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Call for new approach to Asia relations

AUSTRALIA’S political leaders have been criticised by some of the most senior foreign policy advisers for clumsy handling of relations with Asia and slavish devotion to the US alliance.
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A conference held in the NSW Parliament yesterday by the Australian Institute of International Affairs, a federal government chartered and assisted body, heard calls from eminent diplomats for a more balanced approach to the rise of Asia.

The institute’s national president, John McCarthy, who has been Australia’s envoy to Washington, Jakarta, Tokyo and New Delhi, said Australians should not let themselves be led to think they have to choose between new ties with China and the military alliance with the US.

Most thinking Australians supported the ANZUS treaty alliance with the US, making it difficult to change ”even if we personally disagreed with aspects of it”, he said.

”But there is a lot to be said for paying our alliance dues only where it is strictly necessary in terms of the alliance – we don’t necessarily have to please the Americans, as it is often put,” he said. ”We have to honour the terms of the alliance, as a responsible ally will do [but] not say things or offer things that really aren’t necessary.”

He said the the announcement last November that the US would station 2500 marines in Darwin for six months every year was an example of what could have handled better. ”The Chinese and the Indonesians could have been forewarned, very seriously, two or three days before, and explained very very carefully at a very senior level what it all meant. None of that was done.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Still in the dark, with governor on the defensive

Defensive … the Reserve Bank governor, Glenn Stevens, before the House of Representatives economics committee in Canberra yesterday.THE testimony given yesterday by the RBA governor, Glenn Stevens, about the Reserve’s handling of the bank-note bribery scandal was faltering, defensive and, at times, evasive.
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It was in keeping with Mr Stevens’s past appearance at the committee and highlighted again the need for a proper inquiry into the affair.

Mr Stevens was asked about briefings given to senior officers of the RBA in 2007 about bribery and corruption in its subsidiaries.

The facts are clear. A briefing was given to the RBA deputy governor Ric Battellino by Brian Hood, the company secretary of RBA firm Note Printing Australia. The briefings raised serious allegations of bribery and corruption, including the claim that a Malaysian agent was paying off politicians.

Earlier this month, the federal police told Parliament it expected serious bribery allegations received by a Commonwealth agency to be reported to police.

But the RBA didn’t call in the cops in 2007. The AFP were only called after it was reported by the Herald and The Age in 2009. Even then, the RBA didn’t immediately hand over a damning 2007 memo written by Mr Hood.

And, for the past five years, the RBA has chosen not to tell the public or Parliament about the 2007 briefings, even when the opportunity begged.

Instead, Mr Stevens has stuck to the line that the RBA was in the dark about the alleged bribery in its subsidiaries until the 2009 media expose´.

This week, the Herald and the ABC demolished that claim by publishing the contents of the 2007 briefings. The revelations expose a major corporate governance failure at the top of the RBA, as well as an inability to be open about this failure.

At the economics committee yesterday, the Liberal MP Tony Smith asked Mr Stevens when he’d read a 2007 corruption memo addressed to his then deputy, Mr Battellino.

Mr Stevens said that, according to his memory, he didn’t read it in 2007 but may have later.

He thought Mr Battellino “may have been shown a copy at some point”, despite the fact that the memo was addressed directly to him. But Mr Stevens said he couldn’t be “certain of that.” Despite the intense media pressure surrounding the issue earlier this week, Mr Stevens said he hadn’t spoken to Mr Battellino in the last few days.

Mr Stevens couldn’t recall if he was told about Mr Hood’s 2007 meeting with Mr Battelino prior to it occurring. Asked if he had read the memo in the lead-up to his February committee appearance, Mr Stevens couldn’t recall.

When asked by Mr Smith if it would have been in the “interests of openness” for Mr Battelino (who retired in February) to have told the committee during previous hearings about the explosive 2007 briefings, Mr Stevens answered: “I didn’t myself feel that that particular event was of the importance that you seem to feel it is.”

This was a remarkable answer: the “particular event” Mr Stevens felt was unimportant involved a senior company executive exposing details of the most serious scandal to hit corporate Australia in decades.

After just several minutes of questioning by Smith, Mr Stevens was thrown a Dorothy Dixer that would make any backbencher proud. Committee chair and Labor MP Julie Owens clumsily tried to give Mr Stevens an out by stating that his past claim that the RBA knew nothing about corruption prior to 2009 had been misrepresented.

Ms Owens claimed that because the RBA corruption briefings in 2007 dealt with Note Printing Australia and not Securency – and because Mr Stevens was responding to questions about Securency when claiming the RBA knew nothing – he was in the clear.

But Mr Hood’s 2007 briefings to the RBA dealt with NPA and Securency. His memo clearly stated that both firms were using a potentially corrupt Malaysian middleman.

Mr Hood’s briefings also stated that Graeme Thompson, the chairman of NPA, had authorised a payment to this middleman despite probity concerns. Mr Thompson was also the chairman of Securency. The 2007 briefings also accuse Chris Ogilvy, who was the chief executive of NPA and a director of Securency, of malfeasance.

But, instead of ensuring Mr Stevens faced appropriate oversight in her role as committee chair, Ms Owens went in to bat for him. In doing so, she appears to have followed the lead of the Treasurer, Wayne Swan, whose three-years-and-counting response to this growing scandal has been to say nothing and do nothing. By not confronting the unpleasant questions about the RBA and other government agencies that flow from this scandal, the Gillard government is rapidly becoming part of the cover-up.

This story Administrator ready to work first appeared on Nanjing Night Net.

PM tries to tame beast risen from the grave

“Indeed, every union has what it refers to as a re-election fund, slush fund, whatever, which is the fund that the leadership team … puts money so that they can finance their next election campaign” … Prime Minister Julia Gillard.What’s in a name, Shakespeare’s Juliet doth often ask. For shaken Julia, it seems, the answer is quite a lot. Indeed, just what is in the public understanding of ”re-election slush fund” may well determine whether the Prime Minister can extricate herself from swirling allegations that she acted improperly while a solicitor two decades ago.
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If she cannot, her critics will claim vindication in their portrayal of Gillard as a person of questionable trustworthiness and poor judgment. Her electoral stocks will further suffer. If she can knock the allegations into a cocked hat, Gillard will get her head above the parapet probably for the first time since the equivocal election, although she and Labor won’t be out of the woods.

Until a week ago, with mixed success, Gillard employed stonewalling, indignation, intimidation and haranguing to keep her accusers mostly quarantined to internet blogging in the matter we will attempt to outline here. Last year, she scored a humiliating triumph over mainstream journalists who attempted to report suspicions against her. But she didn’t count on her sacked attorney-general Robert McClelland opening old wounds about the extent of union corruption and recent corroboration from people well placed to challenge Gillard’s clean-sheet approach.

As a Slater and Gordon solicitor in Melbourne, Gillard advised her then boyfriend – an Australian Workers Union rising star, Bruce Wilson – on constructing a union facade, the Australian Workers Union Workplace Reform Association, from which Wilson and his AWU sidekick Ralph Blewitt allegedly misdirected hundreds of thousands of dollars.

