Firmly re-ensconced in his role as Federal Treasurer, Peter
Costello has pledged the government can still make its budget forecasts, says
the Financial Review despite a “slow
start” to the financial year that has cut economic growth to its lowest level
in two years. And hey, if Peter Costello has faith, we should too, says the Fin‘s Alan Mitchell (not online). Even
if the economy doesn’t quite manage to make forecasts, there’s good reason to
hope it will climb back to its trend growth rate of 3-3.5% over the next six
months or so.

Sure, it’s possible, says the paper’s editorial, but it’s
unlikely. To do so would require above-trend growth over the rest of the year
to make up for anaemic September growth. This is nothing for the government to
be embarrassed about. Rather it needs to stay focused on the medium term. And,
if we want to avoid a contraction in domestic demand, it could do more to
reverse the stagnation of manufacturing, says John Quiggin, also in the Fin. The government may not be able to
drive strong expansion, but it could do more to facilitate it.

The market’s downgrading of Telstra continued apace
yesterday with credit rating agency Moody’s Investors Service dropping its debt
rating on the telecom a notch, saysThe Sydney Morning Herald. Standard
& Poor’s is expected to follow in January after putting Telstra on negative
credit watch last month.

At last Thursday’s regulatory briefing Telstra spewed forth
a load of uninformed bile about Optus – the competitor Trujillo is setting up
as the rival bogeyman to motivate his staff, says Michael Sainsbury in The Australian. Meanwhile, Optus and
Michael Malone – one half of the founders of Australia’s earliest internet
service providers IiNet – are planning to deliver broadband services at
speeds that may just make a mockery of Telstra’s claim that it is set to build
a “next generation network.”

Toll Holdings’s designated rail freight umpire, David
Marchant, has extended his brutal campaign against Paul Little’s plan to buy
Patrick Corp, says Matthew Stephens in The Oz. In yet another submission
to the ACCC – his third – Marchant has not only taken a big swing at Toll’s
failure to allay the competition regulator’s concerns over the potential of the
takeover, but he has also made it quite clear that his Australian Rail Track
Corp is simply not prepared to act as a quasi-regulator of the merger logistics
giant that the deal would produce.

Meanwhile, comparison with the current bids for overseas
ports operators, P&O and PD Ports, casts a favourable light on Toll
Holdings’s $5 billion bid for Patrick Corp, says Bryan Frith.
Dubai Ports has agreed to acquire P&O, which is predominantly a global
ports company nowadays, while a consortium of Gary Weaven’s Industry Funds Management,
Challenger and 31 Group, have agreed to acquire UK ports company, PD Ports, for
$745 million. Moreover, there is speculation that Babcock & Brown may lob a
higher rival offer for PD Ports, in order to put it into an infrastructure
fund.

Amid the clamour that the Robert Gerard affair has
highlighted flaws in the process of appointing RBA
directors, it needs to be noted the current model – with its mix of RBA
professionals, the secretary to the Treasury, the odd academic economist and
several business people – has served us remarkably well, says Stephen
Bartholomeusz in The Age. And given that it ain’t
broke, why the radical suggestions for fixing it? Although one reform that could be
considered is whether minutes of the board’s deliberations could be
made public at a suitable distance from the meeting. Greater transparency,
while it might constrain debate, would at least demystify
the board and provide some insight into the contributions being made. It would
also provide discipline and help dispel any suggestion (or else confirm them)
that appointments were made as a reward for political affiliations, or even
donations.

And on the Coopers-Lion Nathan takeover saga, we are
probably now at the point where it’s time to call the clergy to administer the
last rites to Lion Nathan’s attempt to take over the independent South
Australian brewer, says Elizabeth Knight in The Sydney Morning Herald. The
chance of shareholders knocking back a proposal next week that will kill the
Lion Nathan bid are slim indeed.

On Wall Street, US stocks closed

lower Wednesday as the market took a break from a five-week
rally, although Dow component General Motors Corp. got a late-session boost
from news reports that there could be a change on its board. The Dow Jones closed down 45.95 points,
after trading more than 90 points lower at one point, at 10,810.91. MarketWatch has the full report here.