At first, the NBN drew little debate beyond the usual Coalition attacks in Tony Abbott’s budget reply speech and Malcolm Turnbull’s inevitable criticism of the government’s spending. But, in the week since, Turnbull has followed his initial response with a change to his NBN position that may put the battle over the NBN into completely new territory.

What Labor said

When it comes to the NBN, Wayne Swan’s fifth budget was largely a regurgitation of the many facts that have already been circulated about the NBN rollout. The project was mentioned 17 times in the Budget papers, highlighting both the status of the project and a number of ancillary projects being run in conjunction with other government portfolios.

The NBN featured prominently in the budget’s Statement of Risks section, with unquantifiable risks including the government’s indemnity for NBN Co directors against liability from their involvement in the Telstra negotiations or any failure of the government to meet its NBN Co funding obligations. Also noted as a risk was the government’s guarantee to Optus under its NBN Co agreement, which hinges on precedent conditions that had not been satisfied as of 31 March; “the guarantee had therefore, not come into effect”, the Budget notes.

Interestingly, the government has also flagged an unquantifiable risk from potential but not-yet-initiated legal proceedings around its 13 March 2009 cancellation of the previous OPEL broadband plan. No such proceedings had been filed by 31 March, although the lingering presence of OPEL confirms that it looms large in the minds of representatives of both sides of politics.

Quantifiable risks included the estimated $1.8 billion identified as liabilities should the NBN rollout be terminated the government forced to terminate its Equity Funding Agreement with NBN Co. Also listed was the government’s guarantee to Telstra around NBN Co’s financial obligations to Telstra; as at 31 March, the project had generated liabilities of approximately $209 million. These liabilities will persist until the NBN is fully operational and has achieved specified credit ratings over a period of two continuous years.

The NBN featured in the Budget’s Major Assets and Liabilities section, with the interesting note that delays to finalisation of the Telstra contract meant NBN Co will only have drawn down $2.1 billion from the government in 2011-12 rather than the $3.4 billion. The budget expects to provide $20.1 billion in equity to NBN Co between 1 July this year and the middle of 2016.

Other Budget measures related to programs that have largely already been announced. There’s $5m for a three-year pilot program to deliver virtual English tuition to new migrants over the NBN; $4.9m over three years to provide NBN-delivered support for hearing and/or vision impaired children in regional and remote Australia; and a $4m, two-year program to provide legal assistance to regional and remote Australians via the NBN. There’s also $2.4m over two years to help “national cultural institutions” explore the NBN’s possibilities, and $20m on an education campaign designed to “improve public misunderstanding, address misconceptions and provide updated information about the NBN”, particularly in regional and remote areas. There’s also a $6.2m allocation with the Department of Human Services for a four-year Digital Productivity pilot program exploring the delivery of face-to-face medical services from remote specialist consultants.

What the Opposition said

Tony Abbott’s speech broadly slammed the government for its “cooked books” approach and lack of a plan for economic growth, then mentioned the NBN in the context of the Coalition’s mooted $50 billion in savings claims. “Why spend $50 billion on a National Broadband Network so customers can subsequently spend almost three times their currently monthly fee for speeds they might not need? Why dig up every street when fibre to the node could more swiftly and more affordably deliver 21st century broadband?

Disregarding subjective debates over what customers do and don’t need, or the viability of the Coalition’s FttN plan, there are several obvious factual inaccuracies in these statements: for example, already-announced NBN broadband plans are broadly in line with current ADSL pricing; and the NBN is currently estimated to cost around $36 billion, with just $27 billion of direct government funding over the next decade – and even that will come back to the public purse once the NBN is completed and sold.

Sticking with a broad policy platform announced earlier this year, Abbott repeated his third factual error in a subsequent interview on the Nine Network, arguing that “the Government will be spending something like $5 billion in the next financial year digging up streets. I just don’t think that is necessary.” In fact, the NBN Co has dug up next to no streets, anywhere; the main purpose of its $11b contract with Telstra was to avoid having to do that. Because that contract had not yet been finalised, last year NBN Co even ran NBN fibre overhead in early-release sites rather than digging up streets.

That the NBN was mentioned at all in Abbott’s speech flew in the face of this determination, which has previously muted arguments that the NBN should be handled as a budget expense and would seemingly have precluded its mention in the context of a budget response. Nonetheless, Malcolm Turnbull took the Opposition argument to Parliamentary Question Time, arguing that if the NBN were an on-budget expense it would have turned the 2012 budget into a deficit of “at least 12 billion”.

This is all just moot speculation, however: Labor has long maintained that the expenditure on the NBN is being treated as an ‘off-budget’ equity investment, which is subject to different accounting rules. In January, this approach was validated in a research note by Brian Dalzell from the Economics Section of the Parliamentary Library, who discouraged the use of the terms ‘on-budget’ and ‘off-budget’ but nonetheless confirmed that what Labor has done is correct:

In the budget statement, the NBN is accounted for as a financial asset (equity investment) under the ‘investments in other public sector entities’ line item of the balance sheet… Money transferred to NBN Co cannot be classified as an expense under currently accepted accounting standards. It is accounted for as a financial asset on the balance sheet (an ‘investment in other public sector entities’), as opposed to an expense item on the operating statement. An eventual gain or loss on the government’s equity investment in NBN Co is accounted for in the operating statement as an expense, but this does not affect the fiscal balance measure.

