Jun 29, 2012

Investors brace for a French fracas |

With investors becoming increasingly nervous about the policies of the newly elected French president Fran├žois Hollande, fears are growing that Paris could be about to be caught up in the eurozone’s maelstrom.
Certainly, French bond yields have climbed sharply in recent weeks. Yields on French 10-year bond hit 2.7 per cent overnight, or almost 30 per cent higher than the euro-era low of 2.07 per cent they reached at the beginning of the month.

Hollande’s supporters point out that France’s borrowing costs remain well below those of Italy (yields on 10-year Italian bonds are 6.2 per cent), and Spain, where the 10-year bond yield is now hovering around the critical 7 per cent rate – the level at which Greece, Portugal and Ireland were forced to seek bailouts. What’s more, the country’s borrowing costs have fallen from a year ago, when French 10-year bonds were trading at 3.3 per cent.

Still, there’s little doubt that investors are becoming more anxious about the Socialist Hollande, who took office on May 15, and this is causing the spread between French and German borrowing costs (yields on German 10-year bunds are at 1.5 per cent) to widen.

Some investors were dismayed by Hollande’s changes to the country’s state-financed pension system. Although he didn’t fiddle with the standard retirement age, which is set to gradually increase from 60 years to 62, he did change the rules so that people who started work at a young age will be able to retire at 60. The move, which will be paid for through higher payroll taxes, outraged French business leaders, who pointed out that it comes at a time when most eurozone countries were trying to cut labour costs and improve their competitiveness.

Similarly, Hollande’s decision to boost France’s minimum wage by 2 per cent (or around €21.50 a month) has also drawn fire. Union leaders slammed it as being far too modest, while business leaders worried that it will further bloat the cost structure of French industry.

There’s also widespread scepticism as to whether Hollande will be able to cut the French budget deficit to 3 per cent of GDP next year (from an expected 4.5 per cent this year) at a time when the French economy is moribund, and the unemployment rate is at 10 per cent. The new socialist government, which will unveil its budget plans next month, has said that it will raise some taxes (particularly on the wealthy), and cut spending, but has promised not to resort to harsh austerity measures that would plunge the economy into recession.

Finally, many investors are far from convinced that Hollande made the right move in siding with Italy and Spain in an effort to convince Germany to agree to eurobonds. As they see it, there is a basic choice – either eurozone debt is mutualised, and controls are put in place to stop countries running up big budget deficits, or else debt remains a national problem. Hollande, however, wants eurobonds but is deeply reluctant to hand over control of the French budget to Brussels.

In contrast, markets have some sympathy for German Chancellor, Angela Merkel. If Berlin agrees to eurobonds, it will become the guarantor of last resort for all of Europe’s debts. It’s a sacrifice that no other country would even contemplate and, not surprisingly, Merkel’s position is that Germany will only take this step if she’s convinced there’s little chance that the German guarantee will be called on. As a result, the message from Berlin remains the same: no eurobonds unless debt-laden countries introduce painful reforms to boost their competitiveness, and agree to controls on their budgets. 

Hollande can’t help but notice that his spat with Merkel is making him increasingly unpopular in the markets. As a result, in recent days he’s dropped his demand for eurobonds, and is instead trying reach a truce with Merkel.

No doubt Italy’s Mario Monti and Spain’s Mariano Rajoy will be deeply disappointed by Hollande’s change of heart, but at this point, Hollande appears to have decided that saving France is a much higher priority than demonstrating solidarity with Italy and Spain.

