Reserve Bank sounds alarm about commercial property sector

The Reserve Bank is becoming concerned about a price bubble building in the commercial property market.

In the minutes from its board meeting a fortnight ago, the RBA sounded an alarm about steep price rises particularly in the hot Sydney real estate market.

"Risks had been beginning to building in commercial property markets, including developers of residential and non-residential property," members noted.

"Prices in several market segments had been rising, even as vacancy rates remained high and leasing conditions weakened."

The caution comes as market watchers ramp up warnings about dangerous asset price bubbles building in real estate around the world.

The RBA also remains concerned about the residential sector, particularly in Sydney and Melbourne, and that February's surprise interest rate cut to a historic low of 2.25 percent could fuel investor interest.

"At the margin, the recent decline in interest rates could boost the housing market, including prices," the minutes say.

However, the RBA said that recent measures announced by the APRA (Australian Prudential Regulation Authority) and ASIC (Australian Securities & Investments Commission) were designed to "temper housing market risks" faced by both households and lenders.

"Although these risks need to be placed in the context of the prevailing low levels of household stress."

The minutes also show that the decision on March 3 to keep the cash rate steady at 2.25 percent was a close call so the RBA could assess the impact of the surprise February reduction.

"Members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change," the minutes note.

"They also saw advantages in receiving more data to indicate whether or not the economy was on the previous forecast path."

The RBA board also signalled it is waiting on a decision by the US Federal Reserve on the direction of the Federal Funds rates which has been at between zero and 0.25 percent since the depths of the global financial crisis.

The board noted "the greater degree of uncertainty about the behaviour of borrowers and savers in a world of very low interest rates".

The minutes also confirm the RBA will not be relaxed until it sees the Australian dollar fall even further than last week's six year low of 75.7 US cents.

"Although the Australian dollar had depreciated, particularly against the US dollar, it remain above most estimates of its fundamental value."

The Reserve Bank board holds its next meeting on Tuesday (date) and money markets see a 50 percent chance that rates will be cut to a new historic low of two percent.

Australian dollar lowest since May 2009 but RBA says not low enough

In long-awaited good news for local exporters, the Australian dollar has hit its lowest level since the depths of the global financial crisis.

Now markets are betting on how low the dollar could go as the softer currency starts working its way through the economy.

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

Earlier this morning the dollar went as low as 75.6 US cents - the lowest point since May 2009 in the wake of the Lehman Brothers collapse.

The lower dollar represents a welcome shift for the Australian economy after peaking at more than 110 US cents in August 2011 when Australia was riding the wave of the mining boom.

While the surging dollar was great news for anyone travelling overseas - especially to the United States -   it was crunching local exporters.

Many smaller players went to wall and big local manufacturers like Ford, Holden and Toyota are now moving offshore citing the high dollar as one factor.

But now, the tables are turning with the dollar lower in part because of good economic news in the US is fuelling a resurgent greenback.

Yesterday, Reserve Bank assistant governor Chris Kent noted that exports of services like tourism and education are bouncing back and in terms of income, they're overtaking exports of iron ore which is now below 58 US dollar a tonne this morning.

Over the past year, the RBA has cited 75 US cents as an approximate target for the Australian dollar but speaking in Hobart yesterday, Chris Kent sent signalled that the dollar might need to go much lower to provide maximum relief for exporters.

Economists remain focussed on when the Reserve Bank might cut the cash rate again to put downwards pressure on the Australian dollar.

A key focus will be on official employment figures from the Bureau of Statistic for February to be released this morning.

Most economists think the jobless rate for February will remain steady at around 6.4 percent with some predicting a slight fall to 6.3 percent.

However while the unemployment figure remains in that vicinity still the RBA has good reason to be be nervous especially with predictions that it could peak later this year at 6.75 percent.

"The Australian dollar has depreciated by nearly 20 percent on a trade weighted basis  since its peak in mid 2013 and is starting to play a role in helping the economy to adjust," Dr Kent said.

 "While the depreciation seen to date will be helpful it's still our assessment that our exchange still remains relatively high given the state of our overall economy."

Cheques not dead yet, but demise is in the mail

The future of cheques as a payment method for many Australians is continuing to slide with transactions falling by almost 14 per cent in 2014.