The association’s stated purpose – at least according to a 1992 public notice – was to promote and encourage ”workplace reform” in construction and maintenance. But it wasn’t used for workplace safety and training. Gillard acknowledged this week she thought it was intended as a union leadership re-election fund where levies on union officials, and the proceeds of fund-raising dinners and so on, could be safely deposited.

In 1995, she confided to senior colleagues that the association was a ”re-election slush fund”. ”It’s a common practice,” she told them. ”Indeed, every union has what it refers to as a re-election fund, slush fund, whatever, which is the fund that the leadership team … puts money so that they can finance their next election campaign.”

On Thursday, Gillard conceded her slush fund reference, uttered in the context of a casual and jovial conversation, ”wasn’t the best form of words”. ”But I’d ask people to assess the form of words in the context in which it was being used in a sentence where the description of the purpose of the association, as I understood it, is exactly the same as the description I’ve given you here today,” she told journalists.

Gillard said her description was not inconsistent with workplace safety aspirations because they were key goals of the union leadership ticket.

Instead, Wilson and Blewitt extracted big deposits from construction and resource companies employing AWU members. Initially, the national AWU knew none of their activity but subsequently notified police of its suspicions and went so far as demanding a royal commission, a call that fell on deaf ears in the Keating government.

Wilson and Blewitt allegedly used the money as a sort of private bank account, buying a house in Melbourne’s Fitzroy, after Wilson moved from Perth, and spending on other activities unrelated to the association’s given purpose.

Wilson, who works as a part-time club cook on the mid-north coast of NSW, and Blewitt, who fled Australia for Indonesia (where he is accused of a land swindle) and Malaysia, have been investigated by police in Perth and Melbourne. Documents reveal Perth detectives wanted them charged but could not convince the builder Thiess to co-operate. Wilson and Blewitt have not been charged but the latter has told The Australian newspaper that ”sham” transactions took place and that he will tell all in return for indemnity from prosecution. An AWU civil action against Wilson went nowhere.

Gillard claimed on Thursday her role was limited to advice and not to execution, that she did not know what improper use Wilson and Blewitt would make of the entity she helped establish, and that she severed the relationship with Wilson in 1995 when ”I became aware that I had been deceived about a series of matters”.

Much of the more salacious, zany and explicitly offensive commentary (and invention) has been restricted to internet ranting – to what Gillard called misogynists and nut jobs. That is not a description neatly befitting Peter Gordon and Nick Styant-Browne, two former senior partners at Slater and Gordon, however.

Together, they are the source – intentionally or otherwise – of much of the fresh revelation. Gillard’s handling of the AWU matter angered some of her senior colleagues and she was interviewed on September 11, 1995, by Gordon and another as part of an internal investigation.

According to a transcript of the interview, Gillard conceded the renovations to her inner Melbourne home might unintentionally have benefited from the rorted union funds, although she doubted this. She provided receipts to show the renovation work was paid by her.

In a Peter Gordon-leaked draft statement, the former Slater and Gordon principal said last week the firm considered terminating Gillard’s salaried partner position but accorded her the benefit of the doubt and accepted her explanations. ”Nevertheless, the partnership was extremely unhappy with Ms Gillard, considering that proper vigilance had not been observed and that [her] duties of utmost good faith to [her] partners, especially as to timely disclosure, had not been met. Ms Gillard elected to resign and we accepted her resignation without discussion.”

But a statement by Slater and Gordon’s managing director Andrew Grech said Gillard took leave of absence at the time to contest unsuccessfully a Senate election and, in May 1996, resigned to become chief of staff to the then Victorian opposition leader John Brumby. Said Gillard on Thursday: ”It had long been an aspiration of mine to move to a political career so I made the determination to resign from Slater and Gordon.”

This story Administrator ready to work first appeared on Nanjing Night Net.

The third man

Hidden agenda … Whitlam looks on as David Smith reads the proclamation dissolving parliament. Sir Anthony Mason.
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As he will be in the shades of history when this is read, his role should be known.

-John Kerr

Sir John Kerr had been governor-general for just eight months when, in March 1975, he approached the vice-chancellor of the Australian National University with a confidential request.

Kerr put forward an unusual proposition – the formation of a group within the university to meet with him, in confidence and without the knowledge of the prime minister, and to advise him on the nature and extent of his powers as governor-general.

Kerr did not inform Prime Minister Gough Whitlam that he had sought advice from this hand-picked advisory group and Kerr never revealed the role played in the formation of this group by its most senior judicial figure, Sir Anthony Mason.

Mason was a sitting justice of the High Court, and a pro-chancellor of the ANU. He and Kerr had been ”close personal friends” since Mason first appeared as a junior counsel to Kerr in the 1950s, and it was Mason who drove the discussions with Kerr on the establishment of this advisory group, conferring directly and confidentially with the Governor-General about ”constitutional problems”.

Kerr’s request for confidential advice posed ”some difficulty” for Justice Anthony Mason, since the matters this group was likely to consider were those same controversial political and legal points currently the subject of intense political debate and that were also likely to come before the High Court.

Mason acknowledged his dilemma to Kerr:

“I have felt some difficulty as to my own participation in the discussions, for it may appear to some that we are engaged in the consideration of important questions which may sooner or later come before the High Court for decision,” he wrote.

“No doubt the questions which you have in mind are presently hypothetical. Unfortunately the hypothetical questions of today have a distressing habit of becoming the actual questions of tomorrow. I therefore doubt whether it would be proper for me to become a member of the group on a continuing basis.”

While expressing some doubt over his own involvement, Mason told Kerr that he would attend the initial meeting and ”refrain from expressing my opinion on questions which might become controversial”.

The group, variously described as a ”seminar” or a ”tutorial” for the Governor-General, met twice at the ANU during September 1975; Sir John Kerr attended with his official secretary, David Smith.

By October, with the opposition senators refusing to vote on the government’s Appropriation Bills in a bid to force a general election, it was clear the ANU was involving itself in matters of partisan political controversy with the Governor-General. Kerr was told their ”tutorials” would have to cease.

The end of his private tutorials did not signal the end of Sir John Kerr’s solicitations to Justice Mason. Before the opposition had taken action in the Senate against the government’s budget, Kerr had initiated, according to his records, a ”running conversation” with Mason to discuss ”probable future events and discretionary alternatives open to me”.

These records describe a series of strategic and undisclosed exchanges that continued through the mounting political crisis, marked by the extraordinarily close involvement of both Justice Mason and the Chief Justice, Sir Garfield Barwick, in Kerr’s final actions, and which ended only with the end of the Whitlam government itself.

Kerr later set out a detailed archival record of what had transpired between himself and Justice Mason and without which ”his part in my thinking in October-November 1975 will not … be known to history”:

“In the light of the enormous and vicious criticism of myself, I should have dearly liked to have had the public evidence during my lifetime of what Mason had said and done during October-November 1975 … [but] he would be happier … if history never came to know of his role,” he wrote.

