Once iconic AWA calls in administrators

AWA was a once iconic brand and last century many Australian homes would not have been complete without an AWA wireless on the kitchen mantlepiece.

The bright, white tower at York Street in downtown Sydney is a feature of the skyline.

Check out this cinema advertisement from the 1940s.

But today, the 105 year old technical services company was placed into administration after running into serious financial difficulties.

The insolvency firm P-P-B Advisory is now trying to sell the company and save the jobs of 250 staff.

My interview with administrator Phil Carter on The World Today will be posted shortly.

Qantas flying under radar on extent of job cuts

Qantas is refusing to comment on speculation that it will announce 5,000 job cuts when its half-year results are released on Thursday.

The latest number - if correct - significantly overshadows the 1,000 job cuts already flagged by the airline in December.

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

The struggling carrier is under pressure to restructure its finances as it seeks a debt guarantee from the Federal Government.

However Qantas says it will not comment on the latest job cut figure reported by News Limited tabloid newspapers, which quote an unnamed Qantas source.

"There is lots of speculation about what things we will or won't announce on Thursday, but we're not in a position to comment on that speculation," a Qantas spokesman told the ABC.

"We have said that we will be making some tough decisions in order to achieve $2 billion in cost savings over the next three years, which is a consequence of an unprecedented set of market conditions now facing Qantas."

Recent speculation on the number of looming job cuts at Qantas has swung widely, ranging from 2,000 to 6,000 with one specific figure of 2,670.

Qantas maintains those numbers are "unsubstantiated and unsourced" but cuts are necessary to remain viable.

The airline's stance means two more days of unsettling uncertainty for the 33,000 people employed by Qantas and its subsidiary Jetstar.

Qantas issued a profit warning in December and said more than 1,000 additional jobs would be going over the next 12 months.

The airline has repeatedly said that "everything is on the table".

Renegotiating terminal leases in Melbourne, Perth and Brisbane to save hundred of millions of dollars could be one option considered.

Qantas has been quick to correct a number of rumours circulating about how it will cut costs, saying it will not be dropping routes from Dubai to London or Sydney to Johannesburg.

The Federal Government, particularly Treasurer Joe Hockey, will be closely watching as they consider the request for a debt guarantee.

Qantas does appear to be edging closer to getting that guarantee; effectively borrowing the Government's sovereign debt rating to raise money on global markets.

The airline lost its investment grade status late last year when the big two ratings agencies downgraded it to junk.

Qantas says it will press ahead with the cost reductions regardless of whether the Federal Government decides to help.

The Qantas share price has lifted since changed language from Mr Hockey and the Prime Minister signalled a Government guarantee was possible.

Qantas shares closed at $1.24 yesterday after falling to 96.5 cents in December after the profit warning and downgrade to “junk” investment status.

G20 communique` - will it be worth the paper it's written on? Treasurer Joe Hockey demands a two page document with tangible outcomes.

Institute of International Finance forum in leadup to G20 meetings. Photo: Peter Ryan

Australia's hosting of central bank governors and finance ministers from the Group of 20 (G20) nations is meant to be more than just a few days in the global limelight for the land "downunder" before it's back to business as usual.

Even so it's easy to understand why some people write off G20 deliberations as a just another high-powered gabfest for politicians, bureaucrats and economists who don't necessarily live in the real world.

Around 530 delegates - the big players travelling at the pointy end of the plane - have descended on Sydney and will be pursued by 320 journalists searching for that special speech, briefing or security incident that will make this meeting just a bit different from the last one. 

The cost of hosting the Sydney meeting and the main game in November when G20 leaders come together in Brisbane is $360 million, a price tag that many families might question given the government's pursuit of austerity.

And what do most casual observers remember about similar summits from the past, apart from television news images of protesters storming venues or the obligatory "class photo" of the participants at a postcard landmarks?

Unlike APEC summits, thankfully G20 group photographs do not mandate lairy shirts that defy most fashion conventions. It's said G20 participants take themselve more seriously and prefer standard business attire .

But could this G20 gathering defy predictions from hardened airchair cynics and deliver tangible outcomes that are meaningful to regular people worried about an uncertain world?

The Treasurer Joe Hockey is hoping so - and not just for a successful event that will endorse Australia's presidency of the G20.

On the eve of the G20, the International Monetary Fund has urged advanced economies to be cautious a about withdrawing economic stimulus too rapidly and that emerging nations are suffering now that the US Federal Reserve is taking away a dripfeed of cheap and easy money which is now down to US$65 billion a month.

But the IMF's warning that "the recovery is still weak" and "significant downside risks remain" could be opportunity ringing in the Treasurer's ears as a sign that opportunities for strong-willed action might be running out.

