are almost certain to be cut next week after official consumer inflation slowed dramatically.

According to the Bureau of Statistics, the Consumer Price Index rose by just 0.1 per cent in the March quarter, making 1.6 per cent for the year.

The evidence that inflation is now less of a worry than the multi speed economy is expected to prompt the first official rate cut since December.

The question is now whether the RBA will cut by 0.25 percent or 0.5 percent to stimulate struggling sectors, some of which are in technical recession.

Here's my analysis from The World Today.

Global markets dive as Europe's austerity resolve falters

European markets fell heavily this morning on renewed concerns that Europe's commitment to budget cuts is fracturing.

In addition to uncertainty about Nicolas Sarkozy's re-election as French president, the Dutch Prime Minister Mark Rutte resigned after failing to agree with on how to impose austerity.

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

Industry superannuation chief warns Reserve Bank's inflation focus is damaging economy

By Business editor Peter Ryan

The head of a powerful superannuation body is calling on the Federal Government to rewrite the Reserve Bank's charter, warning that the Bank's primary focus on managing inflation is damaging the economy.

The chairman of the Industry Super Network, Garry Weaven, says that with inflation now under control, the RBA should be using interest rate cuts to boost employment and to drive down the value of the Australian dollar.

Listen to my interview with Garry Weaven broadcast on this morning's edition of AM.

Read the story on ABC News Online.

The former ACTU assistant secretary, who lobbies for superannuation funds including AustralianSuper, Cbus and Hesta, told AM that the inflation targetting mandate imposed when Peter Costello was Treasurer in 1996 is now " totally inappropriate".

"It seems to be still unduly influencing the Reserve in its policies. I know it's very hard to get the balance right, but I think consistently for many years now the Reserve has had far too much focus on inflation only and not enough on full employment and economic prosperity generally, which is their requirement under the Act," Mr Weaven said.

"It's hard to see that the current arrangements are properly co-ordinated. And I think there seems to be little point in having a situation where the Reserve is locked into a sort of single blunt instrument approach and the Government is locked into a political set of parameters."

Mr Weaven said that to the requirement to keep inflation with a two to three percent band over time, the RBA should follow other mandates in the Reserve Bank Act such as ensuring a stable currency, full employment and "the economic prosperity and welfare of the people of Australia."

Mr Weaven suggested monetary policy could be used to trim the high Australian dollar and bolster industry and said the inflation only focus was already hurting the economy.

"I think it clearly does. Notwithstanding the mining boom, we do have signs of real weakness in retail and manufacturing. But more importantly in a way, we have very high interest rates by international standards. And high interest rates push the currency high and that's very, very bad for manufacturers, tourism and some

other industries."

Mr Weaven said the Treasurer Wayne Swan could renegotiate the Reserve Bank's mandate without comprising its independence which he has also questioned.

"It's not much good being independent if all you can do is react through interest rate policy and have no regard for other factors. So at the end of the day no-one is truly independent," Mr Weaven said.

"If the requirements, both for the Government and for the Reserve Bank, is the greatest good of the Australian people and, in particular, the specific requirements in the Reserve Act of full employment, then in the end you must take account of the full picture. And there needs to be dialogue about what you actually do in a policy setting."

Mr Weaven is also the latest to criticise the government's pursuit of a budget surplus, adding to comments by the former Commonwealth Bank chief executive Ralph Norris that it was a "mindless" strategy.

"I think it's very, very difficult. I think it's now almost a political imperative that they deliver that. That's been the result of, you know, 15 years or more of political and economic rhetoric. Given the actual circumstances right today, I think it's hard to argue that a surplus is the main requirement."

Interest rate cut tipped for May as Reserve Bank waits on inflation update

By Business editor Peter Ryan

The Reserve Bank has signalled that official consumer inflation data out next week could be the trigger for an interest rate cut in May.

In the minutes from its latest meeting, the RBA board noted that it would focus on the official Consumer Price Index due to be released by the Bureau of Statistics on April 24.

Listen to my analysis broadcast on the ABC's The World Today.

Read the April meeting minutes released today by the Reserve Bank.