Even as Abbott hit the airwaves to talk down the Budget, discussion continued at a steady pace, with much criticism of Tony Abbott’s statements – from Stephen Conroy and others – until Malcolm Turnbull came out with a surprising response to Budget figures suggesting it would cost a Coalition government at least $1.8 billion in break costs were it to assume government and try to halt the NBN as currently envisioned. Although Turnbull has previously claimed it would be entirely possible to shift gears on the NBN, his response to the $1.8 billion figure was to concede that the Coalition might not end up changing existing NBN contracts at all.

“We’re not about breaking contracts, even if they’ve been entered into unwisely,” he said after a post-Budget luncheon in which he said the Coalition was “not ruling out fibre to the premises”.

“If the contractual commitments have been made, the Commonwealth has to honour them,” he said. “There are termination provisions in some contracts… but really, I don’t anticipate that happening.

What others said

The industry had been bracing itself for a slim Budget, and the government met anticipations by delivering relatively little for IT. This left the media clamouring for something to talk about – and Abbott’s questionable numbers put him directly in the firing line.

Observers searched for creative ways to fact-check and describe the Coalition’s response, variously warning that Abbott had dredged up the “ghosts of ideologies past”; calling him the “philosopher-prince of the assertion-based community”; and describing it as “all values, no costings“.

Others said Abbott had misled the public and was “consciously lying” about the cost of the NBN; had “fire[d] bullets but misse[d] detail” and questioned why Abbott doesn’t seem to be able to get straight facts from his IT policy advisor Malcolm Turnbull. The ABC’s Annabel Crabb was none too impressed either, calling the Budget “a nuts-and-bolts affair” while calling Abbott the ‘Budget-Smuggler‘ and terming his Budget replies and promises “unrealistic”.

Analysis picked out the Budget “whingers and losers” while others called Abbott’s response a “Magic Pudding Budget Plan“. And telecommunications analyst Paul Budde was equally unconvinced, slamming Abbott’s “ridiculous statements”.

“The question is, who is fudging more?” he told ABC Technology and Games. “The NBN is not a budget item; it is an investment over 10 years. There won’t be any budget savings coming from cancelling the NBN. It is also interesting to note that Turnbull and Abbott spread totally different messages on the issue of the NBN. There seems to be a severe rift between the two of them.”

- ABC News

The European Central Bank has put a temporary halt on lending to Greek banks to limit its exposure to institutions that are under-capitalised, with deposits evaporating and asset values plunging.

London stockbroker David Buik says fear and volatility will only worsen as European Union leaders fail to confront the most likely outcome of the region’s latest crisis – a Greek exit of the eurozone.

Greece will hold a fresh round of elections in mid-June after rival parties failed to form a unity government following several fruitless rounds of talks.

But Mr Buik says financial markets are already in panic mode.

“I’m afraid we’ve got a completely frozen marketplace,” Mr Buik said.

“We’ve got indecision in spades, and that just drives markets into panic and high degrees of volatility, which we’ve seen right across the spectrum.

“It needs the European Union to look at reality and face the music and get on with … Greece withdrawing from the euro over a two-year period given kindness, understanding, time, space and an extension of their repayment program, because it simply isn’t going to work the way we are going.”

The Greek share market is only heading one in one direction, closing down another 1.1 per cent today, adding to much bigger losses earlier this week.

Spain, which is seen as the next most exposed eurozone member, also finished 1.3 per cent lower.

In Australia, shares fell 2.3 per cent yesterday after large falls in Asia.

It was the largest fall of the year, with $30 billion dollars wiped off the market as concerns about an unfolding slowdown in China added to the worries about Europe.

And gold is trading well below highs touched last year, worth $US1,546 a barrel at 10:30am (AEST).

While the precious metal is traditionally a safe haven for investors, money is now instead pouring into the safety of US Treasury bonds, according to Steven Dooley, head of research at Forex Capital Trading.

“The concept of gold as a safe haven, it works when people are relatively scared, but when people are absolutely, desperately panicked gold no longer acts as a safe haven,” Mr Dooley said.

“There is one place that is a safe haven, and that is the US bond market. And that is why we have seen the US dollar push so strongly over the last month and a half.

“Everything that is priced in US dollars – gold, oil, copper, virtually every other currency against the US dollar – is tumbling, because every last cent in the world is going to the US bond market.”

- ABC News

”This ground station will act as an essential satellite gateway, helping deliver fast broadband to rural and remote communities across Australia,” the Communications Minister, Stephen Conroy, said in a statement yesterday.

The ground station at Bourke will provide between 15,000 and 20,000 people in homes, farms and businesses with broadband speeds of up to 12 megabits a second from 2015. It will be joined by a ground station in Wolumla, around 15km north-west of Merimbula on the NSW south coast.

Under the government’s $36 billion project, NBN Co will deliver fibre optic cable network services to 93 per cent of homes, schools, hospitals and businesses by 2021.

Another 4 per cent of premises will connect via fixed-wireless services and the remaining 3 per cent will be on satellite services.

In April, NBN Co announced Wolumla on the south coast would be the first site to host a satellite ground station.
- The Age

The dollar was recently trading at 99.14 US cents, up from 98.93 US cents on Wednesday afternoon.

Bank of New Zealand currency strategist Mike Jones said the Australian dollar rose following the release of US housing data but ongoing concerns about Greece’s political situation continued to weigh on the currency.

‘‘Broadly speaking, the positive news offset the negative and markets are probably suffering from a bit of ‘European headline fatigue’,’’ Mr Jones said.