“I shall keep the whole matter alive in my mind till the end, and if this document is found among my archives, it will mean that my final decision is that truth must prevail, and, as he played a most significant part in my thinking at that critical time, and as he will be in the shades of history when this is read, his role should be known.”

The scenario depicted in Kerr’s record dramatically recasts our understanding of these events and of the role of key individuals within them. This remarkable document presents a hidden history, now left for archival posterity as much for personal vindication as public illumination.

Kerr records that, at every stage in the fraught and apparently confidential discussions between the Governor-General and the Prime Minister during the month from October 12 to November 11, 1975, he was confiding every meeting and recounting every detail to Justice Mason, ”to fortify myself for the action I was to take”.

Sir Anthony Mason has refused to speak on these matters, despite repeated requests to do so. Whitlam was oblivious to it all.

The precise nature of Mason’s role in Kerr’s deliberations has never been revealed, either by Kerr or by Mason himself. In his memoirs Kerr referred cryptically to ”conversation with one person only other than the Chief Justice”.

Although speculation soon emerged that Mason was this unidentified ”third man” in conversation with Kerr, it would be another 20 years before he was identified as the ”third man” and as having spoken to Kerr during that time.

But Kerr’s records suggest that Mason was not merely the third man: he was, in many ways, the man. From their earliest discussions, months before there was even any Supply crisis in the Senate, Kerr records that it was Mason who met, talked with, planned for and counselled him, guiding him through his deliberations and advising him on the action he should take.

Of equal significance from Kerr’s detailed record is his depiction of Mason as providing a necessary bridge between Kerr and the Chief Justice, Sir Garfield Barwick.

In the years to follow, the more his own actions were questioned, the more eager Kerr became that Mason’s opinions and advice to him should be revealed: ”From my point of view it is unfortunate that they are unknown,” Kerr wrote.

Five years after these events, Kerr noted in his journal that he had renewed his plea to Mason to make his involvement public, and that Mason had again refused. Mason’s view, as he still maintained when pressed nearly 40 years later was, ”I owe history nothing”.

What is clear from Kerr’s detailed archival record of these discussions is that, even before Supply had been blocked, he had reached a decision on the critical element fundamental to the resolution of the political crisis that would engulf the Parliament and occupy much of his negotiations with both the Leader of the Opposition and the Prime Minister in the coming weeks.

Kerr accepted without question the existence of ”the reserve powers” – powers that would, if presumed to exist, enable the Governor-General to act independently, even against the advice of his elected ministers.

But the question of the existence of the reserve powers was not only the subject of intense legal debate, it lay at the heart of the political differences over the role of the governor-general. The advice proffered by the shadow attorney-general, Robert Ellicott, was that the reserve powers not only existed but that Kerr should act on them immediately and remove Whitlam from office from the moment Supply was blocked.

The government’s chief law officers and formal legal advisers to the Governor-General – the solicitor general, Maurice Byers, and the Attorney-General, Kep Enderby – firmly rejected Ellicott’s approach.

But from his own record of their conversations over this time, Kerr had not even received the advice of his legal advisers when he declared to Mason he would ignore it anyway, in favour of the advice of the shadow attorney-general.

Kerr had already decided he could act against Whitlam and his government as early as October 12, 1975, at the time of the first of his discussions with Mason when, Kerr’s archival record states, they considered ”probabilities, options and timing”.

On that day, when there was no crisis, no block in the Senate and, as Kerr himself noted, ”no conceivable ground for action on my part, supply not having been blocked”, Kerr resolved that he should not act yet, but that he should ”await further developments”.

By October 17, with Supply blocked for barely two days, Kerr was even more certain in his decision to act against the government. It was just a question of when: ”the real question at this time is whether I should act before the money runs out and whilst the Senate is still only deferring”, he noted.

The next week, as Kerr’s archival record presents it, he again met with Mason and on October 20 resolved to ”still follow the same line” and do nothing for the moment. According to Kerr’s records, it was at this meeting and again by phone the following day that he and Mason discussed for the first time ”the desirability … of seeking Barwick’s formal advice”.

The notion of the Governor-General seeking ”formal advice” from the chief justice, against the advice of the Prime Minister, was an exercise of unilateral vice-regal power, since the Governor-General’s formal adviser is the Prime Minister and his formal legal advisers are the solicitor-general and the Attorney-General.

At this point, as Kerr recorded it, Mason advised he should only approach Barwick once he knew ”what he would be likely to advise”. Barwick believed, as Ellicott did also, that Kerr should move immediately against Whitlam; ”Barwick … would advise immediate radical action – dismissal,” Kerr noted. Barwick therefore should be approached only once Kerr was ready to act.

The timing of this exercise was crucial and, according to Kerr’s record of their conversation, Mason cautioned that ”such advice [immediate dismissal] would be disastrous at this time”.

The next day Whitlam reminded Kerr that he was not entitled to seek outside advice, that ”I could get advice only through him”. Kerr ignored this directive and, according to his records, told Mason of it and continued to seek outside guidance.

Kerr’s actions represented a dramatic subversion of the role of the Governor-General in a parliamentary democracy as an appointed official who acted on the advice of his ministers.

Through this circular, self-referential process, Kerr was constructing an entirely new notion of an independent, unelected governor-general with literal and extensive powers, a view that was at odds with the democratic understanding of the role and certainly at odds with Whitlam’s unstinting trust and belief in him – personally and as Governor-General.

The interaction between Kerr and Barwick on this political struggle stretched back several weeks, to September 20 when Kerr was guest of honour at the annual dinner of the Order of St Michael and St George (a British order conferred for distinguished service overseas or in foreign affairs) in Sydney.

Kerr was seated next to Barwick and the two discussed the possible role of the Governor-General should the opposition senators refuse to vote on the government’s Appropriation Bills. Kerr asked Barwick whether he would be prepared to advise him on his own position and actions. The chief justice agreed.

Kerr’s consistent and repeated concern was for his own security, that the Prime Minister might advise the Queen to dismiss him as Governor-General if he knew that his own dismissal was being contemplated.

Kerr was presented with an unexpected opportunity to canvass his concerns directly with ”the Palace” in the unlikely setting of Port Moresby in September.

During Prince Charles’s 1974 visit to Australia, Kerr had discussed with him the possibility of Charles’s own future appointment as Governor-General, a proposal seriously considered in light of the lengthy time the prince was likely to wait before becoming king.

Kerr took this previous interaction to suggest a personal connection to the Prince of Wales and now, as the two met again in Port Moresby, the Governor-General took the extreme step of raising with the prince the possible dismissal of the Whitlam government and his grave fears that he would himself be dismissed by Whitlam should he do so.

Apparently oblivious to constitutional expectations, Charles replied, according to Kerr’s notes of their exchange, ”But surely Sir John, the Queen should not have to accept advice that you should be recalled at the very time, should this happen when you were considering having to dismiss the government”.