Speaking at an Institute of International Finance forum, Mr Hockey highlighted the challenges of turning good intentions and motherhood statements from recent G20 agreed frameworks into meaningful action.

"In the aftermath of the global financial crisis, the G20 recognised that the recovery was too slow and many downside risks remained. The Framework was the G20's solution to improving its macroeconomic coordination, " Mr Hockey said.

"Unfortunately, despite the G20's initial intention to do so, it did not go down to the next layer of detail and set clear, practical goals.  

"Further, the Mutual Assessment Process set up by the G20 did not provide enough top-down guidance to make sure our individual and collective actions were sufficiently well coordinated to maximise the impact on the global economy."

Mr Hockey's challenge to deliver tangible outcomes as the current steward of the G20 will require hours of hard talk and a fair share of diplomatic arm-twisting.

Veterans of forums like the G20 say peer pressure is a key tactic in building trust and collaboration between players who have to deal with matters of self-interest.

It is anticipated that "robust discussions" are likely over negotiations for the G20 to set a global growth target - something the G20 has never set.

Australia, Canada and the United States are known to be advocates of a target but it's been reported that Germany will resist, citing the setting of a target as an "antiquated" form of economic planning.

Apart from the slogan of "going for growth", the G20 agenda will look at investment, trade, taxation, employment and regulatory reform.

But the communique that will be issued when the summit ends late on Sydney will be key to the perception of the event's success as a critical building block to the G20 leaders summit to be held in Brisbane in November.

The drafting of the communique itself will be a challenge after Joe Hockey ordered that it be no longer than two pages.

In the recent past communiques have extended to 27 pages, so Mr Hockey's plea for jargon-free brevity will most likely be delivered with the fine print coming in a separate document.

G20 delegates have told the ABC the challenge this time around will be to "do it better than it's been done in the past".

The test, come Sunday, will be whether the meetings end with a communique that lays the groundwork for tangible outcomes or whether the document will be more of the same and not worth the paper it's written on.

IMF issues warning to G20 on dangers of stimulus withdrawal

The International Monetary Fund says risks of turmoil in emerging markets and deflation in Europe are threatening the global economic recovery.

The warning that "the recovery is still weak" and "significant downside risks remain" comes as as central bankers and finance ministers from the G20 prepare to meet in Sydney.

The latest reality check from the IMF comes as the US Federal Reserve re-affirms its commitment to gradually trimming back its massive economic stimulus program.

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

But in a paper prepared to the Sydney meetings, the IMF urged major economies to be cautious about winding back the stimulus.

"Advanced economies should avoid premature withdrawal of monetary accommodation as fiscal balances continue consolidating. Given still large output gaps, very low inflation, and ongoing fiscal consolidation, monetary policy should remain accommodative in advanced economies," the IMF says.

"Given still large output gaps, very low inflation, and ongoing fiscal consolidation, monetary policy should remain accommodative in advanced economies."

The IMF says there is "scope for better cooperation" on undwinding stimulus "including wider central bank discussions of exit plans".

The US Federal Reserve's stimulus program is now US$65 billion per month having fallen from US$85 billion per month late last year.

Federal Reserve chair Janet Yellen appears committed to continuing the stimulus windback after the minutes from the Fed's January meeting have endorsed predictable cuts of US$10 billion unless the US economy's performance surprises.

The IMF says "a new bout of financial volatility" has affected emerging economies as the stimulus windback forces markets to "reassess their fundamentals".

"Markets are showing signs of stabilising recently, although they are still fragile, on the back of actions by key emerging economies to shore up confidence and strengthen their policy commitments," the IMF says.

"This episode, however, underscores vulnerabilities and the challenging environment for many emerging economies. The rapid jump in global risk aversion had also driven down advanced economy equity prices."

The IMF believes its global growth forecast issues in January of 3.75 percent, up from 3 percent in 2013, is achievable "assuming that the impact of the recent volatility is shortlived."

The IMF makes special mention of the euro area -still mired in the sovereign debt crisis - where low inflation and falling inflation forecasts raised the risk of deflation.

"A new risk stems from very low inflation in the euro area, where long-term inflation expectations might drift down, raising deflation risks in the event of a serious adverse shock to activity."

ASIC grilled by Senate inquiry over David Jones controversial share trading by directors

A Senate inquiry today grilled executives from Australia's corporate watchdog over their investigation into share trading by two directors of the department store David Jones.

The David Jones chairman Peter Mason and two directors, Steve Vamos and Leigh Clapham, have resigned over the affair.

