NBN to launch rural broadband service

Three towns on the Apple Isle last year became the first locations to be plugged into the network in its initial stage.

Deputy Tasmanian Premier Bryan Green on Thursday turned the first sod on the second stage of the NBN at Sorrell, east of Hobart.

Mr Green said that from March next year, services would be available on the super-fast fibre optic network to 11,000 homes in Triabunna, Kingston Beach, Deloraine, St Helens, George Town and South Hobart.

"Tasmania is proud to lead the nation when it comes to the rollout of the NBN," Mr Green said.

"We recognise the potential this technology has to eliminate the geographic divide between our island state and the rest of the world.

Communications Minister Stephen Conroy has welcomed the commencement of construction at the second release sites in Tasmania for the National Broadband Network (NBN) today, with construction commencing last month as scheduled, according to NBN Co.

In April, it was announced that Triabunna, Sorell, Deloraine, St Helens, Kingston Beach, George Town and South Hobart would be the next sites in Tasmania to receive the NBN, with the roll-out to cover approximately 11,150 premises.

NBN Co will be using a staged approach to construction between the five sites, which is expected to be completed in October. While construction was set to start at the end of May, Conroy only today welcomed the start of construction in Sorrell.

"The Gillard Government is getting on with the job of delivering enhanced broadband services to Tasmania, which has traditionally had the lowest proportion of households with broadband access," Conroy said.

The other stage two communities were set to start soon, except for Triabunna, where, NBN Co told ZDNet Australia, construction is already underway.

"Construction is underway in Triabunna after a period of make-ready work," NBN Co said. "Make-ready work has been underway in Sorrell for some time."

NBN Co is trialling a "network extension process" in the areas around the second release sites that would allow councils outside of the fibre footprint to pay additional costs to have fibre rolled out to them, rather than being served by fixed-wireless or satellite. However, CEO Mike Quigley has warned that the costs to roll out fibre to those areas may be prohibitively expensive for the councils.

Greece votes on where austerity axe falls

Yesterday's market rally on the back of the Greek parliament's decision to move forward with a €78 billion ($105 billion) package of cuts, tax rises and privatisations shows how much investors are hanging out for a resolution of Europe's debt crisis.

Yet it also suggests investors are not too familiar with the classics: the parliamentary vote wasn't a Trojan Horse, but it wasn't a gift from Greece that cured Europe's woes, either.

Last night, the parliament met again amid savage street demonstrations, this time to approve plans for the implementation of the austerity package.

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The numbers on the first vote suggested that this, too, would be approved. The second vote clears the way for the payment of another €12 billion to Greece out of last year's first rescue fund and adds momentum to talks about a second bailout package.

It sparked a worldwide share rally yesterday. In Australia, the ASX200 index shot up by 78.5 points to be above 4600 points again. The euro firmed, European bond spreads narrowed as risk tolerance increased and commodity prices and the Aussie strengthened.

The theory is that the Greek vote and the gathering plans for another rescue package head off a Greek government bond default. Such a default could have pitched Europe's other basket cases into crisis. A cascade of defaults could expand beyond the obvious suspects, Ireland and Portugal, into economies with more economic gravitas and financial counterparty risk, notably Spain and Italy.

Several banks and shopfronts were smashed, while a socialist dissenter who backed the government at the last minute, Alexandros Athanassiadis, was briefly assaulted by protesters after leaving parliament on foot.

Smoke billowed from a post office beneath the Finance Ministry before a fire was put out. Rioters set up burning barricades along Syntagma Square, where demonstrators have staged a sit-in for the past month. Streets were littered with chunks of smashed marble and ripped-up paving stones that had been thrown at police.

A burnt-out van remained within yards of parliament more than a day after youths set it alight.

A general strike that began on Tuesday paralysed the country, grounding planes, leaving ferries docked and stranding tourists during the busy summer season.

Police said yesterday that 49 officers had been injured, one seriously when he was hit in the face by a chunk of marble. Forty-three protesters were detained, with 17 arrested. Emergency services said they had treated 99 protesters and passers-by for injuries.

Across Europe, officials hailed the vote as an act of "national responsibility". "That's really good news," German Chancellor Angela Merkel said on her way out of an economic forum in Berlin. Germany is Greece's biggest creditor.

Christchurch claims fail to shift IAG financial guidance

Insurance Australia Group's shares fell this morning as the investment community grappled with the implications of motoring body NRMA selling down its shareholding in IAG without consultation.

The two boards met last night to discuss the share sale along with other matters, including the almost $10 million a year that NRMA pays to IAG for shop front, IT and other distribution functions. It undoubtedly also discussed the story which appeared in BusinessDay today.