On his return to England, Charles took up Kerr’s concern with the Queen’s private secretary, Sir Martin Charteris. Unknown to Whitlam, who considered Charteris a friend, Charteris then wrote to the Governor-General just one week before the Supply crisis began, with equally remarkable advice.

Charteris told Kerr that, should what he euphemistically termed ”the contingency to which you refer” arise, the Queen would ”try to delay things” although, Charteris acknowledged, in the end the Queen would have to take the advice of the Prime Minister.

Neither Kerr nor the Palace ever revealed that, weeks before any action in the Senate had been taken, the Governor-General had already conferred with the Palace on the possibility of the future dismissal of the Prime Minister, securing in advance the response of the Palace to it.

Kerr’s letter dismissing Whitlam would be accompanied by a statement ostensibly from the Governor-General, setting out the reasons for his decision. According to Kerr’s archival record, Justice Anthony Mason’s role in the dismissal of the Whitlam government was complete with his authorship of this statement.

Kerr states that at their final meeting in Sydney on 10 November, Mason gave him ”a document … in his own handwriting”, to which Kerr added some material but otherwise used as his own words: ”that sheet as added to by me became incorporated in my final public statement”.

Thirty-five years later, when asked specifically about his authorship of one of these key dismissal documents, Mason refused to comment.

Kerr’s archival notes record that after forewarning his wife, Anne, of his intentions on November 9, he then called Anthony Mason and arranged to have another ”private talk” with him later that day.

“I began the conversation by saying that I had decided to dismiss the government, commission Fraser as a caretaker prime minister and get Parliament dissolved on Tuesday the 11th if the crisis was not resolved by then,” Kerr wrote.

Kerr says Mason replied spontaneously and with genuine relief, saying: “I am glad of that. I thought that I might this afternoon have to urge that course upon you.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Astor saga nears happy ending

Opening credits: Eighty-year-old cinema saviour and St Kilda businessman Ralph Taranto shows off his new acquisition.ST MICHAEL’S Grammar School has sold the Astor cinema, bringing to an end its much-maligned plan to redevelop the heritage-listed art deco building as a multi-purpose performing arts complex.
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St Kilda businessman Ralph Taranto has bought the Astor for an undisclosed sum believed to be less than the $3.8 million St Michael’s paid for it at auction in 2007.

”You’d have to spend about $20 million to build it today, but the return on it means it’s not worth much more than $2 million,” the 80-year-old Mr Taranto told The Saturday Age. ”I’m not buying it for the return, I’m buying it for the passion, the love.”

St Michael’s put a brave face on the sale, chairman of the board Paul Orton telling The Saturday Age that it was ”a terrific outcome for the school, for the community and for this wonderful historic cinema”.

But in a prepared statement the school blamed what it called ”misinformation” for a protest campaign that had drawn more than 13,000 signatures on change南京夜网 and torrents of abuse in social media, finally leading it to conclude that ”a shared community arts facility was no longer a viable proposition”.

Now, it seems, it’s as-you-were for the Astor, with Mr Taranto intending to leave the running of the cinema in the hands of George Florence, the man who has run the business since 1982. Asked if his intention was to keep it as a single-screen cinema, Mr Taranto’s response was simple: ”Oh God yes. I wouldn’t buy it otherwise.”

Settlement isn’t until October 31, but he is already lining up builders, plumbers and electricians to attend to urgent repairs. He also wants to consolidate the small shops at the front of the building, probably to create a cafe. ”I think there’ll be a big difference by next Easter,” he said.

This isn’t the first foray into the cinema industry for Mr Taranto. He worked for MGM in the 1940s and for Hoyts in the 1950s. He was in the fruit and vegetable business (he also owned a shoe store) but made his real money in property.

”I used to have about 60 flats in St Kilda and Elwood,” he said. ”Never had an agent, always used to collect the rent myself.”

He bought the Brighton Bay cinema, which he still owns (it is leased to Palace), in 1992.

In 1999, he put a deposit on the Walter Burley Griffin-designed Capitol Theatre in the city before buying the George Cinema in St Kilda instead.

Palace leased the George from Mr Taranto until 2010. In March 2011, he took it over himself and relaunched it as the Aurora, saying: ”It’s always been my dream to run my own cinema.” Eight days later, he closed it.

”I realised pretty quickly that for it to work I’d have to be there to run it myself. I thought, ‘This is madness’. I could do it, no problem – I’ve run businesses since I was 19 – but I’m 81 on New Year’s Eve. If I was younger I’d not have done that, but I want to be a bit free. While you’re still well every day’s a plus, that’s the way I look at it.”

(The George went to auction this month, but was passed in.)

With Mr Florence at the helm, Mr Taranto feels the Astor is in safe hands. So, too, do the Friends of the Astor. ”We’re delighted the sale has finally gone through,” said FOTA president Vanda Hamilton.

”We believe Mr Taranto will act in the best interests of the Astor and we look forward to speaking to him very soon in regard to setting up a trust to ensure that the Astor runs far into the future.”

Mr Taranto has not yet committed himself to setting up a trust to own and manage the cinema in perpetuity, a central plank of the FOTA campaign.

”That’ll come later. First I’ll own it, then I’ll fix it up, and then we’ll see what happens,” he said.

Mr Florence is confident it’s no more than a formality. ”It’s Ralph’s and my intention to form a not-for-profit trust, and he will bequeath the Astor to that trust and I will roll my business into it,” he said yesterday. ”I believe he has honourable intentions.”

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This story Administrator ready to work first appeared on Nanjing Night Net.

The paper trail

All the news that fits the screen … Bill Nighy in State of Play. Dustin Hoffman and Robert Redford in All the President’s Men.
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Gene Evans and Mary Welch in Park Row.

I arrived in the newsroom of this newspaper fresh from school in January, 1976. I was 18 and impressed with everything I saw. This was a newspaper, even if 235 Jones Street, Broadway, looked like Stalin’s other headquarters.

Later that year I saw All the President’s Men, Alan J. Pakula’s masterpiece about Watergate, and I was dumbstruck. The Washington Post newsroom was so modern and white, so big, and ours was so brown and grimy. ”What a dump,” I thought, looking around the fifth floor at fort Fairfax. Such is the power of movies, to make you feel as though you’re not living the right life.

I watch that movie maybe once a year. Now that newspapers are under siege, I may have to step it up to twice, to remind myself that the profession of journalism is still big, even if the newspapers got small.

All the President’s Men is my favourite newspaper film, for its seriousness, the way it shows how a story is constructed, the things you hate yourself for doing (like when Dustin Hoffman has to coax the frightened White House staffer into talking), the terrible price of making a mistake and the inspiration that comes from a great editor, like Jason Robards as Ben Bradlee (”Nothing’s riding on this except the, uh, first amendment to the constitution, freedom of the press and maybe the future of the country. Not that any of that matters but if you guys f— up again, I’m going to get mad.”)

