Medibank Private sale a long haul for journeyman CEO George Savvides

It was early September 2001 when I ran into George Savvides on a busy weekday evening at Melbourne’s Tullamarine Airport.

I was unaware of Mr Savvide’s new post as a director on the Medibank Private board, but knew him from the Melbourne business circuit in his previous roles at the pharmaceutical companies Sigma and Healthpoint.

After studying his new business card and offering the usual congratulations, I recall asking him about the big challenges ahead at the government-owned private insurer.

“They’ve brought me in to help sell it off,” Mr Savvides told me with a smile.

At that point, it was clear George Savvide's destiny at Medibank Private would be more than a boardroom advisory position.

But within the week or so, the world changed forever with the September 11 terrorist attacks in New York and Washington.

Like almost everyone back then, Mr Savvide’s hopes and ambitions were hit by the new global uncertainty.

Suddenly, most big financial deals were in the deep freeze and the sale of Medibank Private was among several potential floats of public assets around the world that were taken off the table.

Within seven months, George Savvides was appointed managing director where he carved a reputation for being hands-on in Medibank Private's long haul away from government ownership.

So today’s announcement that the federal government will finally press ahead with a Medibank Private sale through an initial public offering (IPO) is the culmination of an almost fourteen year process led by George Savvides.

It’s been slow grind that has made Mr Savvides one of Australia’s longest serving chief executives who is now on to his fifth Prime Minister.

In the weeks after last year’s federal election – Mr Savvides told me he felt the anticipated sale of Medibank Private could take place during the Coalition’s first term.

Releasing Medibank Private’s financial results last October, Mr Savvides told The World Today the sell-off remained a key Coalition goal.

"I think it is designed that way and certainly we will respond in a manner required to meet the expectations of the owner," Mr Savvides said.

"But I suspect it will be in the first term."

Over the past six months, speculation of a sale has ramped up when the government quietly initiated an independent scoping study to look at the dollars and cents argument of a potential sell-off.

Indeed, the Medibank Private cash cow appears to have been fattened up after the insurer’s full year profit rose by 84 per cent to $233 million.

It has 3.8 million members with an enviable 30 percent share of the health insurance market.

So how much is Medibank Private worth on the sharemarket?

The Finance Minister Mathias Cormann won’t put a number on it, but estimates range from three to six billion dollars.

That would make it one of the biggest public floats since the final sale of Telstra or T3.

Back in 2006 when a potential sale of Medibank Private was legislated by the Howard government, the insurer was valued at more than $4 billion.

However, Medibank Private’s market value was thought to be around half that so in recent years the government has been waiting for the right time and a better price tag.

With the float preparations still in their early days and bankers yet to be appointed, Mr Savvides is not surprisingly unavailable to speak to the ABC despite the day’s big news.

However, back in October he said Medibank should “value well”.

"Medibank certainly is a mature organisation now, nearly a $6 billion company paying taxes and dividends. So it may be a time to actually be owned more broadly."

Matthias Cormman makes the point that there is no compelling reason for the government to still own Medibank Private.

And the sale removes the conflict of interest where the government is both the market regulator and majority player in a private market.

Investors in a sharemarket-listed Medibank Private may well be some of the insurer’s customers who, through high premiums, might regard themselves as owners of the company.

Those taking a punt will be hoping that Medibank Private follows the form of the Commonwealth Bank – once a government asset which has made many early investors wealthy on paper.

But for George Savvides and Mathias Cormann a new era of hard work is beginning as lead bankers strike the best price for Medibank Private and the taxpayer in an era of government austerity.

RBA warns banks not to fuel real estate speculation with weak lending standards

The Reserve Bank has again warned Australian banks not to fuel real estate speculation by weakening their lending standards.

In its latest Financial Stability Review, the central bank says "the pick-up in lending for houses would be unhelpful if it was a result of lenders materially relaxing their lending standards".

And in a direct message to the Big Four banks, the RBA says "it will be important for financial stability that banks do not respond by unduly increasing their risk."

The Reserve Bank's warning to banks follows similar concern from the banking regulator APRA (Australian Prudential Regulation Authority) about relaxed lending standards in the face of rising property prices in Sydney and Melbourne.

While the RBA does not refer to a property "bubble", it again warns investors about the risks of real estate investment and that low rates "have the potential to encourage speculative activity in the housing market."