The NRMA and IAG have denied there is a conflict but failed to explain what drove the NRMA to sell the shares and therefore breach an important part of a complex set of business relationship agreements.

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IAG has not yet put out a statement to the ASX, but the two companies released a joint statement to the media late this morning to say they remain committed to a close ongoing relationship.

"Contrary to allegations made by unnamed sources in the media today, both organisations enjoy a positive relationship and at no time have conducted crisis talks of any nature," the statement read.

On Wednesday, Fairfax newspapers reported that 13 million IAG shares owned by NRMA had been sold for about $45m.

The NRMA provides large amounts of business to IAG through its 2.3 million members but it was suggested that senior ranks within the motoring organisation were contemplating a split after becoming frustrated with the small financial gain it ekes from its links with the insurer.

IAG and NRMA released a joint statement rejecting the rumours and any possibility of a split and declaring the relationship in good order.

NRMA later added that the decision to sell down its holding in IAG shares was based on financial advice.

"It's a relationship that has to work and although there is friction from time to time it works itself out," said one institutional investor. "This looks more like it's a case of ex-directors making noise because they have an axe to grind."

Analysts said it was unlikely a split would occur as it would require alterations to NRMA's and IAG's demutualisation agreement, which prohibits either company from providing duplicate products in Australia and New Zealand.

Banking and mining good choices for investors

ANY doubt the mining and resources sector underwrote the resilient Australian economy last year - and filled the pockets of canny investors - was clearly put to rest yesterday when miners and explorers came home comfortably as the best performing stocks of 2010-11.

A steady flow of positive economic news during the financial year from the sector's biggest and rapacious customer, China, as well as rising commodity prices and a particularly strong first half ensured that mining companies were the best place to park your money over the last 12 months.

Nine of the top 10 biggest share price gains in the S&P/ASX 200 Index were mining or mining services companies with Bathurst Resources posting the biggest gain of a 585.6 per cent return for the just completed financial year.

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Bathurst benefited from the excitement around coal and is developing a high quality hard coking coal project at the Buller Coalfield in the South Island of New Zealand.

Odd man out in the top 10 was Mesoblast (2010-11 return of 367.57 per cent), a biotechnology company which has hit the headlines and sizzled the portfolios of investors with its adult stem-cell technology that promises to repair damaged heart muscles and combat other degenerative conditions.

At the most extreme end of the market, New Zealand coal miner Bathurst Resources were the top of the class - catapulted more than 500 per cent higher.

Other energy and resource companies in the top 10 ASX stocks for the year include Iluka Resources, Linc Energy, Regis Resources and Sundance Resources.

Banks were the second best performing sector on the ASX with growth of 3.9 per cent. The big four all climbed, including NAB (10.1 per cent), CBA (7.5 per cent), Westpac (4.9 per cent) and ANZ (1.8 per cent).

Commonwealth Bank chief economist Craig James said the All Ordinaries course over the year was best described as "two steps forward one step back", with its high point achieved in March after staging a recovery from the Japanese tsunami when it hit 5064.9.

Since then it has lost ground with fears of a double-dip recession in the US and Europe weighing on sentiment.

The biggest loser on the ASX this year was uranium miner Energy Resources which plummeted 69.10 per cent on the back of the Fukushima disaster.

Industry mobilises in carbon tax battle

Some of the nation's biggest industry organisations is preparing to spend millions of dollars on a campaign to destroy the Gillard government's plans to put a price on carbon.

The group, which has called itself the Australian Trade and Industry Alliance, is prepared to spend at least $10 million on its campaign, which will mimic that which was run against the mining tax a year ago.

The alliance's strategy document, seen by the Herald, lists its key objective as to ''build public opposition to the carbon tax so that it is either substantially modified or fails to pass the Parliament''.

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A campaign involving television, radio, print, the internet and social media would begin within seven days of the government announcing the final details of its scheme and ''would run until the likely parliamentary consideration of the legislation in late 2011''.

The organisations involved include the Australian Chamber of Commerce and Industry, the Minerals Council of Australia, the Australian Food and Grocery Council, the Australian Coal Association, the Plastics and Chemical Industries Association and the Australian Logistics Council, which is a loose collection of freight and transport companies.

A source said even though the details of the carbon price scheme were still unknown, the campaign was in a stage of ''advanced development.

With Intergen's Millmerran and all four major Latrobe Valley power stations facing refinancing negotiations with bankers by the end of next year, Resources Minister Martin Ferguson yesterday called on the banks to back power generators under a carbon price.

"Once we resolve a carbon price, we all - including investors and financiers - have a role to play in delivering energy security and making the significant investments required to transition our energy sector over time," Mr Ferguson said.

Mr Ferguson said the banks had, for some years, vocally encouraged governments to introduce a carbon price and had received significant support during the global financial crisis.

