News Corp shares bounce as Murdoch-Deng split clears decks before company split

News Corporation shares trading in New York ended 2.4 per cent higher in the wake of news that Rupert Murdoch and Wendi Deng were divorcing.

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

Investors appear more confident that the bad news has cleared before the official company split between publishing and entertainment arms.

Also, confirmation - if needed - that Mr Murdoch had an ironclad pre-nuptial agreement with Ms Deng soothed fears of a messy divorce.

Quote of the day goes to the celebrity divorce attorney Raoul Felder who told Bloomberg:

"If he (Mr Murdoch) doesn't have a prenup, he would have to see a psychiatrist and not a lawyer."

Need for Internet speed heralds zettabyte era

By Business editor Peter Ryan

A leading technology firm forecasts that the need for internet speed will increase at a mind-boggling pace over the next three years.

A forecast out this morning from Cisco predicts that by 2017, global internet traffic will be measured in measured in zettabytes. One zettabyte is the equivalent of a billion DVDs downloaded every day for an entire year.

"Our report is showing that in the year 2017, in four years time, the internet and IP traffic will be three times larger than it is today," forecast Ken Boal, Cisco's managing director for Australia and New Zealand.

Listen to the interview with Ken Boal broadcast on this morning's AM.

"If you summed all of the traffic on the internet from 1984 through to the end of last year, 2012, the traffic in 2017 will actually surpass that in one year alone, so huge growth across the world and it is going to be very large in Australia as well. We'll still be twice as large as what it is in Australia today - so huge growth."

Cisco is expecting 1.4 zettabytes of internet traffic by 2017 and, for those who have never heard of a zettabyte, it is an enormous amount of data.

"A zettabyte is the equivalent of a trillion gigabytes. It's a very, very large number with a lot of zeros - 21 zeros - but what that means in reality is if you digitised all of the movies ever made, that could cross the internet every four minutes around the world. So it's an awful lot of data and huge volumes," Mr Boal explained.

"Obviously it's going to have implications for government, business and everyone concerned with the internet."

Cisco's report forecasts that much of the growth will not come from direct human usage, but from automated business processes that are increasingly using the internet.

"It's predominately been, historically, PCs and computers, phones and those things," Mr Boal observed.

"Now we're seeing the rise of the machines - video surveillance cameras, digital health monitors, asset tracking for business, public transport vehicles and cars will also be connected, so in Australia that will sum to about 145 million devices. So considering we'll have roughly 23, 24 million people, that's a lot of extra devices per every user connected."

Outside increasing business use of the internet, Ken Boal says households are increasing accessing their entertainment via the web.

"Three-quarters of the traffic will be video, and we're connecting things like TVs, so high definition TVs, internet video will be absolutely a huge contributor to the growth," he said.

"11 per cent of the internet use in Australia in 2017 will be through internet connected TVs, and that's got new opportunities for providers, content players and so on."

Mr Boal says the increase in internet usage will necessitate a massive increase in access speeds.

"If we look at the global trends, the average worldwide speed will be 39 megabits per second for broadband residential access in 2017. At the moment Australia is around about 9 megabits per second on average, so clearly there's a significant platform upgrade required," he said.

"You know, we're agnostic on the access technology but clearly significant increase in capacity is required and that's what this report is highlighting."

OECD warns about Australia's post-boom outlook

By Business editor Peter Ryan

The future growth of Australia's economy has been questioned in a surprisingly frank update from the Organisation for Economic Cooperation and Development (OECD).

The OECD says the weakening of the resources boom will only be partly offset by a strengthening of the non-mining sector.

It is an unusually direct warning that the OECD makes deep inside its World Economic Outlook, on page 103, and it says Australia's economic growth will temporarily slow to 2.5 per cent this year before picking up to 3.5 per cent in 2014.

However, the report cautions that the anticipated weakening in mining investment, which the Reserve Bank has been warning about for the past year, will only be gradually offset by mining exports and the strengthening of the non-mining sector.

The OECD also says the persistently high Australian dollar and a lack of confidence are holding back new drivers of growth.

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

Read the OECD's World Economic Outlook here.

Even so, Australia remains a pretty bright spot in a world of gloom - ranked 16th out of 59 countries, down one notch.

Professor Stephen Martin, chief executive of Committee for Economic Development of Australia and a former Labor MP, says local businesses need to thinking beyond mining and how to cut the cost of doing business in Australia.

"These are genuine issues which the business community has to confront," he said.

"It's about innovation in management practices, it's about looking at some of the labour flexibility questions again but, look, we are a high wage country but we're a very productive country, and we could do better and I think we'll see some of the changes on how, for example, labour productivity is measured when the effects of the mining investment actually can be measured and come on line."

The OECD's report card has a tick for the Reserve Bank's economic management, which has seen the cash rate cut by 2 percentage points since late-2011. The OEDC says more cuts might be needed.

It says a marked slowdown in China would weigh on exports, hence the need for an accommodative monetary policy to help stimulate the non-mining sector.

On balancing the budget, the OECD says if activity worsens, fiscal policy could be relaxed - so it is not calling for a return to surplus at any cost, but sees it as a desirable aim.

The OECD also thinks that an increase to the GST would enhance efficiency.

On the political front, it thinks the uncertainties weighing on the pace of budget consolidation will probably be clarified one way or another after the September election.

Today also sees the release of the latest quarterly figures from the Australian Bureau of Statistics on business investment - economists are looking at a slight improvement after a 1.2 per cent fall in the last reading.

These figures go to both the weakness and low confidence in the manufacturing sector, and also what mining companies have been doing - paring back or reconsidering their spending plans.

The transition from the resources boom to non-mining growth could be bumpy and these figures will give an indication of how rocky that road might be.