Today's 'specials' can be hard to digest

THERE are two linked social trends that seem to be shaping modern Australian society and consumer behaviour.
The first is the rise of "Special Disease". Did you know I am special? Oh yes. I am very special. And so are you. And you. In fact you and I are so special we need to be treated differently. And sensitively.
Don't offend us or we will publicly accuse you of insensitivity and we will demand an apology. In fact, you and I are so special we need a break on tax and a benefit of some sort to help compensate for the terrible hardship we have had to endure. On a daily basis! Not that any financial compensation can actually salve the pain we have endured, but at least it's a recognition that our problem really does exist.
Politicians understand this sensitivity so well they litter their speeches with the magic phrase "we know some people are doing it tough". The problem is that politicians have been using this phrase for a decade or more, including throughout the boom.
But if everyone is special, who is actually doing the work and paying taxes? Not that those of us with Special Disease actually make the connection between the benefits we receive and those who have to work harder in order to generate a surplus.
That's one of the side effects of Special Disease: selective logic. And if you make us special, people think about mean things like that, then that will make us unhappy and we will require even more special treatment.
Do you know who isn't special? By a process of elimination, the answer can only be the well-to-do middle-class who are employed and most likely in multinational "big-polluting big-exploiting" companies, excluding really cool technology businesses.
The well-to-do middle-class really does need to find a way to make them special.
In terms of consumer behaviour, if everyone sees themselves as special then this drives an expectation of special deals and arrangements; special people never pay full retail.
Not that everyone should get special deals. If that were the case, special people would cease to be special. And that would simply drive special people to find even more ingenious ways of being even more special. As you can see, Special Disease is an insidious affliction.
The second trend shaping modern Australian society is the rise of "Victim Syndrome". One of the surest signs of the onset of Special Disease is the sadly all-too-common affliction known as Victim Syndrome.
You never saw many cases of Victim Syndrome years ago (most people just soldiered on), but since the turn of the century there's been a veritable epidemic.
If I am a victim, I deserve special consideration -- ergo, all I need to do is prove or assert Victim Syndrome.
A truly skilled exponent of Victim Syndrome can turn any situation to their advantage: "The reason why I behaved badly is because I have been under such pressure and I've had such a rough trot lately and all you can do is criticise. I'm the victim here; not you."
But all of this really raises the bigger question of why Victim Syndrome and Special Disease should be so rife throughout all levels of modern society.
Including, I might say, amid the well-to-do middle-class who feel victimised by their exclusion from either affliction.
Perhaps the answer can be traced to a generational and demographic shift in parenting techniques that took place some 30 years ago.
Baby-boomer households and earlier raised large numbers of children on a single income requiring familial and financial discipline. Everyone, including children, had to do their bit.
But baby-boomer and later parents from the 1980s onwards managed fewer children with relatively more income as women remained in the workforce.
Children from smaller families were more likely to be indulged than children in larger families from previous generations.
Indulged children are forever being told that they are special and are provided with the wherewithal to live a comfortable lifestyle.
By the turn of the century, special children and indulgent parents had assembled both critical mass and longevity: this thinking had driven social behaviour in most forums, including at schools for a generation.
A tipping point appears to have been reached over the past decade, and it continues to gather momentum.
Every day it seems there is a new group that requires recognition and assistance as well as an apology.
This is not to say that these special interest groups are not worthy of their special status. But rather, it is to say that there does not seem to be a counter-balancing recognition that someone is working harder in order to pay for these special considerations that now inhabit modern Australia.
And in fact quite the contrary: those who work harder than most are now seen as being part of the undeserving rich.
Special Disease and Victim Syndrome are so rife that many are clamouring for a way to show why their situation requires concession.
This is a no-win situation: the more some segments pursue concession, the more others are compelled to do the same. What is required is a shift not so much in the administration of welfare and tax concessions but in the community's attitude towards specialness and concessions.
There was a time when the idea of getting a concession was regarded as a sign of weakness. Today it's a different story. If you do not claim every entitlement then you are being "done over" by the system. Far better instead to "do over" the system.
This is a way of thinking that can only be indulged by a rich society.
What we need to be doing now is changing attitudes towards excessive concessions. Everyone needs to do their bit, including the well-to-do middle class, but also those who currently see themselves as being more than just a little bit special

Jun 27, 2012

Safe as an Aussie dollar? | Karen Maley | Commentary | Business Spectator

The Australian dollar remained slightly above parity overnight, continuing to defy those who are betting that the sharp slide in commodity prices will cause the currency to tumble.