"Given the support the Australian community has shown the banks, I hope that the banks reciprocate this by participating in financing investment in necessary infrastructure once the carbon price is resolved, and by supporting the transition as existing loans are refinanced."

Mr Ferguson said that in terms of investment, if the government was able to facilitate retirement of a major coal-fired power station, it could try to encourage new investment on existing brown coal sites, "which is easier from a regulatory environmental point of view".

There is between $4.5bn and $6.5bn in refinancing due by the end of 2012.

Treasurer Wayne Swan, addressing the Economic and Social Outlook Conference, said Treasury modelling would show that the transition from a carbon price would be "at a very modest cost". He said the mining sector would experience strong growth and increase as a proportion of the economy regardless of a price on carbon. The manufacturing sector would have broadly similar prospects under a carbon tax, according to the modelling, although there would be a changes in its composition towards lower emissions activities. The services sector would also be broadly unaffected.

But Mr Swan said the electricity sector would undergo a dramatic transition. Instead of emissions increasing by 60 per cent by 2050 under business as usual, emissions would fall by 60 per cent below current levels by 2050.

Ross Garnaut

Ross Gregory Garnaut, born 28 July 1946, Perth, Western Australia AO is a Distinguished Professor of Economics at the Australian National University and both a Vice-Chancellor's Fellow and Professorial Fellow of Economics at The University of Melbourne.

Throughout his career Garnaut held a number of influential political and economic positions as: Senior Economic Adviser to Prime Minister Bob Hawke (1983–85), Australia's Ambassador to China (1985–88), Chairman of the Primary Industry Bank of Australia (1989–94), Chairman of BankWest (1988–95), Head of Division in the Papua New Guinea Department of Finance (1975–76) and Chairman of Lihir Gold.

On 30 April 2007 the state and territory governments of Australia, at the request of Kevin Rudd, then leader of the Australian Labor Party and Leader of the Opposition, appointed Garnaut to examine the impacts of climate change on the Australian economy and recommend medium to long-term policies and policy frameworks to improve the prospects for sustainable prosperity. The Garnaut Climate Change Review was finalised on 30 September 2008.

Garnaut Climate Change Review

The Garnaut Climate Change Review was commissioned by former Prime Minister of Australia, Kevin Rudd, and by the Australia's state and territory governments on 30 April 2007. After his election on 24 November 2007 the Prime Minister of Australia, Kevin Rudd, confirmed the participation of the Commonwealth Government in the review.

The final report was released on 30 September 2008 and recommended that Australia should indicate at an early date its preparedness to play its full, proportionate part in an effective global agreement that ‘adds up’ to either a 450 or a 550 emissions concentrations scenario, or to a corresponding point between. Australia’s full part for 2020 in a 450 scenario would be a reduction of 25 per cent in emissions entitlements from 2000 levels. For 2050, reductions would be 90 per cent from 2000 levels (95 per cent per capita). Australia’s full part for 2020 in a 550 scenario would be a reduction in entitlements of 10 per cent from 2000 levels. For 2050, reductions would be 80 per cent from 2000 levels or 90 per cent per capita. If there is no comprehensive global agreement at Copenhagen in 2009, Australia, in the context of an agreement among developed countries only, should commit to reduce its emissions by 5 per cent (25 per cent per capita) from 2000 levels by 2020, or 13 per cent from the Kyoto compliance 2008–12 period.

The report's recommendations in terms of policy, apart from a Carbon Pollution Reduction Scheme which included forestry and agriculture, centred heavily on hoping that carbon capture and storage and other clean coal technologies would be available on a wide scale within the next twenty years.

The report was criticised by the Australian Chamber of Commerce and Industry for the economic impact that reducing greenhouse gas emissions would have. It was also heavily criticised by environmental organisations, including Friends of the Earth and Rising Tide. The Australian Conservation Foundation praised the report for advocating a 450 ppm target. Dr. Clive Hamilton was heavily critical of the report, arguing that it reduced global expectations of what should be aimed for, naively exposed Australia's negotiating tactics to the international diplomatic sphere, alienates both the Australian public and the international community, misjudges the time frames necessary to avoid dangerous climate change, gives Australia numerous special deals, and would be rejected by the international community.

Responses from political parties were mixed. Australian Greens leader Bob Brown showed that the report demonstrated that reducing greenhouse gas emissions would not come at the expense of Australia's economic growth. Climate Change Minister Penny Wong did not comment directly on the report but said that economic responsibility needed to be considered in responding to the report, and that the Government would wait before Treasury modelling on climate change mitigation before responding.