In a sign that rusted-on cheque users are adapting to changing times, electronic payments grew in the same period with payment card use up by 8.8 per cent and direct debits by 7.5 per cent.

The Australian Payments Clearing Association, which regulates the payments industry, says while cheques are gradually falling out of everyday use they are still being used for major business transactions and property settlements.

The research adds to evidence that cheque use has been declining over the past decade with a 71 percent demise between December 2002 and December 2014.

APCA's chief executive Chris Hamilton told AM that although a "hard stop" to cheques was unlikely,  users should consider switching to electronic alternatives which are now secure, cheap and reliable.

"Older people are much more likely to use cheques than younger people. What the most recent figures show us is that cheques are falling out of general ordinary everyday use quite quickly," Mr Hamilton said.

"Cheques reached their sort of high point in the mid 90s and they've been in decline ever since. The first part of that was quite slow but I think now we're seeing the volumes of them dropping off. So I expect that within the next few years I'll be quite rare to see a sort of cheque in everyday ordinary usage, although they will still be used for specific types of transactions."

But Mr Hamilton says while cheque usage is unlikely to bounce back, banks are unlikely to cease accepting them for the time being.

"It's unlikely that in Australia we're going to have a sort of hard stop. That's been talked about in various countries around the world that perhaps didn't have as strong a tradition of cheques as we do where they have actually turned the cheque system off," Mr Hamilton said.

"What's more likely to happen is if people want a cheque book then they'll have to find an organisation that wants to supply that. Increasingly their biggest problem will be the payees don't want to accept their cheques. So over time it's going to get harder and harder to use them."

Mr Hamiton said the biggest concern for banks and consumers is the cost of processing cheques which can cost five dollars per payment.

But he says the increasing trend for merchants to switch from accepting cheques to electronic payments only will ultimately encourage ever "rusted-on" cheque users to make the switch.

"It is very cultural. And I'm not sure that it's to do with specific issues about security or anything like that. In fact according to our statistics the fraud rates on cheques, while they're low, are still higher than for example what we would call a direct entry payment, which is the sort of basic electronic payment that goes through the system," Mr Hamilton said.

"So I don't think it's really a security issue. I think it's much more what you grew up with and what you feel comfortable with. And so we see it as a process of gradually saying, hey look, there is another alternative. It might be easier for you to use it once you get yourself set up."

Research by APCA shows the Australians are using less cash with the number of ATM cash withdrawals down by 4.8 percent to 714 transactions valued at $143 billion.

Fund boss says bank pressure on business to switch default superannuation funds is widespread

The head of an industry superannuation fund says the unlawful practice of banks using special inducements to win default superannuation accounts from business is widespread.

Andrew Proebstl, chief executive of LegalSuper, says employers who take inducements from banks in return for switching a fund should be forced to disclose any special deals given that the compulsory superannuation of their staff is exposed.

Earlier this week, AM reported that businesses are regularly offered lower interest rates, banks fees, corporate hospitality and Ipads to switch to a bank-run default superannuation fund which manages the 9.25 percent employer contribution.

Mr Proebstl, who oversees the management of compulsory superannuation for 40 percent of the legal profession, says some employers succumb to the pressure to ensure that don't miss out on business opportunities with banks and insurance companies.

"It is fairly predominant and there are employers who may have commercial business that they conduct with particular financial institutions that offer superannuation funds. They make the decision that by choosing that financial institution's default fund, they may more favourably position themselves to have commercial dealing with that financial institution," Mr Proebstl said.

However, Mr Proebstl said employers had a responsibility to disclose any special deals with banks to staff to avoid real or perceived conflicts of interest.

"Essentially the superannuation savings involved are the savings of the employees, they're not an asset of the employer in any way. The employer would need to be very careful if they were in these sort of circumstances, that they had due process around their selection and decision making processes," Mr Proebstl said.

"If there are circumstances where there is even the smallest potential for some form of conflict of interest, an employer should be obliged to disclose the nature of any commercial arrangement or relationship they have with a super fund they're doing business with."

Mr Proebstl said while employees have a right to know how their superannuation is being managed, they might not be comfortable challenging the decision of their employer to appoint a particular default superannuation fund.