Today the Australian Securities and Investments Commission executives were asked why they did not find that the share deals amounted to insider trading when they took place before the release of positive sales data.

Here's my report broadcast on The World Today.

http://mpegmedia.abc.net.au/news/audio/twt/201402/20140219-twt04-asicdjs.mp3

Reserve Bank says "little chance" of a change in interest rates

Interest rates look set to remain on hold for the rest of the year as deep cuts to the official cash rate work their way through the economy.

In the minutes from its February board meeting, the Reserve Bank said there was "little chance of a change in monetary policy at present."

"If the economy evolved broadly as expected, there would likely be a period of stability in interest rates," the minutes say.

Board members signalled that the rate cutting strategy had most likely ended and said "it was prudent to keep policy unchanged while assessing the continuing impact of that stimulus."

The cash rate was left steady at 2.5 percent at the February meeting, having fallen steadily from a recent peak in November 2011 of 4.75 percent.

The RBA is now seeing evidence that the rate cuts are working with more timely indicators having been more positive for consumption, dwelling investment, business conditions and exports.

The board meeting took place on February 4, before the official unemployment reading for January rose unexpectedly to six percent - the highest level in more than decade.

Before the shock jobs result, many economists predicted the Reserve Bank's next rate movement would be up.

However, now most agree the cash rate will remain steady for a long period before the RBA makes a move.

The minutes also show the RBA debated reasons for the last ABS inflation reading coming in higher than expected at 0.9 percent in the December quarter and 2.7 percent annualised.

The RBA believes there are "several possible explanations" but believes "noise" had presented "something of a puzzle in interpreting the mix of activity and price data".

That could mean the RBA is not overly concerned about rising inflation putting pressure on the steady cash rate.

The minutes do not mention concerns about the possibility of a housing bubble in the big real estate markets of Sydney and Melbourne.

However, the RBA noted that "the effects of low interest rates were clearly evident in the housing market."

The Reserve Bank said late last year that talk of a housing bubble was "excessively alarmist."

The board noted the impact of lower rates on the value of the Australian dollar which was 15 percent below its most recent peak of early 2013.

The Australian dollar was buying 90.55  US cents after the release of the January minutes.

Virgin's John Borghetti accuses Qantas of peddling myths to secure government debt guarantee

The Federal Government looks increasingly likely to give Qantas a debt guarantee to help it through its financial crisis.

But the flying kangaroo's chief rival Virgin Australia says it will ask for the same deal within 24 hours if it goes ahead.

Virgin's chief executive John Borghetti has come out swinging, accusing Qantas of peddling myths to twist the government's arm.

Here's my extended interview with John Borghetti broadcast this morning on the ABC's "AM" program.

The real Abdul backs Hockey's kebab comments - but tells the Treasurer he might need to book for lunch

A day ago Treasurer Joe Hockey drew a culinary line in the sand on the fraught issue of whether to provide assistance to struggling companies like SPC Ardmona or Qantas.

He made a big point about small business saying that the proverbial Abdul the kebab maker from Parramatta doesn't come looking for a handout when he wants a new oven.

Business editor Peter Ryan can't resist a lunchtime challenge.

He found a real life Abdul the kebab maker in Sydney who agrees with the Treasurer.

Listen to the story here.

IMF gives Treasurer a tick for hardline budget strategy

The International Monetary Fund has endorsed the Treasurer's anticipated budget cuts but has warned that fiscal buffers are needed to deal with any financial shock.

In its latest economic report card, the IMF said Australia's economy "rests on strong fundamentals" but the near term outlook "remains vulnerable".

The IMF gives Mr Hockey a tick and said it "supported the government's aim to return to a fiscal surplus" while commending Australian authorities "for their sound and prudent macroeconomic management".

The IMF backed the Treasurer's budget strategy and "emphasised the usefulness of early decisions on the spending cut and revenue increases need to reach the fiscal objectives".

However, the IMF appears to be concerned about the rapidly-unwinding investment phase of the resources boom which has been underpinning Australia's economic fortunes.

"A transition phase has now been reached" and "the mining investment boom of the past decade has peaked and the economy is moving to the production and export phase."

The IMF predicts mining related investment will "drop sharply" in the near term and that the recovery of the non-mining sector needs to pick up the slack.

The IMF has also pointed to an "overvalued exchange rate" which is weighing down the non mining economy.

The Australian dollar is currently buying 90.3 US cents in contrast to the Reserve Bank's ambition to lower the currency to around 85 US cents.

With the dollar still strong, the IMF has urged the Reserve Bank to keep the cash rate at its historic low.

The IMF has also pointed to Australian employment and that "labour market conditions have softened" as the jobless rate rises.