‘‘So the Australian dollar has basically traded sideways.’’

The currency moved below parity with its US counterpart for the first time on Monday amid concerns about Greece’s political situation.

The country is facing fresh elections next month after its main political parties failed to form a coalition government in the wake of last week’s poll.

The radical left party, Syriza, which wants to abandon European Union imposed austerity measures, is currently leading in the polls, raising fears the country will ultimately leave, or be forced out, of the eurozone.

Mr Jones said the Australian dollar was likely to trade in a narrow range as traders wait for further developments out of Europe.

‘‘I think we will just be looking towards Asian equity markets for a steer on risk appetite but I think we will stay in this 99.00 to 99.50 range.
- The Age

Prices declined for a fourth day as the Energy Department reported oil inventories climbed 2.13 million barrels last week to 381.6 million. Greece will probably schedule new elections next month. Oil was also lower after Kyodo News reported the US government called on other Group of Eight countries to prepare to release strategic oil reserves.

“We are still not out of the woods yet,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The focus is still on Europe. All the markets are going to be dependent on how things go there.”

Crude oil for June delivery fell $US1.17, or 1.2 per cent, to $US92.81 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 2. Prices have fallen 15 per cent since closing at the 2012 high of $US109.77 a barrel on Feb. 24.

Brent oil for June settlement, which expired today, slipped 59 cents, or 0.5 per cent, to $US111.65 a barrel on the London- based ICE Futures Europe exchange. The more-actively traded July futures retreated 1.7 per cent to $US109.58.

US oil supplies were forecast to rise 1.75 million barrels last week, according to the median estimate in a Bloomberg survey of analysts.

Inventories at Cushing, Oklahoma, the delivery point for Nymex futures, gained 2.3 per cent to 45.1 million barrels, the highest level on record, the Energy Department reported.

Market ‘oversupplied’

“The crude market is oversupplied, and I am going to sell,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “There is no reason to get excited.”

Total US petroleum demand was little changed in the four weeks ended May 11. Consumption averaged 18.7 million barrels a day, up 0.2 per cent from the previous week, according to the Energy Department.

The reversal of the Seaway pipeline tomorrow to move crude away from the storage hub at Cushing for the first time may do little to ease the glut that has kept West Texas Intermediate oil below Brent for an unprecedented 21 months, according to Citigroup Inc. and Barclays Plc.

Brent’s premium to New York futures widened by 58 cents to $US18.84 a barrel. Earlier, it touched $US19.44, the widest spread since April 10.

Seaway pipeline

The line’s capacity of 150,000 barrels a day won’t make much difference to stockpiles amid “really heavy” refinery maintenance, said Amrita Sen, a London-based analyst at Barclays. Supplies will rise as production surges, Ed Morse, global head of commodities research at Citigroup in New York, said in an April 16 note.

“There’s plenty of oil everywhere,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “The Saudis are absolutely producing as much as they can and we are producing a great deal here.”

Prices also dropped on concern Greece may leave the euro zone. A Greek caretaker government will prepare new elections, probably on July 17, after President Karolos Papoulias failed to broker a governing coalition in meetings with other political leaders, Fotis Kouvelis, head of the Democratic Left party, said.

German Finance Minister Wolfgang Schaeuble said the new elections will be a referendum on whether Greece stays in the euro.

Greek election

“Europe is really dictating trading,” said Tom Essaye, president of Kinsale Trading in Palm Beach, Florida.

The European Union will ban crude imports from Iran starting in July, prompting the US government to call on other G-8 members to prepare for a release of emergency stockpiles, according to Kyodo, which cited unidentified officials familiar with Japan-US ties. Iran is OPEC’s second-largest oil producer.

Oil prices are down 6.1 per cent this year in New York.

The EU reached an agreement in January to implement the oil embargo against Iran starting July 1 to pressure the country over its nuclear program.

Prices briefly rose earlier after the Energy Department report, which also showed gasoline inventories decreased 2.8 million barrels to 204.3 million. Distillate supplies, which include heating oil and diesel, decreased 969,000 barrels to 119.8 million.

“There is a big build in crude inventories but on the bullish side are the product numbers,” Essaye said. “The inventory numbers were generally neutral.”

Prices also pared losses after minutes of the last meeting of Federal Reserve policy makers showed several said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery on track.

Electronic trading volume on the Nymex was 578,516 contracts as of 2:52 p.m. in New York. Volume totaled 596,463 contracts yesterday, 0.6 per cent below the three-month average. Open interest was 1.54 million.
- The Age

German Chancellor Angela Merkel attempted to quell some fears by saying the eurozone was committed to keeping Greece in the currency union, but news the European Central Bank had stopped providing liquidity to some Greek banks as recapitalisation wasn’t in place pushed markets lower.

Investors failed to be enticed by the minutes from the US Federal Reserve’s most recent meeting, in which policymakers kept alive the possibility of a fresh round of monetary stimulus on downside risks to a moderately expanding economy.

Worries about Greece’s political and financial future, along with political upheaval in the broader eurozone, have driven equity losses in recent weeks, sending the benchmark S&P index down 5.6 per cent since the end of March.

Opinion polls in Greece show leftists opposed to the terms of the international bailout for the country would likely win a new election set for June 17. Greeks, afraid of the devaluation that would follow an exit from the euro, withdrew at least 700 million euros from their banks on Monday.