"They basically prefer to have harmony with their employer and would prefer to not do something that might be interpreted by an employer as questioning the decision they've taken," Mr Proebstl said.

The banking regulator APRA and the corporate watchdog ASIC are investigating the claims made by Industry Super Australia in a survey of small and medium businesses.

But Mr Proebstl agrees that while regulators need to enforce the law, the methods used by banks and insurance companies could make the allegations of unlawful activity difficult to prove.

"I think one of the challenges is that many of the dealings are very translucent so it's very difficult to pin particular instances of where this has happened," Mr Proebstl said.

"Ultimately, it really can only be addressed by an increase in disclosure requirements around these arrangements so that members can be fully informed."

Aldi posing real long term threat to Coles and Woolworths, Moody's warns

The rise of the cut-price supermarket chain Aldi is posing a long term challenge to to the traditional retail giants of Woolworth and Coles, according to credit ratings agency Moody's.

While Moody's says Aldi's penetration into the supermarket sector has been at the expense of independent retailers and Metcash IGA, the habits of traditional grocery shoppers are changing.

Moody's vice president and senior analyst Ian Chitterer says the "increasing acceptance of Australian consumers" and Aldi's "aggressive expansion plans" are a long term threat to the duopoly of Woolworths and Coles.

"In such an environment and based on international experience with the growth of discounters, we expect the market shares and margins of Woolworths and Coles to come under pressure over time," Mr Chitterer said in a note to investors.

But Mr Chitterer signalled the rise of Aldi would be gradual and that the Woolworths and Coles dominance was not in immediate danger of being toppled.

"It is important to note that the credit quality of the Big Two - which together account for 60% of Australia's grocery market by value - is supported by strong margins, healthy cash flows and ongoing cost reductions," Mr Chitterer says.

"Accordingly, we do not expect their credit quality to be materially impacted by competition from Aldi over the next 12-18 months".

Aldi's credit status is unrated by Moody's while Coles and Woolworths are both rated as A3 stable.

The long term reality check for Woolworths and Coles comes in a Moody's report released today on the challenges for the two supermarket giants.

The report says that since launching in Australia in 2001, Aldi's has opened 360 stories and now has an 8% share of Australia's grocery market with sales reaching more than $5 billion in 2014.

Moody's now forecasts that Aldi's stores will grow 5 to 6% per annum over the next five years which is double its expectations for Woolworths and Coles.

Just last week as it surprised the market by downgrading its full year profit forecast, Woolworths chief executive Grant O'Brien said the retailer is working to counter the competition and that customers are shopping around for bargains more than ever.

"They've certainly been more value conscious than they've been and that's a continuation of the trend we've been seeing," Mr O'Brien told analysts.

"So smaller baskets more often and that's aligned with modern busy lifestyles."

No rubber stamp from ACCC on postage price increase; regulator to consider Australian Post universal service obligations

                             
The Australian Competition & Consumer Commission says it could take six to nine months to consider Australia Post's plans to increase the cost of a basic postage stamp.

The ACCC chairman Rod Sims told AM the regulator will need to undertake wide consultation to determine the fairness of increasing the stamp price from 70 cents to one dollar.

"The tricky bit is the cost allocation. Usually the cost systems that companies have don't provide the sort of cost allocation. So we need to understand what the efficent cost of a standard letter service is," Mr Sims said.

"Consumers have a right to a particular service at a price that's fair and reasonable so we need to assess what that fair and reasonable price is.

"We'll need to consult with particular users to get their input as well. These things always take time."

Mr Sims said the regulator is yet to formally hear from Australia Post since federal cabinet approved the proposed reforms earlier this week, but confirmed informal discussions had recently taken place with Australia Post chief executive Ahmed Fahour.

Australia Post wants to implement wide reforms to it's business that would include a two-speed postage service for its loss making letter deliveries business so it can focus on the lucrative opportunities in freigh and parcel deliveries.

The ACCC will also examine Australia Post's universal service obligations part of the review given a charter to provide a postal service at an affordable price that meets social and commercial needs of the community.

"Of course, technology has changed but you've got to look after those people who, for one reason or another, whether they be businesses or households still want to send letters. So there is a clear case for having a regulated price on that standard service," Mr Sims said.