Software minnow takes on Tax Office over tender veto in David vs Goliath battle

A small software company is taking the Australian Tax Office to court in a case that could expose the way federal government tenders are approved, awarded and sometimes vetoed.

The Melbourne-based Reveal Tools had been the successful applicant to supply workplace productivity software to the ATO and allegedly told its tender had been superior to the existing supplier.

But now the company has now launched a potential David and Goliath legal battle after the ATO abruptly said the contract had been cancelled in "the public interest".

Reveal Tools has lodged a $4.5 million claim in the Federal Court alleging the ATO has attempted to crush the company.

The company's chief executive Paula Crouch acknowledges the "David and Goliath" factor in taking on the might of the Tax Office.

"Without a doubt. They're certainly outgunning us with lawyers and money. But we feel that the ATO should be held to account," Ms Crouch told The World Today.

"But if we can get to court and be heard, then I rate our chance of winning as better than even odds."

Reveal Tools lodged a $6.7 million bid for the ATO contract in February 2011 and spent $770,000 over 12 months developing the proposal.

Ms Crouch says she was advised by the ATO in July 2011 that Reveal Tools was the preferred tenderer only to later learn in a telephone call that the deal was off.

The ATO's reasoning, according to Ms Crouch, was that it was no longer in the public interest to continue with the tender.

"I was absolutely devastated," Mr Crouch said.

"From champagne and celebrations we met with their lawyers and finalised the contractuals and we given the heads up that it would take about two weeks for them to sign off on the final contract.

"It was all handshakes and smiles. Then come December I got a call and they just said they'd basically changed their mind, they didn't have the budget and the whole thing was off."

The ATO has refused to comment on the legal challenge from Reveal Tools, which will be heard in the Federal Court on Friday.

"We are unable to comment on matters before the court. The ATO adheres to the Commonwealth Procurement Guidelines," a spokesman told the ABC.

The case could shine an unwelcome light on how the federal government's multi-billion dollar tender process is administered.

Reveal Tools has cited the recent case of $223 million tender for the Australia Network which was cancelled by the Gillard government after a panel recommended it be awarded to Sky News.

Tax Office watchdog investigating Bill of Rights for taxpayers

The man who watches the tax man is investigating calls for a special Bill of Rights for taxpayers who think they're getting a raw deal.

The Inspector-General of Taxation - whose job it is to scrutinise the operations of the Australian Tax Office - has put the proposed Bill of Rights at the top of ten systemic issues he wants to review this year.

A Bill of Rights if approved by the Federal Government could replace the current Taxpayer Charter which is administered by the ATO and not legally enforceable.

Ali Noroozi is reviewing the viability of a Bill of Rights for taxpayers as part of his powers to monitor the ATO's systems and to make recommendations for improvement.

"People have come to us saying they've had bad experiences with the Tax Office and they don't feel they're being appropriately compensated or that there is not an appropriate avenue for them to take complaints further," Mr Noroozi told AM.

"The question I'm asking if whether there is a systemic issue here and I want to explore whether what we already have by way of the Taxpayer Charter, whether they are adequate and whether we need to go down somewhere towards a taxpayer Bill of Rights."

While Mr Noroozi says there is not a groundswell for better taxpayer protection, some jurisdictions in the United States have introduced a taxpayer bill of rights and Canada is also considering one.

But he agrees that agrieved taxpayers want "some kind of enforceable remedy" which is not available through the ATO's taxpayer charter.

"They want something they can go to court with when they feel that the Tax Office is not living up to its charter. The taxpayers charter is just a declaration by the Tax Office  as to what taxpayers can expect from them and what it expects from taxpayers.

"It does not necessarily create any legal right as such."

Mr Noroozi says the ATO's taxpayer charter - created in 1997 under the Howard government - was designed for different times. But he agrees its administration by the ATO creates at least the perception of a conflict of interest.

"You're right. And that's why people have come to us because they feel that it's all very well for these expectations but without something they can act on, it's not all that useful."

Ali Noroozi first raised the issue of a taxpayer Bill of Rights as "an emerging theme" in last year's annual report from the Inspector-General of Taxation but has now put it on the agenda of his new work plan for 2014.

But the path to a taxpayer Bill of Rights could be a long one.

If make Mr Noroozi makes a recommendation after extensive consultation, the Abbott government would need to pass legislation to introduce a Bill of Rights.

But as the Federal Government seeks to cut costs across departments and agencies, any threat to tax revunue through legally enforceable taxpayer rights could rule out any changes.

Ali Noroozi would not comment on how the ATO would respond to his investigation but conceded that tensions are inevitable.