A number of hedge funds have been shorting the Australian dollar, believing that, with commodity prices dropping sharply, it’s only a matter of time before the currency follows suit. 

Copper – which has such a good track record in predicting global growth trends that it is frequently dubbed ‘Dr Copper’, the commodity with a PhD in economics – has now fallen around 15 per cent from its February peak. Energy prices tell a similarly gloomy story, with the price of crude falling by around 25 per cent in the past three months, while thermal coal is down 18 per cent. At the same time charter rates for oil tankers, an indicator of the level of global demand for crude oil, have slumped by 75 per cent since early April.

Last week, the US central bank disappointed markets by deciding not to launch a major new bond buying program – QE3 – even though it recognised that US growth was faltering. And the market has already given up hope that this week’s summit of European leaders will produce any new initiative that will solve the region’s dire debt problems and prevent it from sliding deeper into recession. 

But other analysts argue that there are reasons for the Australian dollar’s resilience. They point out that all the 'commodity currencies' – which belong to industrialised countries such as Australia, Canada, New Zealand and Norway which also happen to be big commodity exporters – have held up remarkably well. Indeed in the past three months, the 'commodity currencies' have only fallen by around 3 to 4 per cent against the greenback, despite the sharp slide in commodity prices. 

One reason for this is that these countries offer higher interest rates, which are hugely attractive for global investors hunting for yield. Even though the Reserve Bank is cutting interest rates, Australia’s official interest rate of 3.5 per cent remains the highest nominal rate of any industrialised country, which is supporting the local currency.

What’s more, the 'commodity currencies' belong to the shrinking group of developed countries that have been able to hold onto their prized triple-A credit ratings. This makes Australian bonds hugely attractive to conservative investors, including foreign pension funds, many of which have a mandate that requires them to buy only triple-A rated securities, and which see Australian securities a 'safe haven'.

And it’s not only private investors that are attracted to buying the 'commodity currency' bonds. Central banks, wary of incurring losses on their holdings of US dollars and euros, are increasingly looking to diversify their investments. Russia’s central bank has recently indicated that it could allocate up to 1 per cent of its foreign exchange reserves in Australian dollar assets, which could see it buying up to $5.1 billion in Australian bonds. 

In addition, the Australian dollar is also being buoyed by the perception that China – which is an important buyer of our commodities – is taking steps to stimulate its economy. Beijing has already introduced a range of measures to boost growth, including cutting interest rates, reducing the level of reserves that the banks are forced to hold, and offering consumers incentives to encourage them to buy domestic appliances.

But despite Beijing’s stimulus, many hedge funds remain confident that the local currency will eventually stumble. The Australian dollar, they argue, will simply not be able to withstand the mighty headwinds coming from a sharp slowdown in US and European growth, which will cause commodity prices to plummet even further.

And they point to history as a guide. When commodity prices were sent reeling between July 2008 and February 2009, the worst performing currencies were, in order, the Polish zloty, the Hungarian forint, the Czech koruna and the Russian ruble, followed by the Australian dollar

To get rich used to be glorious....