"All part of the logic of having the regular service must meet certain universal service obligations and having to work out the efficient costs of that versus the premium service is what we'll be wrestling with."

Mr Sims said the ACCC would examine the proposed postage stamp increase in the same way it consider increases for other utilities like gas, electricity and water.

"I think you just can't take that service away. You've got to keep providing it, certainly for the foreseeable future. The question is what price people should pay.  But I think having that universal obligation makes a lot of sense."

Qantas back in the black after $2.8 billion full year loss - but Alan Joyce warns of more pain to come

Qantas has returned to profit after a painful transformation program that will ultimately cut five thousand jobs and strip two billion dollars in costs from the airline.

The half year after tax profit turnaround of $203 million follows a $2.8 billion annual loss announced last August.

Despite the good news, Qantas boss Alan Joyce says the pain isn't over yet and once again he's rejected suggestions that it's time for him to quit.

I spoke with Alan Joyce after the results hit the market earlier today.

Surprise fall in official jobless rate casts doubt on rate cut talk; Australian dollar surges

The ABC's Peter Ryan analyses the unexpected fall in the official jobless rate. According to the ABS, the estimate for December unemployment fell to 6.1 percent with 37,400 new full time jobs created. The surprise outcome saw the Australian dollar surge and puts new doubts on predictions that the Reserve Bank will cut the cash rate this year.

Here's my analysis from The World Today.

ACCC boss says regional consumers are probably right to feel gouged on petrol prices

Petrol prices - two different worlds in Australia

The competition watchdog has outlined how it hopes to unravel the mystery of volatile petrol prices and uncover why it's cheaper to fill up in the city than in regional Australia.

But the chairman of the Australian Competition & Consumer Commission Rod Sims says regional consumers are probably right to feel they're being gouged by petrol retailers.

Listen to my interview with Rod Sims broadcast this morning on the ABC's "AM" program.

"I think you'd have to say the presumption is that there's a bit of gouging going on in the sense that the price falls internationally aren't being properly passed on into the market place." Mr Sims told AM.

"We need to get more evidence on that, but that's how it looks at first glance."

The ACCC is under pressure to come up with answers after a recent directive from the Small Business Minister Bruce Billson to determine why people in regional Australia paid an additional 17 cents per litre for petrol in December despite a dramatic fall in the price of crude oil.

Back in July, the gap between capital city and regional prices was narrower at an average 5.7 cents per litre.

The ACCC says that every additional cent per litre costs Australian consumers close to $200 million every year.

While the ACCC is yet to prove anti-competitive activity that breaks the law, Mr Sims is looking for behaviour that might "out" petrol retailers for inappropriate community behaviour.

"Now what we're likely to find is people making a lot of profit. We can shine a light on that and it could embarrass some people into lower prices," Mr Sims told AM.

"Just for consumers being more empowered with more information about what the  profit margins are will I think drive more change and behaviour."

Although petrol prices are not regulated in Australia, the ACCC is now equipped with compulsory information gathering powers which requires companies and retailers to provide information at every level of the supply chain.

The ACCC will produce at least eight reports in 2015 which will examine petrol price movements and what drives volatility.

The first report, covering all capital cities and 180 regional locations,  is due next month and will look at international refined prices, terminal gate prices and the exchange rate.

The price of West Texas Intermediate Crude, the global benchmark, rose today by amost six percent to US$48.48 a barrel.

However prices have tumbled by nearly 60 percent since June as strong global supply outstrips waning demand.

Weak economic growth puts interest rate cut on RBA agenda

So what do those surprisingly weak economic growth numbers which hit yesterday mean for interest rates?

And how worried will the Reserve Bank be that about the ultimate risk of a recession unless it steps in with emergency stimulus?

They're big unanswered questions and why some economists are now changing their forecasts to a interest rate cut in the New Year.

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

The Reserve Bank has held the cash rate steady at the historic low of 2.5 percent since August last year.

The mantra - repeated on Tuesday when rates were left unchanged - has been about "a period of stability" as the economy adjusts from the fast unwinding mining investment boom.

The RBA has been taking what it sees as the most "prudent" course, despite calls for a rates hike to cool hot property investment in Sydney and Melbourne and the threat of a dangerous "bubble".