"If slower growth in demand could be expected to result in a more moderate inflation outcome, then a case could be made for an easing of monetary policy," the RBA board said in the minutes.

"The board would have an opportunity at its next meeting to review the inflation outlook based on comprehensive data on new prices as well as information on demand and output."

In leaving the cash rate on hold at 4.25 per cent at its April meeting, the RBA board "judged it prudent to evaluate those data before considering a further policy adjustment."

Read my story on ABC News Online.

Financial markets are pricing in a 90 per cent chance that the RBA will cut interest rates by 25 basis points at its May 1 meeting, with some economists tipping a more aggressive move of 50 basis points.

In previous statements, the RBA has repeatedly signalled its comfort with moderating inflation, which is expected to be within the central bank's target range of 2 to 3 per cent in the next two years.

The Reserve Bank also suggested that a softer than perceived labour market could add to the case for a cut in the cash rate.

"Despite the rate of unemployment showing little change for some time, it was apparent that labour market conditions had softened over the course of 2011," the bank said.

"An easing in average hours worked and a decline in the participation rate were indicative of a softer labour market than implied by the unemployment rate."

On the controversial issue of funding costs for banks, the RBA board noted that Australian banks had taken advantage improved conditions to issue a large volume of secured and unsecured debt.

The minutes note "a significant fall" of around 50 basis points in five years, "which would help to alleviate the pressure of higher funding costs in coming months".

However, the RBA board was also briefed on the costs of term deposits for banks, which has sparked a competition war that has seen costs rise materially relative to the official cash rate.

The board also noted that the lingering debt crisis in Europe "continued to be a potential source of adverse
shocks to the world economy" despite risks to global growth having receded in recent months.

However, the RBA says Spain is the new concern in Europe, given the recent decline in the nation's fiscal position and its soaring bond prices.

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."

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.

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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".





ANSTO broke competition rules in nuclear medicine tender, Productivity Commission finds

By Business editor Peter Ryan

Australia's government-owned nuclear and scientific agency been has criticised for unfairly using its public ownership to win a contract to supply nuclear medicine to hospitals in New South Wales.

A report by the Productivity Commission has found that the Australian Nuclear Science & Technology Organisation (ANSTO) breached some rules on competitive neutrality when it outbid a small private company, Cyclopharm Limited, in a tender process.

Listen to my report broadcast this morning on the ABC's AM program.

After a nine month investigation into the awarding of the contract, the Commission's Competitive Neutrality Complaints Office found ANSTO breached regulations, suggesting it leveraged the benefits of public ownership in its tender submission.

Cyclopharm referred the complaint to the Productivity Commission last year claiming that ANSTO's subsidiary Petnet had failed to comply with rules on competitive neutrality.

Cyclopharm said the prices included in the Petnet tender did not reflect the true costs and its forecast profits were not commercially acceptable.

In the report released yesterday, the Productivity Commission made two key findings in favour of Cyclopharm's complaint that competition rules were broken.

"Forecasts over ten and 15 years demonstrate that Petnet Australia's operations are unlikely to achieve a commercial rate of return on equity over either time period. This represents an ex ante breach of competitive neutrality policy," the report says.

"To comply with with competitive neutrality policy it would need to adjust Petnet's business model such that it can be expected to achieve a commercial rate of return that reflects its risk profile of the full investment."

Cyclopharm's managing director James McBrayer has welcomed the findings and has called for a shakeup up at ANSTO to ensure small companies are able to compete on a level playing field with government.

Read Cyclopharm's response here.

"We are very pleased with the outcome and feeling quite vindicated through all our efforts over the past nine months," Mr McBrayer told AM.

"We would expect that the New South Wales Department of Health will rescind the tender based on the fact that ANSTO was supposed to be in compliance with competitive neutrality which they are clearly not.

"We would be seeking that the New South Wales Department of Health re-let the tender as we have been disadvantaged from day one. We would expect that the department would do the right thing in awarding us the tender while the review process is underway."

Mr McBrayer called on the federal government to call ANSTO to account to ensure it plays by the rules.