Twenty years ago, Deng Xiaoping made his famous "southern tour." The journey took place just a few years after the Tiananmen Square massacre, with China still internationally isolated and in a period when Deng's reform program was in increasing doubt. Thanks to Deng's tour, economic reform was pushed back on the agenda—and that's when the economy took off. In the last two decades, China grew at an average 10.4%.
For a while it seemed as if China would never look back. But it's clear now that the easy part is over and that the next 20 years will be harder for the Communist Party to manage. The country's looming problems have never looked as sharp in the past two decades, which spells not only an economic deterioration, but also a possible collapse for the Party.
The problem started late last decade, when President Hu Jintao concertedly changed tack, from privileging the private sector to the public. State-owned enterprises became more dominant than they were, while local governments became emboldened especially after a post-crisis lending spree—these entities together swallowed most of the available credit. The small- and medium-sized companies, the engines of job growth, stalled. This is part of the reason growth is slowing, the government recently revising its estimated growth for the current year down to 7.5%.
The current poor management of the economy comes on top of long-term issues that the Party has ignored. Not only have wages been rising enough to start affecting Chinese companies' competitiveness, there is a shortage of labor in the coastal belt, the heart of economic growth. The shortage is due in part to more opportunities inland, but the biggest problem is the working-age population has peaked.
Associated Press
Vice President Xi Jinping.
The government's one-child policy is to blame. This is widely detested at a personal level, and this month the story of a woman who was forced to abort her daughter has China's young online commentators in a frenzy. On the economic front, this policy may have boosted each individual's earnings in 1979, but today it's making China a rapidly aging society that will dampen productivity.
Then there is the matter of liberalizing China's financial markets. Beijing has made waves in the past few years by suggesting it will internationalize the yuan, but that seems like an empty promise if it can't open up its capital markets. Until it does so, Chinese are right to question if their savings could be better allocated. China's resources are being used up by inefficient behemoths in the public sector. Or they're going into a $1.5 trillion property and local-government debt bubble, which many observers think is close to bursting. Meanwhile, earnest startups, like the small manufacturers in Wenzhou, risk getting strangled.
Chinese naturally worry the system is rigged to favor a few, and nothing exemplifies this disenchantment more than recent tales of corruption. The Bo Xilai case this year is perhaps the worst, as the Chongqing boss was brought down and his wife charged with murdering a British businessman. This brought out what everyone implicity knew: large parts of the system are turf for gangster-type control by officials. The Party is set to hand over power to a new generation later this year, and factional infighting at the top may well increase over larger slices of a smaller economic pie. Ordinary Chinese will be left fending for themselves if the turf wars intensify, since they have no property rights, or an independent legal system.
No wonder the middle class is now more pessimistic about the future, more cynical about government, and increasingly focused on protecting their position. Chinese I talked with last week said that the people feel more resignation than resentment towards the Party. Should that distrust grow, a political reaction like Tiananmen cannot be ruled out. A radicalized urban middle class could join forces with a rural population that is already responsible for most of the 180,000 or so mass protests that occur every year.
The Party will probably respond to this by stepping up mass repression, but that will translate into even more domestic instability. At the same time, a weakened China might lash out abroad with its modernized military, to stoke nationalist passion and divert domestic resentment. That will only find China more isolated globally. Whatever the manifestation, there could be carnage at home or abroad, posing an existential threat to the Party.
On his southern tour, Deng immortalized the phrase "to get rich is glorious." China's next leader Xi Jinping and his successors might say in turn that to stay in control is sublime.

Merkel's message weighs on stockmarket

THE sharemarket remained under pressure yesterday as cyclical sectors suffered from a growing sense of despondency about the willingness of global leaders to come up with solutions to the European debt crisis that is crimping world economic growth.
The benchmark S&P/ASX 200 index closed down 0.4 per cent at 4013.3 after being confined to a relatively narrow range of 4002.3 to 4026.3. Share trading volume was light before the end of the financial year and school holidays in NSW next week.
BHP Billiton shares fell 1.4 per cent, hitting a fresh three-year low of $30.55, while Rio Tinto, Woodside Petroleum and Santos fell 1 to 1.4 per cent.
Industrials were also weak, with Brambles, Leighton and Asciano falling 1-2.3 per cent.
Financials pared intraday declines, with Commonwealth Bank closing up 0.3 per cent.
Hopes of a breakthrough from the EU leaders summit due for tomorrow and Friday were dashed by comments from German Chancellor Angela Merkel.
The S&P 500 index fell 1.6 per cent after she said joint euro bonds, euro bills and European deposit insurance with joint liability would be "economically wrong and counterproductive".
"It's quite depressing," said Morgan Stanley Smith Barney investment adviser Shannon Briggs. "Everyone is down in the dumps and there's a distinct lack of confidence in anything."
Some tax-loss selling might be a cause for the slump before financial year end, Mr Briggs said, although he added that the bulk of tax-related selling should have been completed by now.
A "death cross" technical pattern on the S&P/ASX 200 index was another possible negative factor for the domestic bourse. The 50-day moving average crossed below the 200-day moving average on Monday.
"It's pretty much consensus that the EU summit will lack any real meat," IG Markets institutional dealer Chris Weston said. "But I think European officials have done a good job this week of managing expectations, so hopefully they come up with some ideas the market can sink its teeth into."
Seven West Media fell 13.7 per cent after it hired former Woodside boss Don Voelte to replace departing chief executive David Leckie. Deutsche Bank said the media company might seek to raise equity capital.
Billabong rose 6.3 per cent to $1.02 after its founder Gordon Merchant said he was open to another takeover bid.
Fortescue Metals rose 0.6 per cent to $4.88 after its founder and chairman Andrew Forrest raised his stake. Mr Forrest bought 12.8 million ordinary shares, or 0.4 per cent of the company, taking his holding to 32 per cent.
News Corporation rose 2.4 per cent to $20.79, reversing an intraday fall to $20.11, after The Wall Street Journal said News was considering splitting into two companies, separating publishing assets from entertainment businesses. News owns Dow Jones Newswires, The Wall Street Journal and The Australian.