That strategy has been backed by third quarter growth slower than the most pessimistic forecasts and that with a collapse in commodity prices after the boom and a slowing in capital spending, Australia is in the midst of an "income recession".

The RBA board takes January off and meets on the first Tuesday of February - and the possibility of a rate cut to stimulate spending and to bring the dollar down is set to be high on the agenda.

The Australian dollar dived when the GDP data hit yesterday and this morning is hovering around 84 US cents on expectations of a rate cut in 2015.

Even before the weak GDP data, Deutsche Bank changed its rates forecast - down half a percentage point in two 25 basis point steps - with unemployment set to rise, inflation under control and no sign yet of a housing bubble.

Late yesterday, Goldman Sachs mirrored that prediction and is tipping the RBA will start cutting rates in March with followup in August taking the cash rate to a fresh historic low of two percent.

That could stoke further housing investment but stemming damage to the broader economy will be the RBA's main aim if the Board decides to blink and cut rates.

And unlike other central banks like the US Federal Reserve and the European Central Bank which have rates near zero, Australia has enough powder dry to press the rate cut button if needed.

The latest retail sales figures for October due this morning could add to concerns about the strength of the economy.

But forecasts are looking bleak just a few weeks before Christmas.

The consensus according to a Reuters survey is showing little or no growth - a rare zero percent outcome - with some economists are tipping a negative result.

That's more evidence that the cautious consumer is becoming a grinch, watching every penny and not spending despite Joe Hockey's call to spend up for Santa.

And a rate cut might just be the medicine or a temporary hit to get Australians spending.

Oil price dives as OPEC rolls out "do nothing" strategy

The price of oil collapsed overnight after OPEC nations decided against cutting production to prop up dwindling values.

And expectations are that crude prices might go even lower after the usually powerful Gulf producers decided to do nothing.

Listen to my report on The World Today

The deepening oil slide has hurt energy companies around the world and some big names in Australia have seen their share prices dive this morning.

Santos fell ten percent, Tap Oil nine percent and Oil Search was almost eight percent lower in late morning trade.
         
Despite the oil price sliding in recent months, weeks and days, there were low expectations for today's meeting of OPEC oil ministers in Vienna.

Not surprisingly the 12 member cartel delivered on that anticipation and maintained production of 30 million barrels a day, holding firm in the face of too much oil chasing too few customers and and growing pressure to tighten the oil tap.

So how low can the oil price go before OPEC bends to self interest and counters with lower supply to prop up the price?

OPEC secretary general Abdulla el-Badri wouldn't put a number on it and said he was relaxed - for now anyway.

"There's a price decline. That does not mean that we should really rush and do something," Mr el-Badri told reporters.

"We don't want to panic. I mean it. We want to see the market, how the market behaves, because the decline of the price does not reflect a fundamental change."

OPEC's decision to "do nothing" only sent the oil price lower.

West Texas Intermediate crude went to US$69 a barrel having fallen by a third this year.

Brent crude fell to its lowest level since 2010 shortly after the OPEC decision became public.

Analysts say that OPEC is being forced to let market forces apply and unable to use its traditional muscle because of slowing growth in Europe and China.

An even bigger complication is the United States - which is on its way to oil independence with local production of shale oil at a three decade high.

While OPEC's heavy hitters - Saudi Arabia, Kuwait and the UAE - are driving the "do nothing" strategy, smaller member nations are furious.

Venezuela - which relies on a high oil price to underpin government finances - is said to have stormed out of the meeting after the OPEC kingpins refused to cut production.

Wall Street was closed for the Thanksgiving Day holiday but elsewhere financial markets were hit hard.

Russia's ruble went to a record low and energy stocks in London were hit hard.

The Australian dollar is also a casualty of the oil price price - down to 85.1 US cents.

It's become a test of nerves for OPEC and oil investors.

So will OPEC blink before the global oil glut really starts to hurt?

Will the carbon bubble threat spark the next global financial crisis?

I was a participant in this forum at The University of Melbourne's Asia Pacific Social Impact Leadership Centre earlier this week.

Panelists included Professor Ross Garnaut, former Liberal leader Dr John Hewson, Tony Wood of the Grattan Institute and Jemma Green of Curtin University.