The Dow Jones industrial average gained 4.35 points, or 0.03 per cent, to 12,636.35. The Standard & Poor’s 500 Index shed 2.02 points, or 0.15 per cent, to 1328.64. The Nasdaq Composite Index dropped 14.90 points, or 0.51 per cent, to 2878.86.

Industrial shares rose 0.2 per cent after Positive US housing and industrial production data. US output rose in April at its fastest pace in over a year. A separate report showed a rebound in groundbreaking for US homes in April, suggesting the housing market recovery was gaining.

General Electric gained 4 per cent to $US19.14, reversing earlier gains on news its finance arms won regulatory approval to resume returning some of its profit to the parent company. Such a move that could clear the way for GE to accelerate stock buybacks and raise its shareholder dividend.

GE Capital plans to pay a special $US4.5 billion dividend to GE, the biggest US conglomerate, later this year.

J.C. Penney shares plunged 17.7 per cent to $US37.41, it’s biggest one-day per centage drop since 1987, a day after the department store owner scrapped its dividend and showed its effort to remake itself as an affordable fashion-oriented retail chain took a much bigger-than-expected toll on sales in the first quarter.

In contrast, Target advanced 0.6 per cent to $US55.41 after the discount retailer raised its full-year profit view.

Facebook boosted the size of its initial public offering by 25 per cent and could raise as much as $US16 billion as strong investor demand for the No. 1 social network trumps debate about the company’s long-term potential to make money.
- The Age

The SPI200 share futures index was off 3 points at 4156. A flat start, though, would be welcomed by many investors after worries about the global economy wiped off about $30 billion in local market value yesterday. The ASX200 share index posted its biggest fall of the year as it shed 100.75 points, or 2.4 per cent, to 4165.5.

In news this morning, Commonwealth Bank has delivered a third-quarter cash profit of $1.75 billion but said demand for loans remains subdued, while competition for deposits is hurting profit margins.

need2know
SPI200 futures down 3 to 4156
Aussie dollar wavers near 99 US cents
Wall Street: Dow off 0.3 per cent
Oil sinks below $US93 a barrel
Gold hovers below $US1540 an ounce
Europe stocks close at 2012 low
Australian business press digest May 17

Big miners may add to their recent steep losses. BHP Billiton’s US-traded shares fell another 2.1 per cent overnight, while Rio Tinto’s US stock ended trading down 1.6 per cent.

The Australian dollar is hovering just above 99.1 US cents after dropping to as low as 98.7 US cents late yesterday. It was also buying 79.6 yen, 78 euro cents and 62.3 pence.

Joseph Palmer & Sons stockbrokers director Alex Moffatt said the market was facing a “fairly flat” session.

“I doubt very much if the resource boom we’re seeing is going to stop overnight,” he said.

“Like the Chinese expansion, it’s going to slow,” he said.

“But as far as hitting a brick wall, I doubt that’s going to happen.”

Rivkin Securities analyst Tim Radford, however, said he expected more falls today.

“I definitely think the market could continue its falls this morning led by the miners and any companies where the revenues are sourced from commodities.”

“We could see falls of 1 per cent or more, especially if BHP and Rio continue to fall,” said Mr Radford. In local news today, Commonwealth Bank is expected to give a March quarter trading update, while the Australian Bureau of Statistics is expected to release data on average weekly time earnings for the three months to Februry.

US stocks resume retreat

Wall Street gave up early gains to close lower for a fourth consecutive day.

The Dow Jones industrial average dropped 33.45 points, or 0.26 per cent, to 12,598.55. The Standard & Poor’s 500 Index dropped 5.86 points, or 0.44 per cent, to 1,324.80. The Nasdaq Composite Index dropped 19.72 points, or 0.68 per cent, to 2,874.04.

US stocks had been higher after the release of US Federal Reserve minutes revealed several policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going.

The members of the rate-setting Federal Open Market Committee “indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough,” according to minutes of the panel’s April 24-25 meeting.

Central bankers saw Europe’s debt crisis and a fiscal tightening caused by a failure of US lawmakers to agree on a budget as risks to the recovery, the minutes showed.

European markets

Britain’s benchmark FTSE 100 index fell to its lowest closing level in more than four months on Wednesday, as new fears about the Greek banking system killed off a brief afternoon rally on the market.

The FTSE 100 fell by 32.37 points, or 0.6 per cent, to 5405.25 points – above a 5,400 point resistance level but still ending at its lowest close since December 21, when the market finished at 5389.74 points.

Germany’s DAX dropped 0.3 per cent and France’s CAC 40 increased 0.3 per cent. Greece’s ASE Index fell 1.3 per cent to its lowest level since February 1990.

Greece concerns

Greece’s place in the eurozone may remain in doubt for another month with the country set to return to elections on June 17. Elections earlier this month failed to produce a workable coalition after voters pushed aside mainstream parties backing the tough austerity policies.

Other news overnight include news that Europe’s central bank has imposed a temporary halt in lending to some Greek banks.

Meanwhile, International Monetary Fund Managing Director Christine Lagarde called on political leaders in Greece to show the resolve necessary to stay in the eurozone – which will require Athens to stick to the terms of its rescue package.

“I think what we should look at is the optimal scenario where the country has the political resolve to actually observe the commitment, comply with the undertaking, stay within the zone, which seems to be the desire of the population,” Lagarde said in an interview on Dutch television.

“But it goes with the effort to abide by the program which has been put in place and where the euro partners actually agreed to support the country.”

A eurozone exit “would be extremely expensive and hard, and not just for Greece,” Lagarde said.