Corbett warns Work Choices rollback went too far

By Business editor Peter Ryan

Reserve Bank board member Roger Corbett has warned the nation is under-taxed and labour markets are over-regulated.

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

Speaking to reporters after a speech to a business event in Adelaide, Mr Corbett said the Federal Government went too far when it rolled back Work Choices after the Rudd government was elected in late-2007.

Mr Corbett, who's also the chairman of Fairfax Media and a board member of the US retail giant Walmart, was very careful to say he was not advocating a return to WorkChoices.

However, he argued that a sensible balance needed to be achieved and, at the moment, employment costs are eating away at foreign investment and he wants to see a middle ground that respects both employer and worker rights.

Mr Corbett said cost overruns had already seen major resource projects shelved, with Woodside's Browse project in WA a case in point, and his comments would appear to put pressure on the Coalition to take a harder line on industrial relations in the lead up to the election.

"I think this argument of whether we're going back to WorkChoices is highly emotive and clearly very political. I think, very simply, there is a sensible balance between labour and enterprise," he argued.

"It is my judgement and view ... that has moved under the current Government a little far, and I think that needs to be corrected."

However, while Mr Corbett is calling for less labour market regulation, he is also calling for more taxation if Australians want to fund social schemes such as a national disability insurance scheme and more school funding.

"Very clearly, if we are to sustain the level of education, the Gonski report, if we are to sustain a disability provision, a facility across the nation, if we are to provide for health as we need to do so moving forward, if we are to provide other social structures that we need as a community, then very clearly we've got to pay for them, and it would appear that our current taxing base is not adequate for that purpose," he cautioned.

Mr Corbett also had a warning about the ABC in his role as Fairfax's chairman.

Like other commercial media organisations, Mr Corbett is worried about the growth and influence of public broadcasters such as the ABC.

He said restrictions needed to be placed on the ABC's taxpayer funded activities because, at the moment, commercial companies like Fairfax are finding it difficult to compete in the new digital era where traditional media models are hurting badly.

Miners not giant ATM for government to plunder, Gina Rinehart warns

By Business editor Peter Ryan

Australia's richest person, mining magnate Gina Rinehart, says the Government has an unhealthy reliance on the resources sector and has been treating it like an ATM.

In a speech delivered to an Australian Mines and Metals Association conference in Melbourne today, Mrs Rinehart says the nation's debt levels are unsustainable.

She says that without reform, Australia risks following the eurozone into financial and social chaos.

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

"What few seem to properly understand - even people in government - is that miners and other resources industries aren't just ATMs for everyone else to draw from without that money first having to be earned and, before that, giant investments are made," she said in a video recorded for the conference.

"It is incredible that after the last six years of record commodity boom times, we now find the once lucky country in record debt, with the federal budget tipped to deliver yet another deficit, to further increase our record debt.

"This debt is simply unsustainable, especially when Australia now faces an increasing elderly population with increasing needs, and fewer workers to pay for it all. This lucky country has got to start thinking, and acting.

"What few seem to properly understand - even people in government - is that miners and other resources industries aren't just ATMs for everyone else to draw from without that money first having to be earned and, before that, giant investments are made."


In a call to arms, Mrs Rinehart again describes Australia's economy as "too expensive and cost uncompetitive", saying government red tape and regulations are damaging the nation's reputation on the world stage.

Mrs Rinehart has cited Woodside Petroleum's recent decision to shelve its $40 billion gas project at James Price Point in Western Australia, and comments from the former global head of Ford, Jac Nasser, who predicted the eventual demise of the Australian car industry, as evidence that Australia was becoming am unattractive place to do business.

"No wonder major projects like Browse have been cancelled. This should make us all sit up and think," she said.

Mrs Rinehart's address, to be posted on YouTube, was highly critical of Australian governments and
the complacency of taxpayers.

However, it does not mirror earlier inflammatory remarks about African workers being prepared to be paid "less than two dollars a day" that were made in a similar recorded speech last year.

YouTube: Gina Rinehart speaks at the Sydney Mining Club in September 2012

Mrs Rinehart - who is executive chairman of Hancock Prospecting - also appears to attack the complacency of both Labor and Coalition governments which have relied on taxes from the resources sector.

Business lobby slams Budget as lost opportunity

　
Business is the big loser out of last night's budget.

Without a sweetener in sight, business groups are now expected to ramp up their campaign against the government.

The Business Council of Australia, which represents Australia top one hundred companies, says it has no reason to believe the budget will return to surplus by 2016.

The BCA's chief executive Jennifer Westacott says the Budget was a lost opportunity to put the economy on a stable footing and thinks the government will continue to "muddle along".

Listen to my interview with Jennifer Westacott broadcast this morning on AM.

Australian dollar falls on Treasurer's Budget speech; slow growth forecasts renew RBA rate cut talk

A$ falls from from 99.73 US cents as Budget speech begins  Source: Bloomberg

Business lobby sink boot into unseen budget in strategic broadside

By Business editor Peter Ryan

Even though much of tonight's Budget has already been leaked, Australia's business lobby groups seem convinced Wayne Swan's cupboard will be bare.

The big players have gone on a on a major offensive against the government, describing the budget process as "chaotic".

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

The frustration has boiled over with the big four business lobby groups launching a carefully planned broadside against the government well before the Budget fine print is out.

The strategy by the Business Council of Australia, the Australian Industry Group, the Australian Chamber of Commerce & Industry and the Minerals Council represents a new war footing from the big end of town.

The big players normally restrict themselves to traditional lobbying tactics - issuing discussion papers, commissioning reports, sending out media statements and maintaining a constant presence in the Canberra press gallery.

Then of course there are pre-Budget submissions delivered in the weeks and months before the Budget which is accompanied by targeted briefings to journalists with influence.

That is normally the extent of the diplomatic prodding in addition to the odd diplomatic foot in the door.