Robards also played a tough proprietor in Ron Howard’s underrated 1994 comedy about a New York tabloid, The Paper. He tore a strip off Glenn Close for going over Robert Duvall’s bald head to ask for more money.

Close has a deadly battle with Michael Keaton, as metro editor. They end up in a fist fight over an interesting issue. He wants to stop the presses and remake the lead story because he has confirmed it’s wrong. She says it will cost too much: ”The story was right when we printed it.”

That nails one of the big conundrums of newspapers: they are finite, not continuous. Each issue is a weapon, an artefact, and once it’s on the street, you can’t just bring it back, like on radio or TV or the internet. A quicker mechanism has arrived.

I am confining myself to newspaper films, not the best media films. That excludes Good Night, and Good Luck, Broadcast News and great films about reporters in the field, such as The Killing Fields. I want ink, paper, the sound of typewriters and the rumble of the presses.

That’s another thing I loved about The Paper: they touch the air vents to find out when the presses are running. The very building quakes, as it did at Broadway in the days of hot metal.

If those words are a mystery, go to YouTube and type in Park Row. You will get part of Samuel Fuller’s classic 1952 film about the newspaper business in the 1880s in New York, when newspaper type was set by hand, letter by letter.

One of the characters invents the linotype machine, changing the business forever. Park Row is the story of Phineas Mitchell (Gene Evans), a hard-drinking reporter who sets up his own paper to defeat the ruthless woman for whom he once worked, Charity Hackett (Mary Welch).

Their circulation war is an actual war, with bombs and henchmen. At one point, Mitchell tells another drinker: ”Mr Spiro, escort the wench back to her slaughterhouse before I throw her outta here right on her front page.”

Samuel Fuller was an ex-journo and Hollywood has always been a second home for them. After all, newspapers and movies are in the same business, that of retailing stories, although the pay is better at the fictional end.

Ben Hecht wrote for the Chicago Daily News. Charles MacArthur worked for the Chicago Tribune, then the Daily News. Together, they invented the modern newspaper movie, albeit as a play, The Front Page, in 1928. It is still the most accurate portrayal of the cynicism and scepticism of the profession and a defence of its greatest purpose: holding power to account.

The first of four films based on the play appeared in 1931 but my favourite is the 1940 version, His Girl Friday, in which Hildy Johnson is a woman – and what a woman. Rosalind Russell is a gal any scribe would fall for – smart, funny, gorgeous and as hard-nosed as any of the boys in the press room at City Hall, where most of the action takes place, waiting for a hanging.

Cary Grant plays her editor (and ex-husband), Walter Burns, devastatingly handsome and dapper, as well as devious, cheap and utterly fearless. I’ve known editors and reporters like both of them, just not to the same degree.

”A journalist?” Hildy cries, when Walter says she’ll always be one. ”And what does that mean? Peeking though keyholes, chasing after fire engines, waking people up in the middle of the night to ask them if Hitler’s gonna start another war, stealing pictures off old ladies? I know all about reporters, Walter, a lot of dandy buttinskys running around without a nickel in their pockets.”

She got the last bit right. Last year, there were said to be 10,000 journalists out of work in the US. A lot of bad novels are going to be written.

I can’t list all the great newspaper films. Who could exclude Kirk Douglas keeping a man trapped in an old mine for six days to prolong his story in Billy Wilder’s Ace in the Hole, or Humphrey Bogart denouncing the way papers had moved away from news in Deadline – USA.

”It’s not enough to give ’em just news, they want comics, contests, puzzles. They want to know how to bake a cake, win friends and influence the future, ergo, horoscopes, tips on the horses, interpretation of dreams, so they can win on the numbers lotteries. And, if they accidentally stumble on the first page, news,” he says.

That was in 1952. How prescient. And there is Charles Foster Kane (Orson Welles) sending a message to his man in Havana: ”You provide the prose poems. I’ll provide the war.”

What of the profession today, rather than the romance of before? That’s easy. The best drama about a modern newspaper is the English television series State of Play, in which Bill Nighy plays the editor to John Simm’s investigative reporter. There are more dirty tricks in this than any newspaper film I’ve seen.

It’s like a road map of the horrors of modern British journalism: phone-tapping, room-bugging, threatening and kidnapping sources, withholding evidence, more lies than the News of the World had readers. And these are done by the good guys; the people they go after are murderers. Thank heavens it’s just fiction.

twitter南京夜网/ptbyrnes

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Rinehart may move on Fairfax: analysts

FAIRFAX Media shares hit a record low yesterday as the market waited for the next move by the media group’s largest shareholder, mining magnate Gina Rinehart.
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The shares plunged about 12 per cent at one stage, trading at 44.5¢, after Mrs Rinehart’s unsuccessful attempt to offload a 5 per cent stake in the company.

Following a record loss by Fairfax on Thursday, her broker, Morgan Stanley, tried to offload 117 million shares at 50¢ but was knocked back by a market that failed to bite at the price – a 1¢ discount on the closing price.

Yesterday was the sixth-biggest trading day for Fairfax’s shares in a year, with 56 million of them changing hands for 45¢. Multiple parcels of up to 3.3 million shares traded after market close, according to Bloomberg. Broking firm UBS traded 13 million Fairfax shares while Morgan Stanley traded 5.6 million shares.

Media reports yesterday morning suggested institutional investors showed no interest in paying above 45¢ a share.

The corporate regulator was staying silent on questions over whether the sale was a means of testing the market to see how low Fairfax shares could go.

A spokesman for the Australian Securities and Investments Commission would only say: ”We are unable to comment on operational matters or specific companies.”

Now that the stock has reached a record low, speculation is swirling around Mrs Rinehart’s intentions.

A rumour flew through the investment community that Mrs Rinehart never intended to sell the shares on offer, but knew the cheaper offer would push the price down. This would make it cheaper for her to buy more shares or put additional pressure on the board.

One broker said: ”If it keeps falling then I think we fully expect her to make a bid for the company and probably move in to break it up.”

She said shareholders were holding out to make a profit in the event of a break-up while fund managers who knocked back the offer on Thursday afternoon said they preferred to buy into companies with certainty.

Mrs Rinehart’s office did not return calls.

Following the $2.8 billion write-down by Fairfax on Thursday and a gloomy outlook for the short term by chief executive Greg Hywood, analysts yesterday cut their earnings forecasts for this financial year. Mr Hywood said the company was facing the ”perfect storm of structural change and cyclical downturn”.

Mrs Rinehart has laid out an estimated $285 million on Fairfax shares, building up a 18.7 per cent stake. Early in July she cut her stake to 14.99 per cent to meet rules surrounding a corporate insurance policy held by Fairfax.

Fairfax made no comment.

Fairfax shares closed down 5.5¢, or 10.78 per cent, at 46¢.