Energy

Oil prices extended their downward slide Wednesday on rising US supplies and fears that debt-crippled Greece will exit the euro, wreaking havoc in the eurozone.

The euro hit a four-month low against the US dollar as investors sought a haven from risk, pressuring demand for dollar-priced oil and other commodities.

New York’s main contract, West Texas Intermediate crude for delivery in June, shed $1.17 to close at $US92.81 a barrel.

Brent North Sea crude for June settled at $US111.71 a barrel, down 53 cents from Tuesday in London trade.

‘‘The market is not convinced that the EU can keep Greece in the zone and stop the contagion from spreading, despite the meeting of the minds between German Chancellor Angela Merkel and new French president Francois Hollande,’’ said Phil Flynn at PFG Best.

Precious metals

Gold futures slumped for the 11th time in 13 trading sessions, ending at a 10-month low as worries about Europe’s debt crisis and investor demand for the dollar spurred flight from precious metals.

Gold has struggled in recent months whenever worries about Europe’s sovereign-debt crisis dominated trading.

Such concerns have sent investors seeking a safe harbour into the US dollar, pushing the currency higher and pressuring dollar-denominated gold futures by making them appear more expensive for buyers using other currencies.

Such dollar gains can also limit demand for gold as a hedge against declines in the currency.

The ICE US Dollar Index, which tracks the currency against those of some major US trading partners, on Wednesday rose to the highest point since January.

Silver slumped to a 15-month low. The July-delivery contract fell 3.2 per cent to $US27.196 a troy ounce, the lowest settlement since late January 2011.

Base metals

Copper closed lower on the London Metal Exchange Wednesday as investors continued to shy away from risk-related assets amid persistent concerns over the eurozone.

At the PM kerb close, LME 3-month copper was 1.5 per cent lower on the day at $US7649 a metric ton, having earlier fallen to a four-and-a-half month low at $US7625/ton.

The attention of the investment community remained firmly on Greece Wednesday, where new elections will be held in June after last-ditch talks between President Karolos Papoulias and major party leaders failed to reach a cabinet deal.

As LME markets were closing, reports were surfacing that the European Central Bank has halted refinancing operations with some cash-strapped Greek banks.
- The Age

11.10am: Gold has risen half a per cent as bargain hunters resurface after prices tumbled to a four-and-a-half-month low in the previous season, but gains could be limited by fears of a deepening debt crisis in Greece.

Spot gold added $7.64 an ounce to $US1545.94 an ounce after falling to as low as $US1527 on Wednesday, its weakest points since December 29.

11.05am: Sydney’s Star casino has been cleared of wrongdoing over its investigation of sexual harassment claims against its former boss Sid Vaikunta.

The report by Gail Furness, SC, says The Star ‘‘properly and thoroughly’’ looked into the allegations. It also appears to clear NSW Premier Barry O’Farrell’s former communications chief, Peter Grimshaw, of any wrongdoing.

The report says Star owner Echo conducted its investigation into Mr Vaikunta ‘‘free from external influence’’.

10.58am: Markets have taken a fairly dramatic plunge into negative territory. Financials are doing the damage – the sector is now down 0.5 per cent. The ASX200, meanwhile, is 1.6 points lower.

10.53am: Construction giant Leighton Holdings has appointed an external consultant to review its disclosure procedures after breaching laws earlier this year.

ASIC fined Leighton $300,000 in March for contravening continuous disclosure laws over its announcement of an earnings downgrade in April 2011.

Leighton also entered into an enforceable undertaking with ASIC to appoint an external consultant to review the company’s disclosure policies, and says it has appointed Ernst and Young to carry out that role.

10.50am: RBS Morgans Ipswich manager Tony Russell says the bright start at the open reflected the better-than-expected performance from offshore during the overnight session.

”The movement in the market yesterday was probably over-exaggerated, anticipating further major falls in overseas markets last night which didn’t occur,” Mr Russell says.

”There was some stability in those markets and I think we are now seeing a bit of bargain hunting coming in.”

10.48am: Japan’s economy grew by 1 per cent in the January to March quarter compared with the previous three months, as the world’s third-largest economy mounts a slow recovery.

The preliminary figure issued by the Cabinet Office is slightly above expectations of a 0.9 per cent rise, while the economy grew an annualised 4.1 per cent in the January to March period.

The annualised figure also beat expectations for gross domestic product to grow 3.5 per cent, as government spending and recovering domestic demand helped an economy battered by the devasting earthquake and tsunami of March 2011.

10.44am: Some more movers: Aurora Oil & Gas has sunk 10 per cent to $3.49 as the exploration company issues 33.8 million new shares at $3.55 each in a bid to raise $120 million in capital.

GPT Group has climbed 1.4 per cent to $3.185 as JPMorgan Chase upgrades shares of the property manager to “overweight”.

10.40am: Materials are now 1.2 per cent higher, while gold stocks are up 1.5 per cent.

10.37am: Other banks on the move… ANZ is down 0.7 per cent, NAB is down 0.2 per cent and Westpac is also 0.2 per cent lower.

10.32am: City Index analyst Peter Esho says CBA’s profit result puts it on track to meet expectations of a full-year net profit of nearly $7 billion.

”On current market estimates, CBA needs to book around $1.5 billion in the fourth quarter to meet market consensus estimates for the full year,” he says.

”That task seems more than achievable.”

10.27am: Historically high levels of corporate insolvency are tipped to continue in the economy’s struggling industries, despite this month’s hefty cut in interest rates, Clancy Yeates reports.