The "powder is kept dry" on any criticism - or praise - until the fine print has been examined.

Not this time.

Rather than wait, the business lobby is ramping up its complaints about a lack of genuine process and consultation as concerns deepen about the credibility of the Budget.

Today's Budget will be the culmination of significant tensions about the consultation style of the Rudd and Gillard governments.

Business is still seething from the legacy of the super mining profits tax, the carbon tax and more recently the funding model for the National Disability Insurance Scheme.

The Business Council for example is worried that an increase to the Medicare levy without a cost benefit analysis could set the NDIS up to fail.

On the dollars and cents from, the business lobby knows there will be few - if any - sweeteners. A cut to the corporate tax rate seems off the table, although business remains concerned about how it will fund the recent increase to employer superannuation.

But at the very least, business groups are looking credible budget assumptions, an end to ad hoc changes and realistic plans for spending rather than timing shifts that could see spending pushed out over ten years.

Which underscores the business lobby's view about the government reputation and credibility which was damaged by the dumping of the surplus commitment a week before Christmas last year.

In the leadup to the dumping of the surplus commitment, business groups have warned that while they wanted to see a surplus, it didn't have to be immediate and shouldn't come at any cost.

Once again, there is unusual unity from the big four business groups.

But there's also solidarity from the government today, with senior ministers showing there's no love lost, describing business leaders as self-interested whingers and moaners who have ignored the government's reforms.

It's hard to find an olive branch amid the spin from both sides.

But it's clear that any concession to business in today's Budget papers seems unlikely.

Reserve Bank in surprise rate cut to 2.75 percent - cash rate now lowest in 53 years

Tweet revenge: ASIC warns on social media risks; calls for old fashioned commonsense and due diligence

By Business editor Peter Ryan

As US authorities investigate the source of a fake Twitter message that sparked a share slip on Wall Street, the Australian market regulator is warning that social media cannot be trusted.

The chairman of the Australian Securities and Investments Commission, Greg Medcraft, is in New York for conference, and says yesterday's brief but sharp dip on Wall Street due to a fake news tweet  this week's brief, sharp dip on Wall Street due to a fake news tweet should be a wake up call to investors everywhere.

He says, while social media is here to stay, independent verification of alerts that go viral is more critical than ever.

Listen to my interview with ASIC chairman Greg Medcraft.

"New media, particularly Twitter, is not necessarily the source of truth," he cautioned.

"The other thing its highlighted is good old common sense and scepticism that basically you've got to do your due diligence."

Reports from the US have suggested that some of the market response to the fake tweet was generated by automated trading algorithms that monitor Twitter and other social media sources and trade based on that information.

Greg Medcraft says automated trading is the "new normal", including in Australia.

However, he warned that algorithms that scan news headlines and social media for key words need to have better filters to ensure that humans - and not emotionless machines - decide when to buy or sell.

"I think what is important is to make sure that if your algos [algorithms] have that type of element built into them that you're constantly reviewing it to make sure that doesn't come out with a potentially adverse outcome," he said.

"But also, that you've got the overall protection, which we've now required, that you do have a filter that allows for the algo to not operate where there perhaps is an extreme price movement that might be occurring for an unexplained reason."

In an Australian context, Mr Medcraft says the false takeover bid for David Jones provides a good example of why traders need a high level of scepticism when confronted with unverified breaking news or rumours.

"You really do need to focus on the accuracy of information being provided to the market and you need to think about what action you take in relation to perhaps where the market is trading on misinformed information," he said.

Mr Medcraft says companies also have a role to play by asking for a suspension of trade in their stock when they believe trading is being driven by misinformation.

Labor doesn't understand us, business leaders lament. Company directors say relationship is at new low.

By Business editor Peter Ryan

The Government's already strained relationship with the business community has hit a new low according to a survey of company directors.

The Australian Institute of Company Directors polled more than 500 business leaders and only 8 per cent said they thought the Federal Government understood business.

The Institute's "Director Sentiment Index" points to the mining tax, the carbon tax and the National Broadband Network as examples where companies say poor process and a lack of consultation damaged the business relationship.

"In the old days perhaps - and this might be looking through rose coloured glasses - but we used to have say a green paper which said, 'here's an issue which needs to be discussed and thought about', and then you'd go to a white paper and you'd say well look, 'here's some options how you can deal with this issue', and then you'd go to legislation and then you'd have in-detail legislation and discussions about that, and you end up with a pretty good result," said the Institute's chief executive John Colvin.

"I guess the concern of the directors is that that type of good process hasn't been applied to so many issues - including legislation coming unannounced - without proper analysis of whether this is good legislation, whether it's good regulation, and then surprises."

Mr Colvin says the survey outcome reflects the business reaction Labor Government since it came to power in 2007.

"The figures speak for themselves, 80 per cent of the directors think that our Government doesn't understand business," he said.

"I think that it's really the cumulative effect of the way in which directors and business have been treated over, you know, the long period of time.

The Opposition comes out better in the survey, but still only half of those surveyed believe the Coalition has a good understanding of business needs.

John Colvin says that should send a message to both major parties to consult more widely with business before announcing policies.

"It's a warning that business and the director communities can't be taken for granted, can't have laws just changed willy-nilly, can't have sectional interests running policy, and must have really good processes and really good policy discussions before moving in big directions. It's that synergy which is so critical," he concluded.

Wall Street dives on false tweet about White House explosions; shows markets vulnerability to social media

By Business editor Peter Ryan

Markets live and die on rumours - as the interchangeable saying goes "buy on the rumour, sell on the fact".

But what happened on Wall Street around three hours before the close of trade (3.08am Sydney time) shows how sensitive markets are to rumours that now abound on social media outlets such as Twitter.

A report on a Twitter account managed by The Associated Press wire service said there had been explosions at the White House and that President Obama had been injured.