With $20 trillion of potentially stranded fossil fuel assets, the forum attracted a big and vibrant audience.

Here's a report from the ABC's Rachel Carbonell where she speaks with Professor Garnaut and Dr Hewson on the threat of the Carbon Bubble.

Jemma Green's opening comments were published in The Fifth Estate.

This interview with Dr Hewson appeared in The Australian.

Jemma Green was also interviewed by The Australian.

Tony Wood had this opinion piece in today's Financial Review (subscription may be required).

Listen to the entire event here.

Prof Ross Garnaut (far left); Dr John Hewson (third from left); Peter Ryan, Jemma Green, Tony Wood, Ben Neville, Prof Nasser Spear, Deputy Dean Melbourne Business School.

Here are my opening comments from the Carbon Bubble forum to set the scene for panelists and the audience:

The G20 Summit at the weekend and President Obama’s success in getting the issue of climate change firmly on the agenda is an important backdrop for us this evening.

Rather than seeing Tony Abbott shirtfront Vladimir Putin as sections of the media seemed to expect in a physical sense – it’s now looking as though Mr Abbott might have been the target of a shirtfront from Mr Obama.

And just few days before at the APEC Summit in China there was the unexpected development - that even took a few cynics by surprise - when China and the US pledged to reduce or limit their carbon emissions .

The US to cut by 26 to 28 percent below 2005 levels by 2025 – and China to cap emissions by 2030 or sooner.

So over the space of a week – perhaps we’re seeing climate change and the short and long term impacts being taken a bit more seriously.

It is of course significant that climate change made it into the G20's closing communique.

So when you think about the potential or frightening reality of a “carbon bubble” you almost see your life flash before your eyes.

How our lives and our high expectations revolve around fossil fuels.

How most of us are conditioned to a world that grinds along based on dirty coal, oil and gas.

How big business, industry, politicians and a range of vested interests are locked in to immense wealth generated through energy sources that are perhaps better suited to their genesis back in the industrial revolution.

There was a key phrase journalists were using at the APEC Summit.

It was “APEC blue” - as Chinese authorities shut down factories and took cars and trucks off the road.

Dirty brown skies that could be mistaken for an overcast day made way for a crisp blue Autumn sky you don’t always see in Beijing – as China and the US prepared to announce their ambitious new targets to slash emissions.

The APEC blue sky shows what can be done if the world is watching – but of course turning aspirational targets and ambitions into tangible and believe outcomes is another.

So here’s the issue we’re facing.

What would happen if to avoid the worst impacts of climate change, governments agreed to accelerate their move away from the use of fossil fuels?

What if renewable technologies started to take over faster than expected and the supply of fossil fuels began to outstrip demand quite dramatically as governments, industry and consumers took climate change seriously and switched away?

A study by HSBC has estimated that if remaining massive reserves of fossil fuels become redundant – they would become unburnable or “stranded assets”.

HSBC has put a number on that – and it’s in the realm of $20 trillion.

Devaluing those assets could end up halve the sharemarket value of fossil fuel companies.

And if you though the Global Financial Crisis sparked by the Lehman Brothers collapse in 2008 was bad – the Carbon Bubble according to some experts would be a whole new world of pain.

So as the scientific evidence of climate change begins to ramp up – just how seriously should we be taking the carbon bubble?

And how should investors respond given that superannuation funds are exposed and in turn – we’re all exposed in terms of our retirement nest eggs.

That should ring a few alarm bells – even for the cynics – especially when in addition to HSBC, you have Standard & Poor’s, Citibank, the Bank of England, Oxford University and the London School of Economics saying we need to take the carbon bubble threat seriously.

Gail Kelly retires as Westpac boss. So who will be banking's next female titan?

Gail Kelly's decision to retire in February next year is not exactly a surprise, although this morning's announcement was unexpected.

Listen to the breaking news on ABC NewsRadio from this morning.

For the past two years, the pressure had been growing and Mrs Kelly has managed to fob off the unwelcome question when it arose at various appearances and briefings.

Mrs Kelly's responses have been typically diplomatic and predictable, although she appeared particularly unimpressed when I asked for an update on her succession strategy last year.