As the number of corporate failures continues to rise, the chief executive of the credit reporting agency Dun & Bradstreet, Gareth Jones, says the number of companies going into administration in weak industries is likely to remain high.

The number of companies tipped into administration in the March quarter rose 16.7 per cent, figures show.

Mr Jones says lower interest rates will do little to help businesses in financial strife, especially those in struggling sectors such as retail and manufacturing.

10.23am: Toll shares are extending their slide, losing another 7.6 per cent, or 36 cents, to $4.37, adding to yesterday’s 15 per cent fall. At the current market value of about $3.2 billion, about $1 billion has been wiped off its worth after yesterday’s profit downgrade.

UBS was among the brokers to cut its rating of Toll overnight, lowering its recommendation to ‘neutral’ and slicing its profit target for the transport company by 19 per cent.

10.20am: Sydney Airport has reaffirmed distribution guidance at 21 cents per stapled security for calendar 2012 and says it has ample capacity to deal with the expected growth in passengers.

The guidance was in slides to be presented to shareholders at Sydney Airport’s AGM and released on the ASX this morning.

Sydney Airport says it expects 100 per cent coverage of its 2012 distribution by net operating receipts.

10.17am: News that IAG is reviewing its UK business seems to have the backing of the market, its shares are up 8 cents, or 2.4 per cent, to $3.42.

10.14am: Materials are leading the way – the sector is up 0.9 per cent. Financials are flat and industrials are 0.3 per cent lower.

10.10am: As more stocks come online and the miners head higher – so too does the market. The ASX200 is now up 15.4 points, or 0.4 per cent, to 4180.9.

10.08am: Some better news for the big miners this morning – BHP and Rio are up 0.7 per cent and 0.6 per cent.

10.05am: After reporting a $1.75b third-quarter cash profit, CBA shares have opened down as much as 21 cents, or 0.4 per cent, to $51.56.

10.03am: Early take on the market – stocks are down 0.1 per cent in the opening minutes.

9.55am: Minutes before the market opens, SPI futures are down just 2 points to 4157 and the dollar is at 99.27 US cents. Overnight it dipped below the 99-US-cent mark.

9.50am: Also this morning, Insurance Australia Group says it is to review its business in the UK, which could result in its sale.

IAG owns the Equity Red Star insurance business, the fifth-largest motor insurer in the UK, and commercial insurance broker Barnett & Barnett.

The UK operations posted an insurance loss of $5 million in the six months to December 31, an improvement from a $121 million loss in the previous corresponding period.

IAG chief executive Mike Wilkins said it was an appropriate time to assess the options for the UK business, given its improving performance and the current economic conditions in the UK.

9.45am: In news this morning, Commonwealth Bank has delivered a third-quarter cash profit of $1.75 billion but says demand for loans remains subdued, while competition for deposits is hurting profit margins, Eric Johnston reports.

The latest result for the three months to the end of March is just 3 per cent more than a year earlier and matched the average estimate of five analysts polled by Reuters.

Today’s result, though, puts CBA on track for a bumper full-year profit of almost $7 billion.

Full story here.

9.40am: The Australian sharemarket looks set for a weak opening following a late retreat on US markets overnight and continued political uncertainty in Europe.

The SPI200 share futures index was off 3 points at 4156. A flat start, though, would be welcomed by many investors after worries about the global economy wiped off about $30 billion in local market value yesterday. The ASX200 share index posted its biggest fall of the year as it shed 100.75 points, or 2.4 per cent, to 4165.5.

Here’s a wrap of news from the markets:

need2know
SPI200 futures down 3 to 4156
Aussie dollar wavers near 99 US cents
Wall Street: Dow off 0.3 per cent
Oil sinks below $US93 a barrel
Gold hovers below $US1540 an ounce
Europe stocks close at 2012 low
Australian business press digest May 17

9.30am: Good morning folks. Welcome to the Markets Live blog for Thursday.
- The Age

While Macs are ‘PC virus free’ because they don’t ordinarily run Windows, Apple’s increasing marketshare has attracted coders who write malicious software or ‘malware’ just for it.

The past few weeks have shown that Mac users are not safer because Apple implemented better security, they are safer simply because fewer attackers target that platform.

“Macs are definitely not more secure,” explains Dr Charlie Miller from US IT security firm Accuvant.

“[Macs] used to be in fact a lot less secure than Windows but now they have more or less caught up to where they are a little less secure than Windows. It’s so close you pretty can’t much argue about it,” says Miller.

He and the wider security research industry are responsible for finding a large portion of the flaws that software vendors eventually ‘patch’. It’s a critical process that Apple and Microsoft handle differently.

Microsoft delivers a monthly ‘Patch Tuesday’ batch of software and security fixes that offer consumers a predictable rhythm.

Apple on the other hand is widely-criticised for its sporadic security updates that are often shrouded in secrecy.

“The security updates issued by Apple are issued too slow and not an any regular schedule,” says Rik Ferguson, director security research at antivirus firm, Trend Micro.

“Should Apple start patching more quickly? In general terms yes, and particularly where an exploit is in-the-wild.”

Yet Macs can and still are considered “safer” than Windows because of the relative rarity of Mac malware, a catchall term for spyware, keyloggers, worms and viruses.

Russian antivirus firm Kaspersky estimated in April that Mac malware totals fewer than 300 samples.

Windows on the other hand faces millions of threats, even if that number can be reduced by grouping them into families.