Investors, clearly sensitive after last week's bombings in Boston, appear to have sold on an unverified report from a reputable source that terrorism had struck again.

The brief panic from the report - immediately denied by the AP - erased around US$130 billion from the Standard & Poor's 500 Index. Market movers like Apple, Exxon-Mobil and Microsoft were caught up in the selling.

However, Wall Street's broad market indicator quickly recovered to end the day more than one percent higher.

Speculation is focusing on computerised trading as a key cause, where "stop loss" orders can be triggered when a certain price threshold is hit.

However, in the world of expanding social media, there are concerns that algorithmic trading programs can be programmed to read news headlines and tweets where key words can spark alerts.

So it's possible that an algorithm - rather than a human - may be responsible for this morning's selloff when the fake AP tweet was retweeted around the world.

The snowball effect - where unverified reports and rumours are often aired without normal checks and balances - shows the world's exposure to social media.

Today's brief plunge is a reminder of the "flash crash" in May 2010 where rolling stop loss orders - rather than a fat-fingered human trader - saw the Dow plunge 1,000 points in a few minutes.

The brave new world of social media will have many investors yearning for the days when human emotion - rather than computers - made decisions that can change lives and manage minds.

Auditor warns China debt crisis could dwarf GFC

By Business editor Peter Ryan

There are warnings that China could face a financial crisis bigger than the United States or Europe unless it gets its debt under control.

One of China's top auditors has revealed his accounting firm has stopped approving requests from local governments to increase their debt exposures.

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

Concerns about a potential meltdown come as China's stellar economic growth begins to slow.

It is pretty hard to get an accurate reading on China's total debt levels, much of which is held by local authorities, but estimates are that China's provinces, cities, regions and villages owe a collective $US3 trillion.

All of this stems back to 2008, when the collapse of Lehman Brothers triggered the global financial crisis and China needed to protect its growth and status and, as a result, pumped more than $US500 billion of stimulus into its economy and created a massive credit boom.

Now a senior Chinese auditor who is the head of China's accounting association, Zhang Kew Hoc, has told the Financial Times of London that he has stopped signing off on risky bond sales by local governments.

Michael Pettis, a professor of finance at Peking University, says the ramped up caution shows China's debt party might soon be over.

"The problem is that so much of this investment is going into empty real estate, empty highways, empty airports, unnecessary manufacturing capacity, etc, that we're in the position, and have been for many years, where debt is rising more quickly than the ability to service that debt," he warned.

"So that's the conundrum they face - if you want to bring that problem under control, you have to bring investment down, and if you bring investment down growth rates will slow very, very sharply."

The International Monetary Fund has also been warning about China's debt levels, and investment banks and ratings agencies have been on the front foot after failing to read the initial signs leading up to the GFC.

There is a very big focus on China's real estate sector, which accounts for 13 per cent of the country's GDP.

There has already there has been a sharp decline in values but, unless Chinese authorities intervene to stop a real estate bubble, some economists are quite worried that there could be much more than a correction but a crash that could rival the US one, which of course almost brought down the US economy back in 2008.

Europe carbon price plunges to record low; adds heat to Australia's $23tax

By Business editor Peter Ryan and staff

The price of carbon in Europe has plunged after the European Parliament rejected an emergency plan that would have forced companies to pay more for polluting.

European carbon permits fell as much as 45 per cent to as little as 2.63 euros ($3.34) a tonne, and German power prices for next year fell to their lowest level since 2007.

The slump resonates here given that Australia has a fixed carbon price of $23 a tonne until moving to a floating market price linked to the European scheme in 2015.

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

The unprecedented slump has raised debate about whether emissions trading schemes are the best way to handle climate change or to make carbon polluters pay.

The problem for the EU scheme is that the eurozone debt crisis and slowing economic growth has meant less industrial output - that means less pollution and, as a result, companies have been buying fewer carbon permits and the price has dived from highs of as much as 31 euros a tonne in early 2006.

Today's proposal to reduce the short term supply of carbon permits as a way of pushing up the price came from France, but was rejected 334 to 315 with 63 abstentions by the EU Parliament.

"We now expect waves of speculative selling, followed by industrials also liquidating their surpluses," Konrad Hanschmidt, an analyst at Bloomberg New Energy Finance in London, told Bloomberg News.

"There is still a theoretical chance that the measure may pass, but that is not looking at all likely."

One man who voted in favour of the proposal is Chris Davies, a Liberal Democrat from Britain, who says it is a dark day for the environment.

"This is a blow against all who want to see Europe leading in the fight against climate change, and it also represents us turning our back on our own industrial future because most of the big engineering companies recognise that we need to develop low carbon technologies," he argued.

"In order to do that we have to put a price on carbon, create the right incentive. If there's no price, there's no incentive, we're not going to develop these new technologies. This decision today is really very bad news for our future."

Woodside backdown caps rocky week for Australian economy

By Business editor Peter Ryan
　
This morning's announcement from Woodside shelving the Browse project in north-western Australia caps a rocky week for the Australian economy.

Resource projects aren't the only worry. There's a prediction that the demise of the Australian car industry is inevitable - but more on that later.

The combination of the high Australian dollar and the cost of doing business in Australia has been taking a toll for some time, especially with the dollar now back over 105 US cents.

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

Read Woodside's announcement to the Australian Stock Exchange

But simple economics and basic housekeeping rules are at work here for the resource giants - especially when it comes to multi-billion dollar projects like Browse.

And Woodside isn't the only company running a ruler over massive cost versus returns.

Just last year BHP Billiton shelved its much hyped Olympic Dam project in South Australia, citing the cost of doing business here in addition to the Australian dollar.

And Woodside's expected decision fits in with predictions that the investment phase of the resources boom will peak earlier than expected - that's something the Reserve Bank has been saying for the past year as it manages expectations about the long term life of the boom.