"My job is not to have cups of tea with the Commissioner of Tax. My job is to scrutinise. But naturally there would be some tension from time to time," Mr Noroozi said.

"But I think that's good for the system and why you have a scrutineer."

From "google schmoogle" to bargain basement - Telstra finally offloads the one-time "jewel in the crown"

For years, Sensis was regarded as a glittering jewel in Telstra's substantial crown.

And it was such a promising jewel that Telstra's former chief executive Sol Trujillo once dared to compare Sensis to the global seach giant Google when he uttered two now immortal words:

"Google schmoogle".

The financial strength and potential of Telstra's directories business was constantly in the news, and at the time of the "google schmoogle" comparison in 2005, Sensis was seen as a key to Telstra's survival before the final T3 float.

During the years when Telstra was run by Sol Trujillo and his predecessor Ziggy Switskowski, speculation that Sensis would be sold in a public float to underpin Telstra's diminishing treasure chest was constant.

The former chief executive of Sensis, Bruce Akhurst, often quipped that no interview I conducted with him would be complete without me asking the "Sensis float" question.

While Sol Trujillo's "google schmoogle" quote was described as arrogant, his faith in the growing Sensis business was underpinned not just by the White and Yellow Pages but once lucrative search brands such as Whereis and Citysearch.

In a sign of its confidence, Telstra splashed out $636 million in 2004to buy The Trading Post to get into the lucrative classified advertising market, outbidding Fairfax Media and Kerry Packer's Publishing and Broadcasting Limited.

Charles Falkiner, who founded The Trading Post with his late wife in 1966 for $24,000, sold the business to a Dutch company for substantially less and described Telstra's 2004 purchase as "mind-boggling".

Fast forward from 2005 to now, and the Sensis business has been overshadowed by the lightning fast expansion of online search engines and dozens of tablet applications where algorithms "do the walking" rather than the Yellow Pages.

Not long ago, offices - like ABC newsrooms around the country - were littered with phone books of the white and yellow variety.

Now, phone books are more often than not used to raise the height of computer monitors but even now that practice is less common as offices "opt-out" of the delivery of hard copy phone directories.

To put it more brutally, Telstra's $636 million purchase of The Trading Post - a single business in the Sensis family -  vastly outweighs the $454 million Platinum Equity paid for Telstra's 70 percent share in the Sensis business.

The demise of the Sensis business once again demonstrates that no company can quarantine itself from rapidly changing technology and consumer tastes that are now determined by an app on a smartphone or tablet.

Telstra is most likely glad to be offloading Sensis for what it sees as a fair price.

But it might well be reflecting on the award winning "Not Happy, Jan" advertisement that once encapsulated the the value and vitality of the Sensis offering a decade ago in a different world.

  

Bluff or not, Indonesia's live cattle ban threat hurts Australia's reputation

The latest threat from Indonesia to freeze Australia's live cattle trade takes the fallout from the spying scandal to a disturbing new level.

So far this been a war of words and tense diplomatic exchanges, some of which have been conducted over social media and retweeted around the world.

Now the sabre-rattling poses both a perceived and real threat to Australia's live cattle exports which is estimated to be worth around $174 million a year.

Regardless of whether the latest salvo is a bluff, the damage to Australia's reputation as an honest broker in the world of trade and diplomacy is being harmed by the day.

Live cattle is one area where Indonesia could apply pressure and tensions look set to ramp up unless the Prime Minister comes forward with the sort of face saving apology President Susilo Bambang Yudhoyono appears to be seeking.

Today's escalation comes as Australia prepares to take over the chairmanship of the G20 from Russia on December 1.

Indonesia is a powerful G20 member so at the very least, the diplomatic arm twisting could grow more intense given that G20 meetings are billed as opportunities to foster and strengthen trade relations.

It's likely that Indonesia could flag the option of boycotting future G20 talks as part of the protest.

Australia hosts the G20 leaders summit in Brisbane next November and in the meantime, organisers from the Department of Prime Minister & Cabinet will be in damage control mode to neutralise fallout from the spying revelations.

And there'll be more scrutiny on intelligence and communications security than usual given claims that G20 meetings have been bugged by foreign governments in the past.

Words as bullets - Glenn Stevens mouths "intervention" option and dollar falls

The overnight fall in the Australian dollar shows - once again - that just a few carefully targeted words from Glenn Stevens have the power to move markets.

While Mr Stevens didn't say the Reserve Bank was about to intervene to pull the dollar down, his comment that the option was in the monetary policy "toolkit" proves that words from central bank governor can be timely bullets.