Comparing a fully-patched versions of each vendor’s operating system, “right now Mac OS X is safer because there are less types of malware targeting this platform,” Vicente Diaz, a senior malware analyst with Russian security firm Kaspersky Lab tells IT Pro.

Miller agrees. “It’s not like it’s harder to write malware for OS X, it’s just not out there yet, but no matter how you count [malware], there’s still millions of times more for Windows than Macs right now.”

Flashback and antivirus

IT Pro asked Apple for a response to the experts’ claims, but its Australian media department declined the offer.

There’s no shortage of security researchers who criticise Apple’s response to the recent Flashback trojan malware outbreak.

Flashback’s success, compared with previous Mac malware, happened in part because it exploited a flaw in Oracle’s Java software, allowing it to silently install on the victim’s system.

It was a mass, automated attack of the kind that has threatened Windows users for years: a drive-by download where infections occur merely by visiting an infected website.

Flashback netted some 700,000 Macs worldwide, according to several security companies monitoring infections.

Other reasons for the unprecedented infection is that Apple has wrongly convinced people Macs don’t need antivirus, and its Java security update came 50 days after Oracle had fixed it.

“In this case we have seen how the “no anti-virus needed” marketing campaign of Apple made their users more likely to not have their defences ready when more was needed,” says Kaspersky’s Diaz.

“The most recent (Apple) security update contains fixes for many vulnerabilities … six weeks after Microsoft, Adobe and Oracle released their fixes,” adds Ferguson.

Yet there’s no guarantee that any antivirus product would have prevented infection, given that they too reacted to its discovery.

But even those without antivirus to sell they agree Apple is slow to respond to security threats.

“[Apple has] always been slow, it’s just never really been an issue until now,” says Miller.

What remains to be seen is whether it will become necessary as it is on Windows.

“Until a couple of weeks ago, I always said no, [Mac antivirus] wasn’t necessary,” says Miller. “Unless you were in an enterprise, the cost and resources antivirus needs to do scanning all the time wasn’t worth it because there really wasn’t any malware out there.”

Miller still refuses to run antivirus on his machine, and has previously advised others to switch to Macs to avoid Windows threats.

“My sister, she’s the one I fall back to because she used to run Windows and I was over there once every couple of months fixing her computer because it had malware. So I told her to buy a Mac and since then it hasn’t been a problem.”

Yet the Windows versus Mac debate perhaps over-simplifies the state of threats out there for consumers. Most malware today can be traced back to Windows XP’s dominance from early 2000s to today, supporting the theory that Apple’s market share, which until recently hadn’t risen above 5 per cent, made it an unworthy target.

According to Ryan Smith, chief scientist at security firm Accuvant Labs, most malware is written specifically for Windows XP, not Microsoft’s more recent releases, Vista or Windows 7, both which offer newer in-built anti-exploitation features.

“It’s kind of like if malware authors are pulling out enough fish from their favourite fishing hole, why go to explore other fishing holes,” says Smith.

Although the Flashback trojan is a mere single case, it was a turning point in the debate over whether Mac users need to install antivirus.

“Apple has inbuilt antivirus called XProtect but if you look at what happened with this recent outbreak – I’m still sort of up in the air about it because it’s one incident but if you were weren’t sure before, now I would think maybe you should do it,” says Miller.

Microsoft’s Redmond route or Apple’s infinity loop

Whether Apple’s sluggishness is a fair measure by which to judge the quality of its security goes deeper than the speed and regularity of its updates.

“Windows allow Oracle to patch Java, but Apple says: ‘No, only I can do that’. So that’s why [Apple] seems slower,” explains Miller. “It wasn’t like there was a race between Microsoft and Apple and Microsoft won; it’s just Microsoft lets third parties run updates themselves and Apple doesn’t.”

Smith explains the philosophical differences between the two.

“Apple’s design philosophy utilises closely-coupled components to ensure they work seamlessly and make the best use of Apple technology. Including Java is an extension of this design philosophy.”

“Microsoft’s philosophy has always been to provide core components and allow third parties to develop code that runs on the core operating system with the idea that a machine can be extended beyond Microsoft’s capabilities.”

For Redmond-based Microsoft this approach applied to antivirus too, leading to a complex set of choices for consumers that it appears ready to simplify in Windows 8.

Windows 7′s in-built security product, Defender, only guarded against spyware but not viruses, leaving a wide-berth for third-party security vendors to sell fully-fledged antivirus. Microsoft’s own antivirus Security Essentials was free, but only available as a separate download on non-pirated Windows systems.

Microsoft announced last year it would bolster Defender in Windows 8 to protect against “all types of malware, including viruses, worms, bots and rootkits”. The company had found that a quarter of Windows 7 users who bought PCs with pre-installed antivirus never activated their subscription after the free trial period, leaving them exposed.

It’s a minor but important improvement that suggests it may have learned from past mistakes, such as its implementation of “User Access Control” (UAC) in Windows Vista, which over-actively alerted users any time software required ‘administrative’ or elevated system privileges.

“Microsoft inconvenienced the consumer almost to the point where most consumers didn’t even want to install Windows Vista,” Smith says. “UAC required a lot of effort from the end user.”

What Apple got more right than Microsoft, and has expressed most elegantly in its mobile device platform iOS, is that users should have little say over security.

“On well-designed systems, it doesn’t matter what the user does, they’re still going to be protected. You should try to design them so that it doesn’t matter what users do. That’s iOS,” says Miller.