Woodside is one headline today. But other industries - such as the car manufacturing sector - are also putting the government on notice.
.
Jac Nasser, currently the chairman of BHP Billiton and the former boss of Ford, has ramped up the warnings.

Speaking in Melbourne yesterday, Mr Nasser said all businesses including miners are wary about the cost of doing business in Australia, industrial relations and the thorny issue of tax and how much they say they're already paying.

But on the future of the local car manufacturing industry, Mr Nasser is quite pessimistic and he believes it's inevitable because of the factors, in particular the high dollar, that the local industry currently Ford, Holden, Toyota will eventually shut down.

"As soon as you have a reduction in the scale of domestic manufacturing, let's assume one of the three decide to exit Australia in terms of manufacturing, then you end up potentially with a subscale supplier infrastructure. And once that happens, I think it's a domino effect," Mr Nasser said.

"It would be a very sad day for Australia but unfortunately it looks like it could be inevitable."

But the latest unsettling news about resources amounts to a reality check.

It comes after Australia's official jobless rate hit 5.6 per cent after more than 30,000 jobs disappeared in March after expectations had been for a steady result.

Jobless rate spikes to 5.6 per cent

By Business editor Peter Ryan

Australia's unemployment rate has jumped to 5.6 per cent catching some economists off-guard.

According to the Bureau of Statistics, the number of people with jobs fell by more than 36,000.

Listen to my report from The World Today.

The result has added to concerns that the economy is weakening in some sectors and keeps the prospect of another interest rate cut on the agenda.

The outcome for March is a significant snap back or adjustment after the February result which had 71,500 new jobs which has been  revised upwards to 74,000.

But this time around it's all about payback. A jobless rate of  5.6 per cent is a three year high last seen in mid-2009 at the height of the global financial crisis.

Overall jobs are down by 36,100 and of that 7,400 full-time positions  have disappeared.

The participation rate has  fallen to 65.1 per cent which is often a sign that some people have actually given up the hunt for work.

JP Morgan's chief economist Stephen Walters says the result counters signs of a pickup in non mining parts of the economy

"Just this week alone we've now got a much higher unemployment rate, we've had business confident deteriorate this week, certain business conditions were a lot weaker particularly the employment measures and we also had consumer confidence slump yesterday and to top all that off we've now got the currency at post float high in terms of, in trade weighted terms so a pretty sobering message today," Mr Walters told The World Today.

One pleasant surprise from the financial crisis as IMF ponders missing inflation mystery

By Business editor Peter Ryan

The International Monetary Fund has signalled that inflation appears to be under control despite the trillions of dollars that have been pumped into the global economy in recent years.

For those who might glaze over at talk of inflation and quantitative easing, do not switch off now, the International Monetary Fund wants you to stay tuned.

Listen to my report from The World Today.

"We understand that these topics can sometimes be a little bit dry so we've tried to construct this one as a bit of a mystery story and so we've made a reference to Sherlock Homes and one of his famous cases about the dog that didn't bark," said the IMF's senior economist John Simon.

That dog is inflation, and recently Fido has been in his kennel despite trillions of dollars of quantitative easing - or metaphorical money printing - by central banks around the world.

The IMF and most economists around the world would normally be bracing for outbreak of inflation.

Mr Simon says, in terms of conventional monetary policy, it is a thriller.

"The basic mystery is that during the Great Recession we've seen very large increases of unemployment and in the past when you've had something like that inflation has fallen quite a lot, really there's been very little movement in inflation and the question is why was this?" he asked.

Speaking in Washington at the release of the IMF's World Economic Outlook, Mr Simon said the credibility and independence of central banks meant inflation targeting was working.

"There's been an evolution in central banking such that now it's very possible that we really are reaping the benefits of the low and stable inflation targets the central banks have set," he said.

"So one of the consequences is that we think there are actually substantially cyclical unemployment gaps, which means that there is actually the scope for falls in unemployment as the recovery progresses without there being corresponding bursts in inflation."

The head of investment research at Perpetual, Matt Sherwood, says the IMF's confidence that inflation will remain low is well placed.

"It really has been probably the great surprise in the post-GFC world that, despite the fact the growth's at trend and there's been record stimulus in the form of large fiscal deficits and near zero interest rates, I mean inflation does remain very well anchored," he observed.

"In essence I think the IMF's just really reflecting the data which has been coming out, which continues to show that despite all this stimulus there's very little inflation in the global economy at all."

Mr Sherwood says economists have generally been pleasantly surprised by the tame inflation readings in the face of such low interest rates and large money printing programs.

"I think it's been a great surprise to all economists, because given the amount of stimulus in the economy at present one would normally associate that of course with higher inflation," he added.

The one exception of course is that Japan is using massive money printing to push inflation higher, which is perhaps another challenge for the IMF.

There is also the future of inflation targeting by central banks. The IMF's John Simon says perhaps it is time to consider it should be the principal tool in massaging economies.

"There is a case to think about whether inflation targets as they currently constituted are the best way of maximising the welfare of an economy," he said.

"This is not to say there's any predetermined answer here, it's just saying that you can see, for example in the UK, they've been thinking you know is this inflation targeting regime we have and the precise way we've implemented it the best way to go about maximising economic wealth, happiness in our economy."

Inflation is also on the mind of the Reserve Bank of Australia, and for good reasons.

RBA assistant governor Christopher Kent repeated that low inflation provided scope for another cut to the cash rate.

"With inflation remaining recently well contained, and certainly a bit below the mid-point of the target and expected at the current assessment to remain at target over the next little while, with that in place the board's made it clear there's scope to ease monetary policy further should that be necessary," he said.

While another rate cut is increasingly unlikely because of stronger economic news, the latest consumer confidence reading from Westpac shows Australians are less optimistic because of softer share markets and concerns about the eurozone after the near banking collapse in Cyprus.