It was a matter for the Westpac board, Mrs Kelly said, and while the multi-billion dollar profits continued to roll, Australia's highest paid banking boss sent that message that she was going nowhere.

That was until this morning when the announcement hit two hours before the stock exchange opened.

In the leadup to the official news that Mrs Kelly will at last retire, the positioning by her perceived successors was going on behind the scenes and in public.

The winner of the battle for one of banking's crowns is Brian Hartzer, Westpac's current chief of retail and business banking.

The vanquished is Rob Whitfield, Westpac's head of institutional banking, who while highly respected was seen as a long shot for the CEO gig.

Since coming on board in 2012, Mr Hartzer - well liked, urbane and quick witted - had ramped up public appearances but also had a profile at regular briefings Westpac holds for investors, analysts and the media.

A former ANZ senior executive, Mr Hartzer was seen to have been "courageous" in taking up a senior role at The Royal Bank of Scotland in 2009 at the height of the global financial crisis.

The Royal Bank of Scotland is still majority owned by the British taxpayer.

Having survived that, Brian Hartzer has seized the prize with a starting salary of $5.36 million, comprising a base rate and short term incentives. Another $2.5 million awaits if he meets requirements to cash in long term incentives.

That's about half Gail Kelly's $12.8 million for the past year, but with performance in his DNA, Brian Hartzer is well on the way on the assumption that he is not about to take a hospital pass.

The timing of this morning's announcement was perfect with a quiet session on global markets paving the way for maximum exposure about Mrs Kelly's success.

The news also follows Mrs Kelly's final full year profit as Westpac boss announced last week - up 8 percent to $7.6 billion.

Westpac would have been reluctant to overshadow another stellar result with the one of banking’s most anticipated announcements.

So what is Gail Kelly's legacy since joining Westpac in 2008?

Surviving and prospering through the global financial crisis and growing Westpac market value from $50 billion to today's $103 billion is surely one.

But she is in good company with other Australian banking bosses, who thanks the guarantees by the Australian taxpayer, have happy shareholders.

Delivering a merger between Westpac and St George Bank - having come to Westpac after running St George - is another.

The merger was controversial at the time amid concerns from the government at the time that more banks - rather than fewer - were needed.

The then Treasurer Wayne Swan approved the merger deal but not without strict controls on how Westpac would maintain St George shopfronts and importantly jobs.

Six years after that merger, the jury is still out on whether the Westpac-St George merger was actually good for Australian banking and whether in reality it provided more opportunities for Australian consumers to walk away if they didn't like their deal.

But today, it's all about Gail Kelly as Westpac's media machine ramps up to rightly portray her as one of Australia's most successful and savvy business operators – and a banking superstar.

With her replacement a man in Brian Hartzer, the question is who will step up to replace Gail Kelly as a female titan in Australian banking?

Road trip into history - 25 years since the Berlin Wall came down

As global stories go, few compare to the crumbling of the Berlin Wall in November 1989 as Soviet Union satellite states across eastern Europe began to fall like dominoes.

I was working as a news producer for the BBC in London at the time and marvelled at the intense planning that involved intricate and often secret plans for mobilising reporters, producers, camera crews and pieces of satellite equipment into place for the anticipated fall of the Berlin Wall.

Not exactly a warm welcome - but all that changed in November 1989.    Picture: Peter Ryan

It was grey, muddy, cold and dirty. But the soldiers atop The Berlin Wall were smiling,  Picture: Peter Ryan

It was adrenalin charged event just to be working for the BBC as I helped to plan coverage for legendary correspondents like the late Brian Hanrahan and John Simpson who I had previously viewed from afar on the ABC foreign desk in Sydney as an aspiring correspondent myself.

As the fast-moving events unfolded and intensified, teams were sent behind the lines into eastern bloc nations like Romania and Bulgaria that seemed likely to topple as the anti-Soviet mood towards democracy took hold.

Although travel restrictions had been softened by East German authorities, no one expected what appeared to be possible from early October – the fall of the Berlin Wall was coming faster than expected.

With my wife Mary Cotter shortly after we arrived at our hotel near the fast crumbling Berlin Wall.