Jun 26, 2012

Banks wait in Europe's emergency room | Robert Gottliebsen | Commentary | Business Spectator

Despite last night’s fall, markets still don’t really believe that when it comes to the crunch Angela Merkel will pull the plug on the euro – the consequent German banking losses are too great.


But if she does pull the plug – and, for what it is worth, I think there is a good chance she will – then everyone needs to understand that we face a major world banking crisis.


The European Banks have been close to the biggest funders of world trade. They have also taken in major amounts of Middle Eastern oil money via deposits (particularly from those who dislike Americans) and used that money to fund banks around the world via the so-called wholesale market.


Historically, Australian banks have been among the biggest borrowers of this wholesale money, although thankfully they have cut it back. However, wholesale borrowing still represents in the vicinity of 40 per cent of major Australian bank funding. If the euro crumbles wholesale funding is not going to be available, so our banks will have to replace the money over the next three years from our self-managed and other superannuation funds. Lending will be curtailed.


Most of the European banks have been technically insolvent for a year or two because of the massive losses they suffered first in sub-prime lending and then in lending to bankrupt European governments. Many also got caught in the Spanish and other inflated property markets. But if the euro breaks up the major European banks will suffer further enormous losses. Germany may save its banks but banks in countries that leave the euro can’t be saved.


The turmoil will infect the whole global banking system and the American banks will be particularly hard hit because they are deeply involved in the inter-bank derivatives markets, where there are trillions of dollars exposed.


Because this crisis has been anticipated, most of the major world banks, including Australian banks, have their emergency plans in place. We are going to see a lot of pain but the global banking system will come through.


Angela Merkel is currently not prepared to put German wealth at stake in Europe unless there is a delegation of sovereignty over financial affairs – effectively to Germany. Those trying to convince Merkel to soften her line were not helped when the new Greek government effectively moved to step away from its commitments (Greece sets its own price, June 25).


Greece will not be at this week’s summit.


That tells everyone that Greece and most other countries will agree to austerity but are unlikely to implement those agreements unless they have given up sovereignty and therefore have no choice. One alternative strategy is to let Greece go and then let other Europeans see what happened to Greece.


Italy, Spain and others will then be prepared to accept austerity and German control to avoid the Greek fate.


But the austerity pain Merkel is trying to impose on these countries is simply too great. In my view the pain must be inflicted via the currency. In other words, the best way to have Greek wages and asset values halve is to halve the value of the Greek currency. That can’t happen if the Greeks have the same currency as Germany. But the euro is embedded in the system and the break-up pain is even harsher than austerity in the short term.


Meanwhile the banking system, until recently, did not see this coming.