"ANSTO gets about $165 million of taxpayer's funds each year. ANSTO's role is to support Australian industry in this particular area instead of preventing it from happening," Mr McBrayer said.

ANSTO has defended its conduct in the tender process but says it will review the Productivity Commission's findings.

"ANSTO will now carefully consider the report, its recommendations, and the need to ensure continued supply of radiopharmaceuticals to Australian patients," a spokesman said.

“That said, ANSTO notes that Royal Prince Alfred Hospital produces and sells FDG at significantly lower prices than both PETNET and Cyclopharm."

Read ANSTO's full response here. 

The New South Wales Ministry of Health is yet to respond to the Productivity Commissions findings and said it would be inappropriate comment until the report has been completely reviewed.

Phone hacking toll grows as James Murdoch quits BskyB; Murdoch family succession in tatters

Rupert Murdoch's media dynasty has taken yet another blow with James Murdoch resigning as chairman of News Corporation's British pay TV arm, BSkyB.

James Murdoch is facing more questions about the phone hacking scandal gripping News Corporation and says he didn't want the fallout to tarnish BSkyB's reputation.

But it all but confirms that James Murdoch is no longer the most likely successor to his father at News Corporation.

Here's my coverage and analysis broadcast on the ABC's The World Today.

Reserve Bank leaves interest rates on hold at 4.25 percent. April 24 inflation reading now seen as trigger for May rate cut.

Company directors urge government not pursue budget surplus at any cost

A major business lobby group is urging the Federal Government not to push for a budget surplus at any cost.

The Institute of Company Directors (AICD) has warned that business is already hurting from the high Australian dollar and that the pursuit of even a wafer thin surplus could damage the economy.

Read the story on ABC News Online.

An index by the Institute shows 90 per cent of directors surveyed believe the Government's performance is continuing to damage consumer confidence.

According to the index released today, around 60 per cent of directors say it is not vital for the Government to achieve a budget surplus in 2012/13.

AICD chief executive John Colvin told AM that only 26 per cent thought that achieving a budget surplus was vital.

"The view of the directors, or the majority view of the directors, is that that's more of a political aspiration than an economic one," Mr Colvin said.

"Any more burdens to business at this stage of the cycle would be regarded I think as a difficult thing for business and probably counter-productive."

Balancing act

Mr Colvin said that while many company directors would normally urge a budget surplus, most agree the time is not right to make spending cuts that could potentially damage the economy.

"My surmise would be that [directors] would think that a budget surplus is the right thing to do, but trying to do it all at once or in a very quick manner rather than staggered over time, can be hurtful in the short term," Mr Colvin said.

"All businesses have to be careful about paying off debt, making sure the shareholders are looked after, making sure they can spend in terms of investment and what have you.

"It's a balancing act all the time for businesses, so I think they would assume that the balancing act in all those areas is a better way to go rather than sort of just hammering away on a debt level. "

Mr Colvin said that the government would be better focused on issues such as infrastructure, health, education, business regulation and industrial relations.

"Industrial relations was ranked as a number one concern by 20 per cent of those surveyed directors," he said.

"Ninety per cent of directors, which is a very high number, said that infrastructure spending was too low."

The index also says that around 90 per cent of directors still believe the performance of the Federal Government is continuing to hurt consumer confidence.

"Obviously it's negatively impacting on people's willingness to spend and get the economy moving outside the resources and a few other related industries," Mr Colvin said.

Carbon tax

Mr Colvin also identified the carbon tax as an issue affecting business, though for many it was no longer a primary concern.

"Significantly fewer directors, at 16 per cent in this survey down from 31 per cent in November, identified the carbon tax as one of the main economic challenges facing business, although more than 60 per cent of directors still believe that the announcement and the legislation of the carbon tax will impact their business negatively," he said.

"That's pretty much unchanged from the last survey which had about 63 per cent.

"So 60 per cent of directors still believe the announcement of legislation of the carbon tax will impact our business negatively."

Austar chief slams News Corporation pay TV piracy claims as "farcical"

The chief executive of regional pay television company Austar has denied reports that News Corporation promoted a wave of piracy to damage its pay TV competitors.