Coalition to release NBN policy as early as tomorrow

By Business editor Peter Ryan

Business groups have raised concerns about a potential cost blowout on the National Broadband Network ahead of the release of the Coalition's broadband policy.

A leak of the Coalition broadband policy in News Limited newspapers says that document finds the final price tag of the NBN could exceed $90 billion.

The Daily Telegraph Mon April 8, 2013

The Australian Industry Group says if that figure is correct it is very alarming.

AI Group chief executive Innes Willox has told AM he wants the government to provide a genuine cost-benefit analysis of the NBN.

"There are those who argue the government has been fairly transparent on costs all the way through, but a rigorous cost benefit analysis that would be done while the rollout continues, that can do no harm, it can only instil further public confidence in the rollout," he said.

However, the Federal Government has dismissed the leaked figure, saying it is scare mongering.

"The corporate plan, audited by the Auditor-General, is produced each year, and what you're seeing in that corporate plan is $37.4 billion is the cost of building the NBN - not, as today the Coalition is claiming, $90 billion," the Communications Minister Stephen Conroy told AM.

Innes Willox says business just wants high speed broadband to be built quickly and cost-effectively, and a cost-benefit analysis would assist in ensuring the project is on track to deliver on its promises.

"We believe the NBN, or a high-speed rollout of broadband, is very important to our future, but we don't want to get the productivity argument lost in the debate about costing. We believe it's very important as a productivity enabler and driver in Australia," he said.

"We're not particularly fussed about whether it's fibre to the home or fibre to the node, as long it's a good product, rolled out expeditiously, that business can utilise as well as the broader community."

Could Slovenia be the next domino to fall?

With Cyprus set to plunge into a deep recession because of harsh bailout terms that target bank deposits, the big question is: which country could be next?

Attention is now turning to Slovenia as the next potential flashpoint in the eurozone debt crisis.

Slovenia joined the eurozone in 2007 and became the first post-Soviet era nation to take on the single currency.

At first, its banking sector grew rapidly, but since 2009, when Europe's debt crisis erupted, Slovenia's banks have been under siege and the biggest are struggling with bad loans that now equate to around a fifth of economic output.

It is estimated that Slovenian banks and companies need around four billion euro in special funding to remain solvent.

Slovenian prime minister Alenka Bratusek admits the nation's finances are in bad shape and has ramped up austerity to rebuild the banking sector.

But she stresses that Slovenia's troubles are not in the same league as Cyprus - which had a much bigger and more bloated banking sector.

While there is no request for a bailout yet, the cost of protecting Slovenia's debt rose around 0.49 per cent overnight in a sign that financial markets are nervous.

The recent focus on Cyprus has also brought the fate of Greece back into sharper focus.

It has received a number of bailouts since 2009, but given that the deep austerity is only having a minimal impact, there are concerns that Greek bank deposits could be targeted if another rescue is requested.

As a result, the share market in Athens fell close to five per cent this morning before recovering.

Currency strategist Kathleen Brooks says patience is running out.

"The appetite to continue with these bailouts is very, very weak from the kind of core countries in the eurozone," Ms Brooks told the BBC.

"Now what we know about Greece which obviously has been bailed out is that there is a lot of expectation they'll need to be bailed out going forward, and if that doesn't happen and a bail in if you like comes into play, then their banks could get hit as well, so their deposit holders could get hit."

The fallout from Cyprus, combined with new fears about Slovenia, is putting pressure on bigger nations like Britain and France to build their capital base to reduce potential exposure.

The caution about Cypriot contagion has also sparked open talk that, in addition to Slovenia, smaller economies such as Malta and Luxembourg could also be exposed.

Waiting game on how Cyprus will stop flight of cash when banks re-open

By Business editor Peter Ryan – analysis

The big question for Cypriots - and foreigners holding bank accounts in Cyprus - is what happens when the nation's big two banks finally open.

But the Central Bank of Cyprus is yet to announce a plan to stop money being pulled out of the country.

So far, the central bank's governor has only said capital controls will be "loose" and "temporary" with no word on what form they'll take or how long they'll last

But the early options are not good ones for ordinary Cypriots who need to put food on the table or businesses needing to pay suppliers or be paid themselves.

Some of the options being canvassed include:

* a weekly limit on how much cash can be withdrawn from banks of ATMs

* a temporary ban on the use of cheques

* powers to prevent the use of credit or debit cards to stop money from being switched out of the country

* limits on access to fixed term bank deposits that have matured or are about to mature

* tougher restrictions on the amount of hard cash that can be taken out of the country

Extreme capital controls are rare but there are precedents.

After the collapse of Lehman Brothers in 2008, Iceland imposed capital controls to protect its currency.

Malaysia did the same during the Asian financial crisis on the late 1990s to ringfence its economy.

But as a Eurozone member, Cyprus is meant to be part of the EU model - the free movement of money, people and trade.

The proposed restrictions highlight the looming crisis Cyprus poses to the Eurozone and the imperative to do whatever it takes to stop depositors from draining bank vaults.

In other developments:

* the European Central Bank moved to quash suggestions that the bailout deal for Cyprus was not a model for future rescues in the Eurozone.

* sharemarkets in Italy and Spain fell after unconfirmed rumours that depositors were shifting their money to financial havens

* Russia's main share index fell to the lowest level in more than three months as Cyprus's bailout plan cast doubt on the safety of $60 billion of loans and deposits in the island nation.

* and the British government has told 18,000 expatriate retirees living in Cyprus to consider diverting pension payments into different accounts to avoid any losses - or perhaps have their pensions paid into the account of a trusted friend.

Global economy improving despite Cyprus bailout says cautious Reserve Bank

By Business editor Peter Ryan

Global financial conditions are continuing to improve despite this week's emergency bailout for Cyprus.