The review echoes warnings made repeatedly by the Reserve Bank governor Glenn Stevens that real estate investment was not an assured path to easy capital gain.

"It is important for both investors and owner-occupiers to understand that a cyclical upswing in housing prices when interest rates are low cannot continue indefinitely," today's review said.

"And they should account for this in their purchasing decisions."

The RBA also says there are indications that some lenders are using less conservative assessments when determining the amount of money which can be lent.

The comments from the RBA saw the Australian dollar remain steady at around 91.6 US cents on speculation that the next move for the cash rate will be up from a record low of 2.5 percent.

Westpac's chief economist Bill Evans recently dropped his forecast of two more rate cuts this year and is now predicting a rate rise in 2015.

The Reserve Bank is also concerned that household debt is "still around historic highs" and that unemployment is trending upwards.

"Continued prudent borrowing and saving behaviour is needed to underpin the financial resilience of households," the RBA says in the review.

"The recent momentum in household risk appetite and borrowing behaviour, in particular, therefore warrants close observation."

The RBA gives the overall financial system a tick of approval and says indicators of financial stress remain generally low.

ASIC boss wants civil penalties for corporate crime that "inject fear"

The corporate regulator says Australia is too soft on white collar crime and that civil penalties here are a slap on the wrist compared to other parts of the world.

In a major report comparing penalties, the Australian Securities and Investments Commission (ASIC) says the rewards of corporate crime can often outweigh light penalties.

"Clearly what we found was with criminal penalties, we're reasonably consistent but in relation to civil and administrative penalties, we're actually somewhat inconsistent," commission chairman Greg Medcraft told ABC's AM.

Mr Medcraft says one of the big problems for ASIC is that penalties for corporate crime are often small in comparison to the proceeds of the crime.

A recent example is the insider trading case against the former Gunns chairman, John Gay.

"Often [internationally] the penalty is you get to disgorge your financial gain and in fact the concept in many jurisdictions is triple damages," Mr Medcraft said.

"You actually have a penalty that is three times your gain and if you think about it, that is actually what having a deterrent is all about is that if you wanted to consider breaking the law then there will be a significant penalty."

The report suggests that access to disgorgement laws, which allow the seizure of any ill-gotten gains of convicted corporate criminals, would improve the situation.

"Frankly, if in fact you are considering whether to break the law and it's a risk/reward decision, many people weigh up what the penalty will be or may be versus the gains to be obtained," Mr Medcraft said.

"And you've actually got to incent the right behaviour and those that intentionally break the law should be well aware that there's going to be a significantly adverse outcome and they won't get a financial gain.

"Now what we've got to have is penalties that actually inject fear and that overcome that urge perhaps to break the law via greed."

Currently the maximum civil penalty for crimes like insider trading and market manipulation in Australia is around $200,000.

ASIC says in Canada the equivalent penalty is around $1 million, and in the United States the penalty is three times the profit gained or loss avoided.

"What you have to do is have a system that makes it very clear that if you cross the line, there will be significant penalties and I think that is very important," Mr Medcraft said.

Mr Medcraft also confirmed ASIC is monitoring Leighton Holdings amid reports the company is sitting on undisclosed write-downs of more than $2 billion.

"Directors, under continuous disclosure, have an obligation that if it is a material fact that would have a significant impact on price or material impact on price, it is something that they need to disclose," Mr Medcraft said.

"What we'll do is see how they approach that issue." 

Qantas: What's the future for the flying kangaroo?

For most ABC correspondents, boarding a Qantas 747 or perhaps more recently a Qantas A380 is often the first memory of a usually hard fought but ultimately exciting post overseas.

Here's my piece broadcast yesterday on the ABC's Correspondents Report.

Packing up your life in Australia, farewelling families and friends, while feeling the pressure to hit the ground running to win over critics back home, can fade temporarily in that unreal world of long haul travel - even better if your seat allocation is at the pointy end.

Qantas of course was once an essential part of overseas jaunts for business and government travellers - and for many Australians, boarding the "flying kangaroo" was welcome comfort that felt like "home".

But as aviation has become a globalised business, badly damaged by the terrorist attacks of September 2001, Qantas like most national carriers has struggled to maintain its once iconic status.

Greater competition, cheaper seats, and savvy travellers who expect more for less while venting their opinions on sites like TripAdvisor - means profit margins have narrowed.