John Porter, who has led Austar since 1995, told AM the accusations made by the Australian Financial Review newspaper and the BBC are "farcical".

Listen to my interview with John Porter here. 

Read the ABC News Online story here.

Austar shareholders meet this afternoon to vote on Foxtel's $2.5 billion takeover bid for the regional pay TV company, and Mr Porter is firmly backing the offer.

Foxtel is 25 per cent owned by News Corporation's Australian division, News Limited.

Mr Porter says all pay-TV operators deal with hackers and he is not surprised to hear that News Corporation had its own security unit to protect its profits.

"Certainly there was a piracy issue back over a decade ago," Mr Porter said.

"It was the early days of digital satellite transmission, and the whole industry worldwide had a problem; you didn't have to be a Mossad agent to crack the encryption of the early satellite transmission system."

Mr Porter insists that News Corporation did not promote pay-TV piracy; in fact, he says both Foxtel and News Corporation worked to resolve piracy issues around the world.

"I think we would have been aware of a conspiracy in this area," he said.

 

"I mean, it doesn't surprise me that a bunch of security experts would be discussing these issues over a decade ago in the very early days of visual encryption, but we've seen no signs of any conspiracy in this area that would lead me to believe that this story is just not on base."

And he says he would not waste his time reading any of the 14,000 emails published by the Financial Review to support its claims of piracy.

"I find this story to be so farcical that I really don't think it is worthy of my time," he said.

Mr Porter says Austar staff also deal with hackers in their efforts to maintain the security of the company's systems.

"I have a security expert, ex-Australian Federal Police, who works in this area full-time," Mr Porter said.

"Any time you have a secure system in the pay world, people are going to try to hack it. Every so often it moves us to build a better mousetrap."

And Mr Porter insists the value of Foxtel's takeover offer has not been affected by any security operations.

"The scheme arrangement in front of our shareholders is extraordinarily compelling, and I think what happened over a decade ago in the area of security, which was certainly not material to the value of the deal, is completely irrelevant," he said.

Reserve Bank cites sudden worsening in Eurozone crisis as biggest risk confronting Australia and the world

By Business editor Peter Ryan

The Reserve Bank has warned that any new escalation of the Eurozone debt crisis remains the biggest risk to the Australian economy.

In the minutes from its March 6 meeting, the RBA board has provided a reality check on the still fragile state of the global economy and Australia's exposure to Europe.

"The clearest downside risk to the outlook for Australia remained a sudden worsening in the situation in Europe and its flow-on effects to the rest of the world through trade, financial and confidence channels," the boardroom minutes warn.

"Members noted that a sharp slowdown, particularly in east Asia, would have significant implications for commodity prices and demand for Australian exports.

The minutes warn that a resulting "flight from risk" in global markets would see significant changes in credit conditions, the exchange rate and confidence.

While the RBA believes a worst case scenario from Europe is now less likely, it warns "this downside risk could still materialise."

The board minutes show that although the RBA believes the current cash rate setting is appropriate for now, it still has "ample scope" to ease policy as long as inflation remained contained.

The RBA board left interest rates on hold at 4.25 percent this month citing improved conditions in Europe and local comfort about inflation. The RBA cut rates by a total of 0.25 percent in both November and December last year as fears about Europe intensified.

The RBA board also underscored the strength of Australian banks which have been under pressure from higher funding costs on global markets.

"Members noted that the Australian banking system remained in a relatively strong condition," according to the minutes.

"The larger banks were in a better position than a few years ago to cope with the tighter funding conditions given the improvements made to their funding.

"The wholesale funding task had also become more manageable, with deposit growth continuing to outpace credit growth by a wide margin."

The minute also note the impact of the high Australian dollar and the creation of a multi speed economy.

But the RBA believes the booming mining sector is compensating for losses in struggling manufacturing industries which rely on a lower currency.

"Most information thus far has indicated that weakness in parts of the economy - including manufacturing, building construction and parts of the retail sector - was being approximately balanced by the strength in the mining sector and some services industries."

The Reserve Bank also noted that while global sharemarkets had grown ten percent since the beginning of the year, the Australian market was relatively weaker because of a larger weighting on the mining sector.