Chipping away at what once represented the Soviet Union's ironclad grip on East Germany.   Picture: Peter Ryan

While many of my colleagues were being enlisted to head to Berlin as the BBC planned major coverage, I was given the news I would be staying in London.

Rather than missing out on history in the making, and having exhausted lobbying efforts to be sent, I managed to book a week off - encouraged as always by my wife Mary Cotter who remains my best life adviser.

I discuss our journey from London to Berlin with John McGlue of 720 ABC Perth.

We hired a trusty Vauxhall and headed off at around 4am from London to take the ferry to Calais.

Despite being fogged in, we were invited in for coffee and croissant by a kind young French couple who were intrigued to see a couple an Aussie journalist and his New Zealander wife heading off on such an adventure.

Picture: Peter Ryan

Outside the Brandenburg Gate as it was in November 1989   Picture: Peter Ryan

More than twenty years before in-car navigation systems became commonplace, we studied foldout road maps and made our way to Bruges for the night, on to Hamburg the next day and then into East Germany on our way to Berlin.

As we got closer to Berlin, we soon saw streams of people, presumably east Germans in their Skodas and Ladas heading west – horns tooting, lights flashing, arms waving.

The new-found freedom of just going out on a day trip was their reason for jubilation and you could cut the happiness in the air with a knife.

It was all consuming and I thought at the time about how many Australians took their travel liberties for granted.

It was an unforgettable experience – and the excitement easily surpassed taking a right hand drive Vauxhall on West German autobahns as left hand drive BMWs and Mercedes glided past.

As soon as we checked into our hotel not far from Checkpoint Charlie, we headed out into the streets of West Berlin to witness history unfolding before our eyes.

East German soldiers peered through cracks in the Wall and even allowed those on the west side to light up their cigarettes.

This image sums up the high emotion on the West Berlin side of the Wall.    Picture: Peter Ryan

Cracks widening between West and East.    Picture: Peter Ryan

Soldiers walked atop the Wall, viewed by locals and tourists who jostled to clamber up makeshift stands to view over into the East.

Mary and I lined up to take our turn with a hammer and chisel chipping what we could from the graffiti covered Wall which was once an icon of the Soviet Union’s iron-fisted resolve against the west.

The chisel slipped and I emerged bloody having scraped the skin off my knuckles.

But it was a price I was prepared to pay to be a participant in an event the whole world was watching.

Ramps were constructed to get a better view of the grey, muddy landscape over the Wall.   Picture: Peter Ryan 

Picture: Peter Ryan

The next day we lined up at Checkpoint Charlie for our day visa to get over into East Berlin.

The weather was cold, drab and grey – just like the Soviet style architecture – but it was a privilege to be part of the generation that passed into East Germany knowing there was an easy and free way of getting out.

I returned to Berlin two years ago, once again as a tourist, and found it to be vibrant, colourful and free.

I walked through the Brandenburg Gate from west to east, remembering how it was a cold sealed-off no-go area just 23 years before.

Since then, German reunification has been a challenge but a eventually a successful template despite initial cries that the West German economy would not be able to sustain the extra demand for basic services and givens such as health care and education.

Our road trip from November 1989 might sound like the account of a journalist’s road trip.

But for me, it will always represent a career highlight and underscores the privilege of being a journalist with a front row seat to history.

Picture: Peter Ryan

Mary Cotter chipping away at history - the road trip was at her urging.     Picture: Peter Ryan

Unaccustomed as I am to hard labour, I made an exception for The Berlin Wall.     Picture: Mary Cotter

The Berlin Wall went up in 1961 - the year I was born.     Picture: Mary Cotter

The dark graffiti belies the jubilation that The Wall was about to come down,    Picture: Peter Ryan

Picture: Peter Ryan

Picture: Peter Ryan

A cold and desolate view towards the Brandenburg Gate.    Picture: Peter Ryan

Checkpoint Charlie     Picture: Peter Ryan

Picture: Peter Ryan

An East German guard on the east side of the Brandenburg Gate (from our day trip)              Picture: Peter Ryan

That's Mary Cotter with the white hood - yes, it was bloody cold!     Picture: Peter Ryan

"You can't change the world but you can change the facts"       Picture: Peter Ryan

"West is Best" says the slogan - money never sleeps.      Picture: Peter Ryan