And in recent years, Qantas has been making heavy losses on its international business.

Now its once lucrative domestic business is under pressure and Qantas is in a loss making war to maintain its 65 market share over Australian skies.

It's chief rival,  Virgin Australia - which began as a cut price airline in the wake of the Ansett collapse - is now enticing corporate customers to come on board.

And late last year, even the ABC sidelined Qantas to make Virgin its preferred domestic airline.

The sad reality is that life is getting tougher by the day for Qantas - and just a few weeks ago it posted a half year loss of $235 million and announced the axeing of 5,000 additional jobs as part of a two billion dollar restructuring program.

Standard & Poor's downgraded its credit rating to "junk" on the day Nelson Mandela died, meaning Qantas can no longer claim to be the only "investment grade" airline left in the world.

So how did Qantas get into this mess?

The most obvious answer is that "this the free market" and the forces of supply and demand are at work.

And after all, Qantas is listed on the sharemarket as one of Australia's top one hundred companies by market value - though getting close to the tail end of that list.

But the other more complex part of the story is that Qantas remains shackled by government regulation through the Qantas Sale Act of 1992 which restricts foreign ownership to 49 percent.

Virgin, on the other hand, has been able to attract significant foreign investment and lists three state-owned airlines as its top three investors  - Air New Zealand, Etihad and Singapore Airlines.

Combined, they own more than 60 percent of Virgin stock and have signalled interest in maybe buying more.

Qantas has been furiously lobbying the federal government to have the Qantas Sale Act repealed or amended so it can compete on a level playing field with Virgin.

But the messages became mixed - when Qantas also urged the government to provide a standby debt guarantee - where Qantas would use the government's sovereign credit rating for borrow at a more attractive rate than "junk".

The proposal sparked a national debate over whether any flavour of government should risk potentially owning the debt if Qantas ever defaulted.

Not surprisingly, Virgin's chief executive John Borghetti said he'd be asking for the same treatment "within 24 hours" if the Qantas bid was approved.

But providing that debt facilility was never going to fly with Federal Cabinet once the Prime Minister ran his "if not one, why not all" argument on the day Qantas announced fIve thousand job cuts.

While Tony Abbott did agree to repeal the Qantas Sale Act he did so knowing there's little or no chance that the Senate will pass it.

So Qantas knows its campaign is mired in politics more than ever - and that the government is using the repeal of the Qantas Sale Act as a political wedge against Labor.

But even if Labor did agree to back the Sale Act repeal, it would almost certainly find itself in a war with trade unions especially if any new legislation saw more Qantas jobs move offshore along with maintenance, the Qantas head office and maybe even the Qantas board.

And while the government's move to amend the Qantas Sale Act is significant, it comes after both the Prime Minister and Treasurer urged Qantas to "get its house in order".

That's seen as code for "workplace reform" as the government continues to question "the age of entitlement" and  sections of enterprise agreements relating to troubled companies such as SPC Ardmona and Toyota.

And the government's proposal to provide highly qualified support for Qantas comes as preparations begin for a Royal Commission into trade unions.

Undoubtedly, the role of unions at Qantas could become part what's expected to be a wide-ranging inquiry.

And in the background, calls are growing louder for Alan Joyce to quit as the airline's long serving chief executive.

The Irish born Australian citizen - who controversially grounded the entire Qantas fleet in late 2011 in his fight with unions - is vowing to stay on.

Alan Joyce once joked in his first ABC interview as Qantas boss back in 2008 that he took a "hospital pass" from his tough talking predecessor Geoff Dixon.

The question now is whether any corporate warrior would have the nerve and stamina to take a hospital pass from Alan Joyce.

Malaysia Airlines disappearance rewriting the issues management text book

The disappearance of Malaysia Airlines flight MH370 is quickly becoming a new chapter in the crisis management text book.

Three days after the Boeing 777-200 disappeared from the skies around Malaysia and south of Vietnam, the absence of wreckage or any sign of what really happened is only fuelling unhelpful speculation.

That speculation is deepening the distress for families and friends of the 239 souls on board as the reality sinks in that the journey for "closure" isn't even close to beginning.

Malaysia Airline officials have ticked the first box of crisis management by keeping families and the media constantly informed despite an eerily unchanged message that there is nothing new to report.