And the impact-laden comments show the Reserve Bank's frustration in its attempts to lower the dollar, despite 2.25 percentage points in cash rate cuts since late 2011.

The dollar's fall accelerated as Mr Stevens rolled out  the "intervention" word, even though he has used this type of language before in keeping the option open and refusing to rule anything in or out.

But speaking to an audience of dollar-focused market economists and journalists, Mr Stevens knew his comments would hit the newswires immediately and take the stubbornly high dollar even a bit lower.

"Our position has long been and it remains that intervention can, in the right circumstances, judiciously used, be effective and useful," Mr Stevens told the Australian Business Economists annual dinner in Sydney last night.

"It can't make up for policy weaknesses in other areas and it can't really stand against fundamentals but subject to those conditions, if it works with fundamentals, it can be effective and so it remains part of our toolkit."

"That doesn't mean we will always eschew intervention."

While the wording was calm and measured, there was no doubt about the Glenn Stevens' intentions.

Mr Stevens knows even light-hearted comments about Reserve Bank deliberations can set blood pressures racing.

Back in July, Mr Stevens said that the RBA board had “deliberated for a very long time” when it decided to keep the cash rate on hold.

Market economists took that to mean that a rate cut was on the agenda and revised their forecasts accordingly.

Mr Steven’s deputy Philip Lowe was forced to clarify the next day that the comments were part of “a very light-hearted introduction” that the media had misinterpreted.

But even before Glenn Stevens started speaking last night, the Australian dollar had been gradually falling.

It was well-telegraphed that Mr Stevens was the keynote speaker at the dinner so the decline was partly in anticipation of Mr Stevens' likely "jawboning".

Much earlier on Thursday morning the dollar fell from a high of 94.05 US cents after the US Federal Reserve said it might reduce its massive stimulus program "in the coming months".

The decline continued until the dollar bottomed at 91.98 US cents at 5.24 AEDT in what appears to be partly via the Stevens "intervention" comments and heavy selling of the Australian dollar from the United States.

Taking all factors into account, the Australia dollar fell by more than two US cents over that period.

But this morning as reality about the Reserve Bank's task of taming the dollar returned, the dollar recovered to as high as 92.66 US cents.

The Australian dollar has rocketed in the recent years to a peak of 110.61 US cents in August  2011 after Australia sidestepped the global financial crisis and China-led mining investment boom spurred growth.

But manufacturers and exporters have been squeezed,  prompting changes on the industrial landscape including the decision by Ford to exit Australia in 2016.

With a cash rate of 2.5 percent and concerns about rising property prices, the Reserve Bank will be reluctant to cut rates again.

So with the rates cut instrument likely to remain idle in the monetary policy toolbox, talk of currency intervention in the right circumstances is likely to become louder especially if the US Federal Reserve delays its stimulus windback.

IMF urges caution on potential property price "overshoot" - but not worried yet about "bubble"

The International Monetary Fund has cautioned that the recent surge in Australian property prices and rising investor expectations could cause values to "overshoot".

While the IMF does not point to a property bubble in the hot markets of Sydney, Melbourne and Brisbane, it is urging regulators to scrutinise property investment to ensure banks maintain strict lending standards.

"Attention should be paid to the risk - as in any situation where asset price inflation accelerates - that a prolonged period of rapid price growth could give rise to expectations-driven, self-reinforcing demand dynamics and price overshooting," the IMF said in a statement.

"A sudden house price decline, were it to occur - possibly triggered by a shock to household incomes and borrowing costs - could reduce consumer confidence and impact overall economic activity.

"The authorities would need to be prepared to take preventative actions if household credit growth, transactions volume, and prices accelerate."

Source: IMF Article IV Consultation with Australia

The advice comes in the IMF's latest report card on the Australian economy, which says it has "performed favourably" compared with other advanced economies.

Listen to my interview with IMF deputy managing director Min Zhu broadcast on AM

However, the IMF says the Reserve Bank is well equipped to manage any potential price bubble, as it did in the early 2002 when the cash rate increased from 4.5 per cent to cool property speculation.

The IMF also believes Australian households are also better prepared having "built up large mortgage buffers" because of lower interest rates and consumer caution.

The IMF's deputy managing director Min Zhu, who is visiting Australia, told AM that while there is no sign of a housing bubble, regulators need to ensure strict lending standards are maintained.

"The real risk is a financial risk," Dr Zhu said.

"You have to see the qualifications of borrowers, you want to see the quality of the mortgage loan. I think this is the most important things. We need to carefully manage it.

"Particularly if expectation driven investments, you got to be very careful. So once again, the financial sector play a very important role to make sure the quality for long, to make sure the lending standards is there."