But the Reserve Bank has warned the rescue of Cyprus is the latest reminder that the Eurozone debt crisis is far from over and that another financial shock could still hit the global economy.

In it's six-monthly Financial Stability Review released today, the RBA said it was still to early to say if the improved market sentiment was the beginning of a sustained recovery or "merely a temporary upswing".

"The renewed market tension associated with the handling of the sovereign and banking crisis in Cyprus in recent weeks has provided a reminder of the political, economic and social challenges of resolving the pervasive fiscal and banking sector problems," the Review says.

"There have been a number of periods of optimism which ultimately turned out to be short-lived as financial markets refocused on unresolved underlying problems."

In the six months leading up to the Cyprus bailout, the improvement in global investor sentiment has seen a rally in risk appetite and significant gains on major bourses.

But since the Cyprus crisis has emerged, investors throughout Europe have sold off shares fearing that targeting of bank deposits in the island nation could spread to other Eurozone members.

The European Central Bank today moved to quash fears that the Cyprus solution was a precedent after the Dutch finance ministers said it could be a "template" for other rescues.

The Reserve Bank also gave a tick of approval to Australia's banking system and it "remained in a relatively strong position."

The Review says wholesale funding costs for banks have eased "at the margin" while making the point that banks have been "continuing to limit their use of wholesale funding in any case."

The RBA says growth in deposits is outpacing growth for credit and that rates paid for retail deposits "remain around historically high levels."

The comments appear to support claims from the Big Four banks that the competition war for deposits is responsible for an inability to pass on cash rate cuts in full to borrowers.

The RBA says that while banks are looking for new strategies to underpin growth, there was "little sign at this stage that banks have been motivated to take on excessive risk."

Households still prefer to pay down debt rather than take on new debt, according to the Review.

However, the RBA has warned that big household debt remains a major risk.

"Household indebtedness and gearing are nonetheless still at historically high levels and hence continuation of the household sector's more prudent approach to borrowing would assist in strengthening the financial sector's resilience."

The Review also predicts the peak in the mining investment boom is now expected to be lower and occur earlier than previously forecast.

While the impact on the financial system would be limited, the RBA warns that companies servicing the mining industry could be hurt.

"Some mining services companies could face greater difficulties in repaying their debt (and) this could lead to loan losses to financial intermediaries even though their exposure to mining services companies is small."

The Reserve Bank meets next Tuesday for discuss interest rates after cuts of 175 basis points since late 2011.

Most economists think that despite the emergency bailout for Cyprus that the cash rate will be held at 3.0 per cent.

Reserve Bank escapes cyber hack attack

By Business editor Peter Ryan

The Reserve Bank is in the midst of a security crackdown after a cyber attack with the potential to expose sensitive internal information.

The attack occurred late in 2011, when a series of emails - carrying what's been described as a "malicious payload" - targeted senior RBA staff.

While the RBA's integrity was not comprised on this occasion, there are concerns that Chinese-developed spy software is posing a major threat to government institutions including central banks.

The Reserve Bank is well known for its tight security and few, if any, cyber villains have managed to get through its digital firewall.

Listen to my story broadcast on The World Today.

However, that changed on November 16 and 17 2011, when a number of suspicious emails were sent to senior RBA staff.

According to an internal report titled "targeted email attack", six staff clicked on an embedded hyperlink to what is described as a "virus payload".

"Malicious email was highly targeted, utilising a possibly legitimate external account purporting to be a senior bank staff member. It included a legitimate email signature and a plausible subject title and content," noted the report.

"As the email has no attachments, it bypassed existing security protocols, allowing users to potentially access the malicious payload via the internet browsing infrastructure."

The report says the six users potentially compromised their workstations, and points to fears about a malicious externally generated attack, or act of sabotage, as a major risk.

While a successful cyber attack was averted this time, the report says bank assets could have been compromised, leading to service disruption, information loss and damage to the RBA's reputation.

"I think it raises the same sorts of questions that you'd have right across the public service," said Paul Bloxham, a former Reserve Bank economist and now chief economist at HSBC.

"All public institutions are subject to these potential threats from information technology attacks and cyber attacks."

He says the thwarted attack has a range of implications for the RBA and other central banks.

"It would depend on the nature of what sort of cyber attack that they got and of course it does pose a threat, and it's something that needs to be dealt with appropriately," he said.

"It's certainly something that you'd expect that central banks would need to take into account, and they're highly likely to be taking it into account because it does potentially pose a threat to their reputation and to their operations."

The Reserve Bank has refused to comment beyond the report posted on its website, and will not confirm what steps are being taken to stop further cyber attacks.

However, the report does note the difficulty in keeping up with the the speed of spy programs that can be hidden in emails.

"While users are aware of the need for caution with suspicious attachments, such awareness is unlikely to protect the bank from credible looking emails and attachments," the report said.

Tony Kirkham, from the network security company Palo Alto, says the RBA attack should be a wake-up call for other agencies and he was not surprised to hear about it.

"This sort of attack is sadly becoming very commonplace these days," he said.

"We're seeing this sort of thing happen on a number of organisations, and the other thing we're seeing is that these attacks are becoming very targeted and crafted very specifically to go after organisations and quite often particular types of information.

They'll quite often start by sending some sort of a spear-fishing attack, an email which looks credible, which will then be a trigger to trigger some sort of malware on the computer of the person who receives it.

Network security company spokesman Tony Kirkham

"They'll quite often start by sending some sort of a spear-fishing attack, an email which looks credible, which will then be a trigger to trigger some sort of malware on the computer of the person who receives it.

"Once they install some malware on that machine, that gives them a foothold inside the organisation and that allows a person on the outside, malicious parties, to control a device on the inside of the network.