With journalists under pressure to feed the 24/7 news cycle, reports from both Kuala Lumpur and Beijing have had nothing tangible to add apart from unconfirmed talk and images of distressed family members.

In today's world of hi-tech communication, it feels unusual not to have instant reasons and outcomes given public expectations that television news will produce instant pictures of wreckage and final words from a black box recorder.

The social media generation of Facebook and Twitter have been platforms for the fuelling of speculation that ranges from terrorism to Bermuda Triangle comparisons to extra-terrestrial intervention.

One of Australia's top crisis management experts, Michael Smith of Inside PR, says the Malaysia Airlines disappearance is testing the skills and experience of crisis management professionals.

"I don't think it gets much bigger or any more difficult than this one because there's a paucity of information" Mr Smith told the ABC.

"One of the ways to manage a crisis effectively is to get as much information out as you as quickly as you can and as regularly as you can. But here there is little or no information and that makes the mood grimmer and grimmer and the prognosis grimmer and grimmer.

"It's also a testing crisis to manage because the audience is so broad. The families are from all over the world and its difficult to communicate with them directly.

"But to the poor families who are grieving for the victims every second is very, very painful."

Mr Smith, a former editor of The Age, says that unlike most crises, the lack of any immediate "closure" or party to blame is prolonging the agony for families and friends.

"Familes do want closure, they want certainty and unfortunately it's human nature that people want someone to blame," Mr Smith explains.

"But there's no evidence to even point the finger at what has caused this and you can understand the anger building up amongst not just the families but anyone who is observing this crisis."

However, Mike Smith says despite criticism from China over a lack of action, Malaysian Airlines has followed all the critical rules of crisis management.

"I think they've done extremely well under all the circumstances because they've had nothing to provide but they're providing nothing regularly," he said.

"People managing a crisis like this have to be very careful not to speculate because they can go a step far and say something that ultimately turns out to be dead wrong."

Mr Smith - regarded as one of the "go-to" professionals in a crisis - agrees the crisis management text book will be rewritten to reflect the Malaysian Airlines disaster.

"Every major disaster brings a bit of a bit of an update and a rewrite because technology changes, politics changes, the globe changes," Mr Smith said.

"Other issues are already emerging from this such as passport controls. There are learnings from every crisis and it makes it easier to handle the next one."

Crisis management professionals and executives from Malaysia Airlines know they're in for the long haul with evidence, outcomes and ultimate blame out of reach as the mystery continues.

Qantas future goes to Federal Cabinet

                               

By Business editor Peter Ryan

The future of Qantas will be high on the agenda when federal Cabinet meets later today.

Today's deliberations will be the first of many after last week's announcement that five thousand Qantas staff will be sacked as the airline seeks to save two billion dollars over three years.

Qantas has been lobbying the federal government for months to provide a standby debt guarantee or to change the Qantas Sale Act which restricts foreign ownership to 49 percent.

However, Prime Minister Tony Abbott last week dashed the airline's hope of a debt guarantee last week saying that if the commonwealth made it available to one company it would have to offer it to everyone.

Instead, Mr Abbott is expected to focus on the Qantas Sale Act which he has described as "a ball and chain" which restricts the airline’s ability to attract foreign investors.

Coalition hardliners, such as the Nationals leader Warren Truss, are sceptical of the Qantas claims and are reluctant to immediately support moves to overhaul the current foreign ownership restrictions.

Any move to change to Qantas Sale Act will be blocked by the Senate and last week Mr Abbott called on Labor to provide bipartisan support.

Qantas maintains the current limits put it at a disadvantage to its chief rival Virgin Australia which has been able to able to raise capital from three state own airlines, Air New Zealand, Ethihad and Singapore Airlines.

Qantas has rejected a compromise proposal to maintain the 49 percent foreign limit while easing single ownership limits within the cap to manage fears that Qantas could fall out of majority Australian ownership.

A spokesman told the ABC this morning: "you either level the playing field or not. Just tilting it doesn't fix anything".

Meanwhile, The Greens and independent senator Nick Xenophon will ask for any inquiry into the future of Qantas when parliament resumes today.

However, without Labor support the move is likely to fail.

Qantas has also refused to rule out the option of taking Virgin Australia to court over claims its has manipulated foreign ownership rules.

Last week, Qantas and Virgin revealed after tax profit losses of $235 million and $84 million as a discounting war on domestic routes damages both airlines.

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.