Dr Zhu repeated warning from regulators, including the RBA governor Glenn Stevens, that investors should not expect instant capital gains from property.

"No, you don't want to jump into the market and expect to see a huge return. It will never happen," he said.

The IMF has also endorsed the strength and stability of Australia's "big four" banks, but warned that "vulnerabilities remain".

"The four major banks are systemic with broadly similar business models and their reliance on wholesale offshore funding, although falling, still represents a risk," the statement says.

The IMF says that while stress tests show Australian banks "could withstand a number of sizeable shocks", the effects would "make major inroads into their capital buffers."

The IMF says that in the event of an shock - similar to a Lehman Brothers collapse - banks would possibly require intervention from the Reserve Bank.

"Banks would also likely require RBA help to withstand an extreme funding shock," the IMF says.

"Banking sector vulnerabilities should be assessed on an ongoing basis to manage the risk that systemically important banks pose to the economy."

Dr Zhu says while the reliance on offshore funding by banks is declining, it still poses a risk but one that can be managed.

"The whole banking sector still relies on the offshore funding. The one thing is that Australian banks have a good reputation and good quality ratings so they will be able to maintain a sustainable funding flow." 

Indonesian spying scandal could overshadow Australia's G20 chairmanship

By Business editor Peter Ryan - analysis

The revelation that Australia has been spying on Indonesia is likely to cast a diplomatic shadow over preparations for the next G20 summit.

The eavesdropping on the phones of President Susilo Bambang Yudhoyono, his wife and cabinet ministers comes as Australia prepares to assume the G20 chairmanship from Russia next month.

The next G20 leaders summit will be held in Brisbane in November next year and is being billed on the Prime Minister's website as "the most significant meeting of world leaders Australia has hosted".

The G20 summit is also being trumpeted as "Australia's opportunity to influence the global economic agenda" and to "strengthen engagement with the world's major economies".

But as the Indonesian spying scandal escalates, the big picture global issues and Australia’s moment in the global limelight risks being clouded or diverted.

With as many as four thousand delegates including heads of government, finance ministers and central bank governors set to attend, the pressure to ensure secure communications will be more intense and complex than usual.

It's also anticipated that around three thousand journalists will also be attending and some will be gripped by recent spying scandals and wondering if intelligence agencies will have a covert seat at the G20 table.

Australia's growing impasse with Indonesia comes amid more evidence - if needed - that eavesdropping on foreign leaders is a common practice even between friendly nations.

An earlier diplomatic flashpoint was the revelation that US intelligence broke through three levels of encryption to intercept mobile telephone calls made by the German chancellor Angela Merkel.

And in the past, there have been unsubstantiated allegations that G20 meetings have been frequently bugged by foreign governments.

Just last week, the former cybersecurity adviser to Presidents Obama and George W Bush expressed concern that cybersecurity was not on the G20 agenda.

Melissa Hathaway, now an advisor to thetechnology giant Cisco, told AM the episode showed how widespread surveillance has become around the world.

But without confirming or denying whether such eavesdropping activity takes place, Ms Hathaway signaled it was common practice.

"Citizens should expect that our governments are doing everything in their power to enable a productive and safe lifestyle," Mr Hathaway told me.

"Each of our governments approach that differently."

There's no doubt that the G20 Taskforce set up by the Department of Prime Minister and Cabinet will be in damage control mode to ensure the Brisbane G20 runs smoothly and that unhelpful issues such as spying are neutralised as quickly as possible.

Turnbull warns of "daunting challenge" in getting NBN back on track

The Communications Minister Malcolm Turnbull has warned it will be a "daunting challenge" to get the National Broadband Network back on track.

Mr Turnbull was speaking at a conference in Sydney to update the telecommunications industry on whether the NBN would be delivered on time and on budget.

Listen to my analysis from The World Today.

The NBN Company is currently in the middle of a 60 day review ordered shortly after the Coalition was elected.

But the outcome is becoming a headache not just for Mr Turnbull but the entire telecommunications industry which is looking for certainty after the instability of the Labor years.

When the review ends on December 31, industry stakeholders will want a clear answer on whether the NBN will be delivered in a fashion that works not just for the Coalition but for them.

While Labor's fibre to the home version was costed at $44 billion, the Coalition's fibre to the street corner using Telstra's copper wire to home is more modest at around $29 billion.

But anything is possible given Mr Turnbull's comments earlier this year that all options will be assessed during the review.

Mr Turnbull made the point this morning that the Labor government had no business in undertaking such a massive financial project with underwriting from the private sector.