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The only way is up for tax reform

‘Although some of these problems with the tax base may go away in time, it’s hard to see that time occurring in the next five to 10 years.’ONE OF Julia Gillard’s proudest claims is that the federal tax burden is much lower under Labor than it was when John Howard and Peter Costello were in charge. It’s true. But it’s not anything to boast about – the tax base has sprung a leak. Several leaks.
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In the mid-noughties, federal tax receipts hit a record 24.2 per cent of gross domestic product. This year they’re expected to equal only 22.1 per cent, despite the introduction of the carbon tax and the mining tax.

The fact is, the global financial crisis hit tax revenue hard and it’s yet to fully recover. The budget’s forward estimates see it returning only to 22.9 per cent by 2015-16.

If you don’t enjoy paying tax you may be tempted to regard all this as good news, but as both the present Treasury secretary, Dr Martin Parkinson, and his predecessor, Dr Ken Henry, have warned in the past week or so, it’s quite worrying.

It means the budget won’t ”whirr back into surplus” the way it did after the recessions of the early 1980s and early ’90s. It will be a continuing struggle to keep the budget in surplus, meaning it will take a long time to pay off the net public debt incurred in the recession everyone says we didn’t have.

It means we’ll be struggling to keep up with the growth in existing spending programs – particularly health – with little scope to pay for the disability insurance scheme, the Gonski Report’s proposals for education, aged-care spending and any other improvements we’d like to see, without dropping some big programs or introducing new taxes.

So what exactly is the problem with the tax base? Why has it never been the same since the GFC?

The biggest problem is with company tax collections. For many years they averaged about 3 per cent of GDP, but in the long boom that preceded the crisis, they grew to an unprecedented 5.3 per cent. Last year they were 4 per cent.

Much of the trouble is the collapse of receipts from capital gains tax. The long boom of rising share and property prices saw many taxpayers building up capital gains, which were realised and taxable when the assets were sold. Capital gains tax receipts got to as much as about 1.5 per cent of GDP, most of which was paid by companies.

The financial crisis saw big falls in the sharemarket, wiping out unrealised gains and creating losses. Share prices on the Australian stock exchange haven’t recovered to their peak before the crisis, and it’s hard to see another boom starting any time soon.

At present, gains tax is raising only about 0.5 per cent of GDP.

The second big change in company tax revenue since the crisis concerns the mining companies. In the first phase of the resources boom before the crisis coal and iron ore prices shot up and miners’ profits with them. Pretty much 30 per cent of that increase would have been taxable.

The second phase following the crisis saw prices go even higher, but by then many of the miners had embarked on major expansion plans, so that the depreciation charges on their capital spending significantly reduced their taxable profits.

So the mining investment boom adds to GDP on one hand, but directly subtracts from company tax collections on the other.

The problem with personal income tax collections arises from the eight tax cuts in a row announced by Costello (with Labor delivering the last three). When you cut taxes that often, you do a lot more than give back the proceeds of bracket creep (known to economists as ”fiscal drag”).

So the real level of income tax was reduced. The width of the tax brackets was widened, with the threshold for the top tax rate raised from $60,000 to $180,000 a year, thereby greatly reducing the tax scale’s capacity to generate bracket creep.

Yet another tax with big problems is the goods and services tax. With households’ decade-long spending spree a thing of the past, consumption spending is now growing no faster than household incomes.

But not all consumer spending is subject to the GST, and some of the categories that aren’t – particularly private spending on education and health – are growing a lot faster than the categories that are, meaning GST collections are growing slower than consumption.

That’s not the states’ only revenue problem. They’re locked in a destructive competition to raise the threshold at which payroll tax becomes payable. And the weakness of the residential property market – including the lower number of sales – has hit another key state tax, conveyancing duty.

Although some of these many problems with the tax base may go away in time, it’s hard to see that time occurring in the next five to 10 years.

And by then the problems for the taxman created by globalisation and the greater mobility of capital and highly skilled labour (which I wrote about last Saturday) may be starting to bite.

To many people – particularly business people – the words

”tax reform” make them think of paying less tax. One day soon it will dawn on them that the reform we must bring about is new and higher taxes.

Twitter: @1RossGittins

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Ski operators snug with sky-high prices

FANCY a nice carton of hot chips for $11.50? How about a $5 cappuccino, after you’ve forked out $110 for a ski pass for the day and queued for half an hour to get on a chairlift?
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Welcome to Thredbo, Australia’s most exclusive ski resort where the prices make Toorak and Double Bay look like a $2 shop. We stand to be corrected on this but the Australian ski fields are quite possibly the most expensive places in the world, and not just ski places, but places full stop.

You won’t pay $100 a day for a lift ticket in Aspen, Zermatt or Chamonix – or $17.70 for a second-rate chicken burger and Coke at Whistler. But that’s what you’ll pay at the cafeteria at Blue Cow in Perisher.

Victorians are slightly better served on prices, although day tickets at Falls Creek and mounts Hotham and Buller still hover around $100. But at Thredders, they take the cake. This is where the elite of Sydney come to play, and pay, pay for the pleasure of going up Crackenback on a 30-year-old chairlift verging on the rickety.

And they joke about it, happily whining about the old T-bar at Antons. Any self-respecting resort in Europe or the US boasts a capsule on their chairs these days, protection from the wind and, of course, cable cars for a nice warm trip up the mountain. None of that here.

Yet they come in their droves. Though this is no miracle of marketing – where second-rate facilities fetch super-premium prices – simply a captive market. Thredbo has the longest, steepest ski runs in the country. It’s a pretty village. And when the snow is good, as it was this week, and the wind dies down, it’s worth the while.

AMALGAMATED Holdings, the company that owns Thredbo, or the resort operator, Kosciuszko Thredbo, to be more precise, reported on Thursday. It showed a profit of $10.7 million, down from $15.17 million the year before.

Last year was not a great season for snow. And while it may not have upgraded the lift system, it does spend a bit on snow-making machines and groomers. The 29 per cent fall in profit before tax was due in part to a 7 per cent decline in the number of skiers, the results commentary said.

Apart from that, the commentary didn’t say much. It never does. And there is precious little financial detail. There have always been sensitivities between Thredbo’s patrician lodge community and the operator.

Besides, Amalgamated is a billion-dollar company that has done quite well in recent years, and the resort accounts for just 10 per cent of profits. Its hotel and cinema operations in Australia and Germany make up the bulk of the business.

One man, Alan Rydge, controls roughly 60 per cent of the stock. Rydge, who doesn’t court publicity, bought Thredbo from Lend Lease for $18 million in 1986 when he was 34. On a cursory poke around the internet we found his corporate headquarters listed simply as ”level 22, Sydney”. Love that.

He renegotiated the 50-year Kosciuszko Thredbo head lease with the state government in 2007. It seems that KT and Amalgamated Holdings had done rather well out of it before that, with leaks to this media outlet in 2004 indicating the resort had been paying National Parks and Wildlife annual rents as low as $8000.

Now that’s a bargain, but as the terms were always secret we can only surmise that it must have been based on a calculation of profits – and it may well have involved infrastructure spending on the part of the operator.