Jun 22, 2012

Rinehart is Labor's page-one disaster | The Australian

GINA Rinehart is Labor's nightmare come to life.  Her opposition to the mining tax was as hard and tough as the stances she takes in her business and personal life. While predicting the wrack and ruin that the mining tax would bring to bear on her industry, she was being hailed as the world's richest woman.
In just a few short years her fortune had ballooned from $5 billion to $20bn. She is a living, breathing proof that a mining tax was just what the doctor ordered for a country with a two or three-speed economy.
She joined in the campaign against the government with gusto. She spoke at rallies and helped fund the ad campaign that forced the government into a hasty retreat. Tony Abbott was then accused by the Prime Minister and the Treasurer of being the mere mouthpiece of the mining billionaires.
Along with Clive Palmer and Andrew Forrest, Rinehart has been demonised by senior Labor Party figures in a class war they hope will resonate with the working-class battlers who have deserted them en masse.
Rinehart is tough and gruff and has a reputation for taking no prisoners. Under normal circumstances that sort of character, armed with unrivalled sums of cash, would be seen as a real threat.
These, though, are circumstances far removed from normal. To the government's horror, she wants to add Fairfax Media's stable of newspapers and radio stations to her business portfolio, and will do that knowing she will lose money on the deal.
This is a woman who is not satisfied with merely being rich -- she wants power and influence as well. Rinehart can afford a Fairfax play with what to her would seem like small change.
The problem the government has to come to terms with is just how, in a capitalist democracy that guarantees the freedom of the press, you find a means to prevent the fall of Fairfax. The answer is, of course, you can't. If she wants Fairfax, she will get it.
The members of the Fairfax board, who look so uncomfortable under siege, have only themselves to blame. The leadership, from Fred Hilmer to Roger Corbett, has failed employees, investors and readers. I can remember when Fairfax was courted so sensationally by the likes of Conrad Black, Kerry Packer and Tony O'Reilly. In those days, 20-odd years ago, there was talk of the "rivers of gold" that The Sydney Morning Herald and The Age classifieds represented. Even five years ago the share price was about $5, yesterday it was under 60c and has been dropping like a stone.
Successive boards and management teams at Fairfax simply missed out on the internet. They didn't see it coming and now are paying dearly for that lack of vision.
Why didn't Fairfax invent Seek? Or why don't they own it? Surely they must have realised that newspapers worldwide were in decline. Circulation numbers have been falling for years as generations X, Y, Z and beyond turn to the net for their information.
Decisions to lead this trans-formation to a new digital world at Fairfax should have been happening two decades ago. It is to the everlasting shame of those involved at the time that opportunities were missed, but none of that helps much now. The rivers of gold are now tiny trickles that are drying up fast.  At the same time the notion that so called "quality journalism" only exists in the musings of Fairfax journalists and contributors is truly offensive.
It is certainly the case that there are many fine journalists at Fairfax who maintain the highest possible professional and ethical standards.
It is equally true that some currently at Fairfax, or Fairfax-trained, are believers in target journalism -- a world where the writer presents himself or herself as the arbiter of what is acceptable.  These journalists act as judge and jury and, once they have found you guilty, anything they write in the hunt for the hapless victim is OK. In this process truth inevitably suffers and, eventually, so does readership.
The punters worked out the SMH years ago and have been deserting it in droves. The inmates have been running the asylum for far too long and it shows.  Various Fairfax journalists have pursued me over the past 35 years. I am still here and am financially richer for the experience. I am not Robinson Crusoe. The SMH and The Age have too often got it wrong and paid for it both in money and circulation.
I can't see how the Rinehart juggernaut can be halted. Few others can afford to throw good money away, and even fewer have the knowledge of the media that might produce a plan to turn the good ship Fairfax around.
About the only individual who could sort out the mess is Kerry Stokes. Even if he wanted to, of course, the cross-media laws would rule him out -- and, yes, I do work for Channel 7 but I would like you to know I haven't spoken to Stokes in 20 years.
At least Stokes knows something about running profitable media businesses and that certainly separates him from Corbett, whose tenure at the helm of Fairfax looks certain to come to a premature but deserved end.
There are so many political and economic bloggers around now that the relevance of the cross-media rules must be up for review. Owning a newspaper is not the big deal it once was.
By the way, don't hold your breath waiting for Rinehart to sign the Fairfax charter. She is in this for power and she can only achieve any of that by making sure Fairfax speaks with her voice.
For the Labor Party it is a chilling thought, and it's not too warm for a few journalists I know, either.