Political issues to one side, Mr Turnbull is now warning of "bumps in the road" in the rollout of "a colossal undertaking" which is now "a daunting challenge".

It's easy to get the impression that Mr Turnbull is carefully managing expectations about how and when the NBN will eventually be rolled out.

"Make no mistake. To get this project back on track and completed in a reasonable time frame at a reasonable cost is a daunting challenge," Mr Turnbull said.

Participants at "The NBN Rebooted" conference hosted by the Communications Alliance would have been disappointed at the "no show" of NBN executive chairman Ziggy Switkowski who was billed earlier as keynote speaker.

However a spokesman for Mr Turnbull said Dr Switskowski had never accepted the invitation to speak and that his listing on the conference agenda was mischievous.

It's understood the Dr Switskowski - in the past accessible to journalists including this reporter - has agreed to keep a low profile in line with the communications strategy of the Coalition.

And on the theme of public commentary in relation to the NBN (which was almost daily during the Rudd/Gillard governments) Mr Turnbull said he had ordered the NBN Company and anyone related to the project to "tell it as it is".

"There is no longer any room at the NBN Co for spin or for telling the minister what people imagine he wants to hear," Mr Turnbull said.

"In short, I expect the team, management, the board at the NBN Co to regard every forecast and every decision as something they would be prepared to defend in the prospectus for a public listed company."

In ordering the elimination of "spin" in NBN communications, Mr Turnbull is raising the bar for all government projects.

Mining industry "sharing the wealth" says report - but Mitch Hooke says "laggards" need to do better

The mining industry's chief lobbyist says there are still corporate "laggards" when it comes to ensuring that mining communities get a fair share of benefits from the resources boom.

The comments by the Minerals Council's chief executive Mitch Hooke come as a study shows the resources industry spent $35 billion on community infrastructure, indigenous contractors and local suppliers in the 2011 - 2012 financial year.

That is $14 billion more that the $21 billion dollars the the industry is estimated to have paid in company tax and royalty payments in the same year.

The research by the corporate social responsibility consultants Banarra has been released as the political debate over the proposed repeal of the Mineral Resource Rent Tax (MRRT) hots up.

Mitch Hooke told AM that despite the massive spending there are still gaps in communities that need to be filled where the mining industry needs to do a better job.

"Yeah, I think so. Communities are voting with their feet. And they're actually picking on the companies, and identifying the companies that they'd like to be a part of their community. So if you extrapolate that across the industry as a whole, you'd come to the conclusion that we've got some laggards and they need to pick up their act if they're going to be part of the new equation," Mr Hooke said.

The Banarra study, based on a survey of 25 Australian mining companies, found that $34.7 billion was spent on community infrastructure, Indigenous contractors and local suppliers.

According to research by Deloitte Access Economics, the spending exceeds the projected returns from the MRRT and company tax and royalty payments from mining companies.

Infrastructure projects funded by mining companies include health care centres, education and training, sporting clubs, swimming pools and transport services.

But Mitch Hooke said the spending was not a "philanthropic exercise" to appease critics of the mining industry.

"There still has to be a business case to it. But the benefits of that community investment and that community contribution, they extend beyond the direct benefits of the company. And so therefore there's knock on effect to the community as a whole," Mr Hooke said.

And Mr Hooke said the mining industy was committed to assessing infrastructure spending despite concerns that the investment phase of the mining boom is peaking.

"There's a correlation between the extent of economic activity and the level of investment. But it's not going to fall off the edge of a cliff.  It's coming off down the other side

"I think you've got to have the social license. You've got to have the confidence of the communities in which you're operating and the business case for investing in those communities, not only as a source of skills and as a source of goods and services and supplies,  but also confidence that the mining industry is part of their local community and therefore part of their quality of life."

Mr Hooke also had a sharp response to critics who believe spending on social infrastructure is something the mining industry should be doing anyway.

"Well I agree. We agree wholeheartedly. The argument is, from the former government, was that we weren't doing it. So we agree that we should be investing in those communities. We agree that a social license to operate is a fundamental platform for the manner of our business. And we agree there's a very strong business case for having vibrant and strong communities."

And Mr Hooke agreed that attitudes to community spending had changed in mining company boardroom during the resources boom.

"Yes. It's been a transformation. It's almost been a renaissance over the last decade or so. They had a bit of an epiphany. Even our harshest critics will tell you that there's been a massive transformation in the way the industry operates. The cheer squad of enthusiasts will always keep prompting us to do better and that's a good thing."

The Labor Party and the Greens have pledged to oppose the repeal of the MRRT which replaced the more controversial Super Mining Profits Tax introduced by the former Prime Minister Kevin Rudd.