In any case, besides sunlight, the other great threat to Thredbo over the years has been its arch rival, Perisher. Although just up the road, they don’t share ski passes, or sympathies for that matter.

Perisher people tend to regard their nemesis as full of snobs, while the patricians of Thredders often deride Perisher as a bit flat, ugly and overrun with bogans who can’t ski properly. With 48 lifts compared with Thredbo’s 13, Perisher is far larger. It’s also higher, so the snow is often better. And it has really taken it up to its picturesque contender in the past few years, forcing Thredbo to finally counter with a restructuring and a marketing push.

Ironically, the prices are even a tad higher at Perisher, an adult day pass at $112 versus $110 for instance, and it boasts the same sort of extreme prices for very low-quality tucker.

But the move to bring four ski fields together – Perisher, Blue Cow, Smiggins and Guthega – all lift-linked and under one ski pass, has been a good one. Like the Victorian resorts, the lift systems are newer. Skiers have been streaming in. Still, you won’t find much financial detail here, either. It’s owned by the Packer family and housed in a private company. From time to time reports emerge that the resort is up for sale, with price tags ranging from $60 million to $200 million.

With the Packer casino interests humming in the past two years, the rumours seem to have died down.

Last year, Perisher went for the jugular, hitting its rival where it hurts – in the fat ski-pass profit margin – with a half-priced season pass. Thredbo countered with a half-priced deal of its own, and a management overhaul. Former ski champ and long-time general manager Kim Clifford has been replaced and new management is poised to go hard with a summer marketing campaign, perhaps trying to replicate the success the NSW wineries had with the George Benson tour.

Even if the summer marketing push fails, you get the feeling that Thredbo will still produce a good return, as it has all through the financial crisis. A tight rein on costs and the dedicated patronage of the seemingly price-immune, diehard skier should see to that.

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RBA says boom still blooming

The global price of iron ore has slipped below $US100 a tonne for the first time since late 2009, with experts predicting future falls.THE Reserve Bank has hosed down claims the resource boom is over, saying mining investment will keep rising for up to two years and the economy would even benefit if some projects were scrapped.
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As the price of Australia’s most lucrative export fell to a near three-year low, RBA governor Glenn Stevens said yesterday that miners had billions more to spend.

Despite BHP Billiton shelving its $20 billion Olympic Dam expansion this week, Mr Stevens stood by the Reserve’s forecasts for mining investment to keep climbing towards historic highs of about $145 billion a year, or 9 per cent of gross domestic product.

The prediction came as the global price of iron ore slipped below $US100 a tonne for the first time since late 2009, with experts predicting further falls.

”Looking ahead, the peak of the resource investment boom as share of GDP – the highest such peak in at least a century – will occur within the next year or two,” Mr Stevens said in Canberra.

He also said the economy would be better off if some potential projects did not go ahead. Mining companies already faced rising costs due to fierce competition for staff, he said, and these problems would intensify if too many projects proceeded.

”There are a vast number of [possible projects] which I think in truth really shouldn’t be done, because if they were all attempted, there’s already pressure on the cost side for resources companies,” he told a parliamentary committee. ”You probably just cannot do everything that people have postulated might be done.”

The comments came after Resources Minister Martin Ferguson said the resources boom had peaked. Other ministers sought to retract that claim, instead saying commodity prices had peaked.

This point was underlined by the recent plunge in iron ore. The mineral brought about $US135 a tonne for much of the year, but began slipping seven weeks ago on slowing construction in China and an oversupply of steel there.

On Thursday night it slumped by almost 5 per cent from $US104 to $US99 a tonne, sending chills through the Australian market.

Glyn Lawcock of UBS said he expected further falls. ”Now that it has broken through $US100 a tonne, traders I speak to think the price could get a 7 in front of it,” he said.

Despite this, Mr Stevens said the economy remained healthy and interest rates were unlikely to change barring a sharp deterioration.

He conceded that reports of job losses and the debt crisis in Europe were denting confidence. But he said: ”I begin to wonder whether we in Australia worry about the Greek economy more than the Greeks do.”

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You know what they say about assuming anything

Assumptions are the mother of all mistakes and here are five. Let’s start with the basics.
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Making money is about predicting share prices.

Not really. Making money is about entering an investment (a stock) with as high a probability of getting the direction right.

You can narrow the odds in a million ways but ultimately the best you can do is narrow the odds of getting it right rather than wrong. The game is about doing your best, not predicting the future and when, a split second after you invest, everything changes, you simply accept it.

There’s no ”mistake”, there is simply an outcome you have to deal with. If you narrow the odds you will win more than you lose and that’s about as good as it gets.

What goes up must come down.

Definitely wrong. What goes up is more likely to keep going up and what goes down is more likely to keep going down. They say the best technical analysts are kids. Show a five-year-old a chart and ask if the stock is going up or down and they will tell you the obvious truth, not concoct some miraculous pivot point out of nothing. The trend is more likely to be your friend which challenges the idea of catching the knife or averaging down. What is more likely – that a stock that falls 10 per cent is going to miraculously turn on a sixpence and go up for ever more, or that it’s more likely that something is wrong and it is going to trend down?

Diversification is good.

The argument for diversification is based on the mathematical truth that if you combine risky assets you reduce overall risk. But the reality is that you also reduce return. If you diversify you are committing yourself to the average return and accepting average market fortunes. Diversification negates the whole idea of the equity market, which is to take more risk to make better returns. You don’t do that by avoiding risk. You do it by embracing it, controlling it and winning at it.

History repeats.

This is one of the weakest tenets of financial research. If you add up the performance of the All Ordinaries index in every month of the year for the past 100 years you will find that there is one month that is statistically the best month of the year and one month that is the worst. But it is just a statistic, it is not a prediction. You were bound to come up with a good month and a bad month. It adds no value at all. It is voodoo. Unless you can explain the reason a statistical phenomenon will repeat, it is of no value. Who cares if the stockmarket goes up in an election year and down in October. What about this year? Some of the ”Sun Spot”-type predictions that lace the stockmarket are simply people with too much time and too much data on their hands. ”Statistically nine out of 10 statements that begin with the word ‘statistically’ are utter rubbish.”

Dividends are good.

Not necessarily. This is a bit complicated but basically return on equity, the amount of money a company makes on the money you give them, is far more important than how much money they give you back. Really good companies should have a yield of zero because it is far better for shareholders to have them keep the money and invest it in the business than return it to you. Why invest the money in the first place if they’re just going to give it back? A high yield also suggests a mature, low-growth company with few growth options to invest in, not the best investments. The dividend decision can also be driven by a lot of factors that do not reflect success. Like the CEO having a lot of shares. Yes, income stocks are in favour in this rather unique income-deprived moment in investment history, but they will not be forever. It is a purple patch. The bottom line is that you need to look at the total return from an investment (capital plus income) not yield. The yield is a distraction, it will distract you from the share price which is far more volatile, far more important and can do you far more damage than a dividend will do you good.