"That allows them to get access, quite often, to all the information on that particular machine and can be used as a launching point to get other devices and other information systems within the organisation."

The World Today contacted the Department of Defence in relation to national security issues amid concerns about ramped up attacks sponsored by China.

While the department says it does not comment on specific incidents, it did say that hacking is a constant threat, especially for the nation's businesses and economic institutions.

"At least 65 per cent of cyber intrusions on Australian computers have an economic focus," a Defence spokesperson said in a statement.

"Cyber intruders are looking for information on Australia's business dealings, intellectual property, scientific data and the Government’s intentions."

The Department of Defence says the Cyber Security Operations Centre estimates that at least 85 per cent of cyber intrusion techniques can be mitigated by adopting standard security procedures, including installing the latest patches to applications and operating systems and minimising administrative privileges.

Blokes still rule boardrooms, major super fund warns

By business editor Peter Ryan

A report out today shows the majority of Australia's listed companies now have policies to get more women into top corporate roles, but so far they have only managed to generate one woman for every six men in the country's top 200 boardrooms.

Accounting firm KPMG analysed 600 companies and found that almost all have a gender diversity policy in place or plan to introduce one.

ASX corporate governance guidelines on diversity are not mandatory, and the Australian Council of Superannuation Investors (ACSI) says the situation remains unacceptable.

As the world marks International Women's Day, the council is warning that quotas might be needed to get more balance in boardrooms.

ACSI president Gerard Noonan told AM that corporate Australia's commitment to diversity is disappointing given moves in Europe for 40 per cent female representation at the board level.

"Over the past year there has been some improvement, but it's pretty disappointing as an outcome because the top 200 companies in Australia, just over 15 per cent are women so that's up from 14 per cent last year," Mr Noonan said.

"At the same time at least two-thirds have less than two women on their boards and none has a majority. Even, oddly enough, in the health sector, where you've got an overwhelming majority of women working, it's still under 10 per cent."

The criticisms come as the ASX Group chose International Women's Day to release its diversity report which shows 196, or 99 per cent, of ASX 200 companies have adopted a diversity policy or explained why one is not in place.

However, Gerard Noonan says having a policy in the system or on a shelf is not good enough, and does not mean more women are getting into boardrooms.

"Look, it's a good thing to have a policy of that sort and we applaud that but in 2010 ASCI announced a benchmark of all companies in the ASX 200, that's the 200 biggest companies, having at least two women on their boards by 2014," he said.

"But at this rate, it's a very, very slow change. It'll be another decade before we get there let alone 2014."

ACSI's audit shows that an additional 24 women were appointed over the past year, meaning the target to have at two women on every ASX 200 board by 2014 will not be met.

"Men hold over 1,000 more board positions than women. In Australia there's about 1,250 men in the top 200 companies compared with about 230 women. So we've got a long way to go," Mr Noonan said.

ACSI has pointed to a report by European bank Credit Suisse showing the greater diversity resulted in higher average returns on equity, lower debt and better average growth over the course of the last six years.

AUDIO: Blokes still rule boardrooms, super fund warn

Mr Noonan warns that unless companies put diversity policies into action, it could call for regulatory intervention to mandate quotas.

"We say that if companies can't adapt to meet that 2014 benchmark without good reason - and it's a pretty modest benchmark - we may need to consider recommending that our members vote against re-election of incumbent boards if it comes to that," he cautioned.

"It'll be very difficult for us as a shareholder organisation not to consider calling at least for some regulatory intervention to see whether that can improve."

Topics: business-economics-and-finance, corporate-governance, management, women, australia

First posted 10 hours 5 minutes ago

Business lobby urges carbon tax compromise

By Business editor Peter Ryan

A major business lobby group is proposing a compromise solution to the political impasse over the carbon tax.

The Australian Industry Group says the fixed carbon price should be scrapped in favour of an immediate switch to an emissions trading scheme, with the price floated.

The group says that is a more practical alternative to the current carbon pricing model, as it will be difficult for the Coalition to unpick the tax if it wins government.

Listen to my interview with Innes Willox broadcast on this morning's edition of AM.

"We have to start with the reality here that both major political parties have said that they want to achieve a 5 per cent emissions reduction cut by 2020. Both parties are locked into that, the question is how they get there," explained the industry group's chief executive Innes Willox.

"So what we've proposed today is that we drop the carbon tax immediately - it's a dead weight cost on business at the moment - and move to an internationally linked emissions trading scheme which we're due to do in mid-2015 in any case."

Mr Willox says an immediate move to emissions trading could still be a prelude to removing carbon pricing altogether if the Coalition wins a majority in both houses of Parliament at the next election.

"The issue here is the axing of the tax, how would that occur, how long would it take, what cost would business have to incur in the meantime," he said.

"What we're proposing here is what we think are quite sensible strategies for all parties to reduce the cost on business while they work through to the next step."

Mr Willox says business would be very happy to consult with the Coalition on its direct action policies on carbon emissions, but would like to see some reduction to the cost impost on business in the meantime.

"If the Coalition wants to develop direct action further, we are obviously part of discussions with them about that, but it's a policy that is still being developed and is continuing to be developed," he added.

"The Coalition have made it very clear that they'll continue to consult on this and consult through the election period."

The Australian Industry Group says its proposal to switch immediately to emissions trading would be a face saving win-win for both sides of politics.

"This debate is going to gain momentum right through the election period, and it doesn't take away from either party putting forward their points about which sort of overall strategy is best, who's right, you know, all the political argy-bargy will occur in any case," Mr Willox said.

"This is a sensible policy approach which gives both parties the out, and it also gives some business some certainty."

Innes Willox says the group has put forward its proposal to both major parties, but will engage in further consultation to convince them of its merits.

"We believe this gives both major parties about 80 per cent of what they want and does help us move towards reaching that emissions reduction target that both have committed to," he added.