In November 2010 the Minister for Climate Change and Energy Efficiency commissioned Professor Garnaut to update his 2008 Garnaut Climate Change Review. Eight papers were released in February and March 2011 and the final report of the Garnaut Climate Change Review Update 2011 was presented to the Government on 31 May 2011.

Career history

Garnaut attended the Australian National University and attained a Bachelor of Arts in 1967 and a PhD in 1972 as a student of Emeritus Professor Peter Drysdale. He has worked in the following positions:

Senior Economic Adviser to Prime Minister Bob Hawke (1983–85)

Australia's Ambassador to China (1985–88)

Chairman, Primary Industry Bank of Australia Ltd (PIBA) (1989–1994)

Chairman, Bank of Western Australia Ltd (BankWest) (1988–1995)

First Assistant Secretary (Head of the Division of General Financial and Economic Policy), Papua New Guinea Department of Finance (1975–76)

Research Director of the ASEAN-Australia Economic Relations Research Project (1981–83)

Foundation Director, Asia-Pacific School of Economics and Management (1998–2000)

Garnaut is Chairman of the Papua New Guinea Sustainable Development Program  and a member of the Trilateral Commission. Garnaut was Chairman of Lihir Gold Limited from 1995 until the merger with Newcrest Mining Limited in 2010 and he was the Chairman of the International Food Policy Research Institute from 2006 to 2010.

He is married to Jayne, with sons John (born 1974 - a journalist for Fairfax Media newspapers) and Anthony (1977).

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Only the best, unless I'm wrong, says Ross Garnaut

Professor Garnaut, who compiled his original Climate Change Review in 2008 and an updated version last November, said much of the media and public discussion on climate change was crude and distorted.

He described reaction to some of his conclusions as "somewhat rabid" and chided the media for misrepresenting US climate change policy.

Prof Garnaut also warned of the worst result of a rejection of carbon pricing would send Australia into a political retreat.

"If carbon pricing were defeated this time around it would open the way to myriad regulatory interventions," Prof Garnaut told a Melbourne conference.

"These would raise costs directly, there would be no opportunity to introduce productivity-raising tax cuts as a form of compensation to low and middle income earners.

The effects of climate change will be one of the reasons to expect higher food prices and higher agricultural prices in the 21st century . . . The question will be what parts of the world will retain a capacity to make use of those better markets," Professor Garnaut said.

He said farmers would also benefit if carbon pricing saw a slowing of growth in the coal and mining sector. "If the huge growth of coal and gas is a bit slower, if the mining industry is right, that will lead to a lower real exchange rate and a huge benefit to the rural sector."

Professor Garnaut conceded he was interested in seeing the final package to come out of the climate pricing negotiations. But he was cautious about passing judgment on the likely overcompensation of low-income earners through a 20 per cent "battler's buffer".

"We don't want the scheme to make lower- or middle-income Australians poorer, but I thought the job was done by just making sure we didn't make them poorer," he told The Australian.

Professor Garnaut said it was optimal for Australia to have a fixed price for three years to allow a comfortable transition to an emissions trading scheme and avoid extreme fluctuations "while the politics settles down".

But he acknowledged a cost of such an approach was that fluctuations in international prices, such as the EU emissions trading scheme, could "get out of step" with the Australian price.

"I recommended three years because it was the best. I only recommend the best for Australia," he said with a smile. "Unless I make a mistake, in which case I am very honest about correcting it.

US Federal Reserve must tighten policy, says RBA board member

Mr McKibbin described debt-laden Greece as merely "the first carriage to break".

Speaking at the same conference in Melbourne, however, Treasurer Wayne Swan offered a different perspective.

"Some have a dire view of what's happening in Europe," he said. "I don't share those views."

The comments came shortly after Greece staged a last-minute escape from bankruptcy, passing a range of austerity measures designed to keep bail-out funds flowing from the European Union and the International Monetary Fund.

That news buoyed markets with the ASX 200 climbing 1.7 per cent to 4608 points, while the dollar soared against the US and hit a 26-year high against the British pound of 66.76 pence.

Since Monday morning the dollar has gained more than US3c against the greenback to trade last night at $US107.37.

The Greek parliament was to stage the second part of the vote last night.

Prof McKibbin - who stressed his views were his own and not those of the RBA - said Greece was just one of several nations that needed to rein in spending and increase taxes.

The US Federal Reserve has to tighten policy. You cannot give away money and have a vibrant economy. There has to be in Europe a tightening of monetary policy and there has to be some adjustment in Asia," he said.

In recent years, he has been a vocal advocate of tighter policy settings, pointing to rapid growth in commodity prices, fuelled by the emergence of China and India, as a risk to the global economy.

He also renewed his call for Australia to embrace a sovereign wealth fund, in part to help the Australian economy deal with a mining boom, which is fanning an enormous wave of investment with the economy.