Five more next week.

Marcus Padley is a stockbroker with Patersons Securities and the author of stockmarket newsletter Marcus Today. For a free trial go to marcustoday南京夜网.au. His views do not necessarily reflect the views of Patersons.

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Today’s Chinese proverb: he who craves wealth joins the party

If the rich keep getting richer at the expense of the poor, China may actually need to go communist.MAYBE China’s Communist Party needs to consider a name change. Two news items this week remind us that there is nothing classless or egalitarian about the political machine ruling the most populous nation: the sentencing of Bo Xilai’s wife, and hints that China’s wealth gap is bigger than anyone thought. Both are more intertwined than meets the eye and show China has a 1 per cent problem that is holding back the other 99 per cent.
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The Bo scandal isn’t often viewed in economic terms. When his wife, Gu Kailai, received a suspended death sentence for killing British businessman Neil Heywood, attention turned to the political fortunes of the former Chongqing party boss. Instead, it should be on the institutional rot that has befallen the party and the precarious standing of the political system after 10 years under departing President Hu Jintao.

Bo’s tale is symptomatic of the official corruption and how it stymies much-needed economic and political reform. It cast an unsparing spotlight on the obscene wealth amassed by politicians. How did Bo, with his modest government salary and a wife he claims didn’t work, live so well and send his son to such pricey schools in Britain and the United States? How did his wife’s sisters come to control a web of businesses valued at more than $US126 million ($A120 million)

The problem is, politics is proving to be an extremely lucrative field. The Communist Party is the largest political party in the world, claiming some 80 million members. At its core is the 25-member Politburo that includes the all-powerful Politburo Standing Committee. Corruption may not taint every member of the inner circle. Yet the financial empires being amassed by some and the lack of transparency about wealth require attention and, even, legal action.

US politicians are paupers in comparison. Earlier this year, an eye-popping figure was revealed in the Hurun Report, which tracks China’s wealth. The wealthiest 70 members of China’s legislature added almost $US90 billion to their bank accounts in 2011. That increase is greater than the combined net worth of all 535 members of the US Congress, the President and his cabinet and the nine Supreme Court justices. Why start a technology company, study science or work in finance when the riches are to be found by rising within the party?

As more and more politicians get rich through questionable land grabs, insider trading and old-fashioned rent-seeking, there is less incentive to retool the economy. Political will shrinks as overseas bank accounts swell. All that money conspires to widen China’s rich-poor divide.

Bo was ousted from his post in March. Yet here’s a twist: just weeks before, he warned that China’s wealth gap had reached the danger zone. He was right. On August 21, we learnt that the wealth gap in rural China approached a United Nations warning level for social unrest.

China’s rural Gini coefficient was 0.3949, slightly less than the UN’s 0.4 warning level last year, the Xinhua News Agency said, citing a survey by Central China Normal University. A reading of zero suggests equality of income distribution. The further you move towards one, the closer you are to complete inequality. As economic indicators go, this is a bad one for Hu as he steps down.

Hu’s decade in power has delivered rapid growth, but few of the reforms needed to elevate the masses from subsistence wages. China hasn’t figured out how to be more than a one-trick economy driven by exports, cheap labor and unsustainable levels of investment. It hasn’t loosened up on internet or media freedoms, raising questions about how a nation innovates while limiting access to Google. It hasn’t devised a strategy to cut pollution. It hasn’t made its leaders more accountable.

To China bulls, the Bo case suggests progress on this last front. Bo committed unspecified economic crimes for which he has been humiliated; his wife was punished, so all is well, they argue. The truth is more complicated, of course. Many believe Bo’s real crime was his ambition. Bo was the closest thing China had to a political rock star and a spoiler for plans to replace Hu with Xi Jinping. Purging Bo, it might be argued, was all about reinforcing discipline and loyalty and maintaining the status quo in a pivotal year.

That is part of the problem, especially as the world economy deteriorates. China is focused on sustaining growth at 8 per cent or more. That seems to mean giving short shrift to recalibrating a lopsided economy. The same could be said of making the political system more responsive to the needs of the 99 per cent.

If the rich keep getting richer at the expense of the poor, China may actually need to go communist.

BLOOMBERG

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Dick Smith drag on Woolworths profit

WOOLWORTHS has posted its first drop in annual profit since 1999 after triggering a $420 million write-down of its embattled Dick Smith chain, and will turn to a revitalisation of its flagship supermarkets group and the rollout of Masters hardware to drive future earnings growth.
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A final sale of Dick Smith is yet to be clinched but the electronics business is believed to have attracted a shortlist of possible buyers with a deal expected soon.

In the meantime, a decision to write down the asset value of Dick Smith to only $20 million sank the company’s bottom line, forcing Woolworths to post a 14.5 per cent dip in net profit to $1.82 billion and marking the first time it has witnessed a retreat in earnings in 13 years. Dick Smith had already cost Woolworths a $300 million provision for the first half.

However, buoyed by the dominance of its food and liquor offering, as well as its other retail businesses such as Big W, Woolworths recorded a net profit from continuing operations (excluding Dick Smith) of $2.182 billion, up 3.6 per cent. Sales rose 4.8 per cent to $55.5 billion. The profit was slightly below market expectations.

Chief executive Grant O’Brien, who is less than one year in the top job at the retailer, said yesterday a refocus on its earnings engine, supermarkets, would be heralded by $1.3 billion in capital expenditure this year of which the bulk, more than $813 million, would be harnessed to re-establish and extend its leadership in food, packaged groceries and liquor.

The increase in spending on a new supermarket store format for 100 existing sites and the construction of more than 30 new stores this year using the new model marks the biggest investment in its supermarkets in nearly three years, with Mr Grant confident investors will get bang for their buck.

Woolworths has trialled a handful of its new format stores around the country and was pleased with the results, he said.

Mr Grant said the investment wasn’t ”outlandish” and although up significantly on the $614 million spent on supermarkets in 2012, it was still slightly below the $847 million in supermarkets capital expenditure booked in 2010.

”Of the strategic priorities that I put up in November last year, [supermarkets] was No. 1 for a good reason and that is because I recognise the capacity that business has got for improvement, there is a lot of upside available.”

New stores and refurbishments, as well as improved marketing and better value to entice shoppers, would also help drive profits with Woolworths expecting the division to fuel group profit growth of 3 per cent to 6 per cent in 2012-13.

He said Woolworths could once again return to its historic growth record of double-digit profit expansion as it faced a tough economic climate and a resurgent competitor in Coles.”That’s our ambition. That’s how we are attacking this business … we believe we can control our own destiny and be clever enough as retailers to provide reasons for customers to buy.”

Elsewhere in the group, a further $124 million in capex would be devoted to its hardware business Masters this year. Mr O’Brien said that division should emerge profitable in 2013-14 after swallowing about $100 million in costs the year before last and $80 million in costs last financial year. Woolworths declared a final dividend of 67¢ a share payable on October 12.

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