Apple will partially extend this model in its upcoming release of OS X 10.8 Mountain Lion, requiring all application makers who want to distribute software on Apple’s Mac App Store to apply for an Apple Developer ID as part of its Gatekeeper security feature.

Microsoft will require developers who want to distribute apps on its Windows Metro 8 store to undergo a similar process, signaling a shift by both vendors to stem threats by filtering software through a centrally-controlled gateway.

“It’s smart because it takes the decisions of security away from the users who just want install some game or software,” says Miller.

Perhaps the irony is that as vendors begin to implement security controls away from the device and user, the information consumers want to protect is also moving outside the device to the apps and to the cloud.

Vendors like Apple, Microsoft, Google and Amazon are providing fertile grounds for storage and integration of data outside the devices’ operating systems. The question is, do people have reason to trust these platforms any more than their own ability to protect data on the device?

- The Age

Telstra is sitting on copper wiring scrap potentially worth more than half a billion dollars – and it is undecided what to do with it when the national broadband network is rolled out.

Thieves routinely steal the metal – which can fetch up to $6.50 a kilogram – in the form of pipes and wiring from churches and schools, but the telco says it could be uneconomic to recover all the copper wire that connects 8.2 million premises through 140,000 kilometres of ducts.

NBN Co’s $11 billion contract with Telstra gives it the right to lay fibre-optic cables through those underground ducts.

But what happens to the copper remains unclear. Discussions have been going on for years about whether Telstra would extract it and sell it for scrap but no decision has been made. Enquiries by IT Pro confirmed the company has still not decided what to do with the valuable metal.

Recovery would involve great expense in labour and processing. Telstra might also be waiting to see whether a possible change of government in 2013 changes the NBN rollout. The Coalition’s alternative fibre-to-the-node (FttN) plan would rely on gaining access to and building on the existing copper network, a policy that CEO David Thodey recently indicated could be beneficial for Telstra.

The copper “is definitely worth something as scrap, although I don’t think the company is going to get rich on it,” said a Telstra source who asked not to be identified. “Some of it will be left there because it will be more costly to pull it out, but there are definite plans to recycle whatever can be recycled. However, it’s still too early to talk details.”

Rough calculations suggest both the potential value of the copper assets and the massive logistical effort that would be required to process it to be sizeable. Estimates suggest Telstra currently has up to 154 million kilometres of copper in the ground. While copper wiring comes in many thicknesses, typically used 26 AWG (26 gauge) cable measures 0.405mm in diameter and weighs approximately 1.152 grams per metre of cable. The entire network would therefore comprise at least 177,408 tonnes of raw copper.

Current prices for recycled copper range from approximately $2.30 per kg for thin copper like that used to connect houses, up to $6.50 per kg for higher-grade, thick bundles of copper like that used within much of Telstra’s copper network. T1 cables, for example, bundle 25 pairs of 22-gauge copper wires, each strand of which is thicker than 26-gauge – so each metre of T1 would have significantly more copper in it than in the premises access lines.

“From both a financial and pragmatic perspective, it would make sense for Telstra to recycle the copper in its network,” says Shara Evans, CEO of telecommunications research firm Market Clarity.

“The NBN implementation study estimated that 50 to 80 per cent of conduits have enough room to also deploy fibre – so, depending on the size of the existing copper conduit, it may be necessary to remove the copper in order for NBN Co to use the conduit for fibre deployment.”

Copper isn’t always being removed to make way for fibre, however: in South Brisbane, Queensland, Telstra recently rolled out fibre to the premises and has not yet removed the old copper, according to a Telstra spokesperson.

“The copper remains in the ground,” he said, “but this is not to be seen as a precedent for the NBN more widely.”

That suggests recovery could indeed be a part of Telstra’s strategy going forward – and Telstra may need to act sooner than later to deter thieves that have shown remarkable tenacity in pinching old copper cable for resale.

In January, thieves stole copper piping from a former police station in Melbourne.

In March, the ACT Master Builders Association called for copper to be declared a precious metal to ensure sales be regulated, meaning that sellers must declare the origin of any stock. The ABC reported more than $300,000 worth of wiring, pipes and scrap had been stolen from construction sites in the ACT in 120 incidents in the previous 12 months.

Four years ago, Victorian police found 8.3 tonnes of stolen copper wiring ready for export as part of a copper-theft ring they said had netted over $1 million. In 2010, thieves in New Zealand staged a bold but risky attack on an electrical switch yard in which they drained coolant oil from 220,000-volt transformers and dug up lengths of copper cables,as reported by The New Zealand Herald.

Whether targeted by opportunistic thieves or methodically recycled by Telstra, the volume of copper in Telstra’s network would likely make it a valuable target.

At the low-end price, and assuming the entire network were built from 26-gauge wire and completely recycled, Telstra’s copper network would be worth over $408 million; if the entire network were built using the thick cable – which it is not – it would be worth $1.153 billion, notwithstanding the price effect of dumping such a massive quantity of copper into the open market.

Paul Ryan, secretary of the Australian Metal Recycling Industry Association, believed the market could absorb the extra quantity, particularly in China – but noted that the extensive process involved in stripping and cleaning Telstra’s copper would not be insignificant.

High local labour costs mean much of the wiring might have to be shipped overseas for labour-intensive processing, he said.

“It’s difficult and expensive to get the PVC or other wrapping off the copper material. That sort of work goes to places where the pay rates are significantly lower and they can afford to have lots of people removing the bits.”
- The Age