Reform or face the fallout, says IMF | The Australian

THE International Monetary Fund has warned that the global economy is losing momentum and is in jeopardy from the European crisis and a sharp slowdown in China.
An analysis prepared for the G20 summit in Mexico called on countries including Australia to tackle reforms, ranging from tax to unfair dismissal laws, in an effort to stimulate investment but said the global economy had become "highly vulnerable".
The IMF warning comes amid fresh signs that China's economy is softening. A closely followed manufacturing survey shows output fell in May, with the biggest fall in export orders since the peak of the global financial crisis.
The world economy slowed in the second half of last year but appeared to be strengthening this year, leading the fund to upgrade its economic forecasts in April.
"The latest news firmly suggests that momentum is weakening again," the IMF says. If this is confirmed over coming months, it will affect Australia's exports, growth and budget tax revenue.

The IMF's concerns are not confined to Europe. It says that in a number of emerging countries, including China, "rapid credit expansion may have pushed output growth above sustainable rates".The fund says Europe remains the most immediate threat, with investors unsettled by the political difficulty of implementing needed budget savings. "The narrow path between too much adjustment, which would hurt growth, and too little adjustment, which would hurt confidence, appears difficult to navigate," it says.
It says episodes of high credit and GDP growth are usually followed by much lower growth, with excessive lending during the boom leading to rising bad debts.
The latest Chinese manufacturing survey from HSBC shows output is now is at its lowest level since last November.
The IMF also warns that the heavy government debts of the US and Japan may prove destabilising to the world economy. Until now, both have been deemed "safe havens" by investors fleeing Europe. However, the IMF says their "repeated failure" to present credible plans for narrowing their budget deficits could "eventually unnerve investors".
The IMF highlights Australia as the advanced G20 nation that has done the most to improve its budget bottom line and stabilise its government debt since 2010.
But it says for the world to pull out of its malaise, countries need to match their efforts to bring budgets under control with economic reforms that will encourage investment including tax, competition, and labour market policy.
If all G20 nations implemented the reforms outlined by the Organisation for Economic Co-operation and Development in its annual review of growth strategies, the IMF says, the world economy would be four percentage points larger by 2017.

Amazon lands in Australia

Amazon's worst kept secret is no more. The retail and internet giant has finally admitted to opening a data centre in Sydney with a post on the Amazon Web Services blog.
The post said the cloud computing company, owned by etailing mammoth Amazon.com had just added an "edge location in Sydney, Australia", its 33rd.

The location will be used for AmazonCloudFront, a web hosting service, and Amazon Route 53, a domain name system (DNS) hosting service that connects to Amazon Elastic Compute Cloud (EC2), one of the company's main cloud services. It is independent of Amazon.com's online retailing arm, which sells books, videos, electronics and other items.
Cloud computing refers to computer resources that can be turned on or off and scaled up or down, depending on demand. It is increasingly used by businesses to supplement or replace their on-site computing facilities.

The company said "edge locations" help lower latency and improve performance for end users. They allow data to be stored temporarily to reduce download times. Eight new edge locations have been launched this year.
In the post, the company said it was answering "frequent requests" by customers in Australia for local services and would provide pay-as-you-go services.
"Based on customer requests, internal logging, and the response to our recent survey, we believe that this location will prove to be of great benefit to our customers, providing them with increased performance and reduced latency. We believe that CloudFront's pay-as-you-go pricing model will provide Australian companies and global companies with a very cost-effective alternative to traditional content delivery solutions."

Rumours of an Australian Amazon data centre have circulated for a year, since a report appeared in The Australian in July 2011, but the company has refused to talk about it, preferring instead to try to feed journalists with positive client case studies in preparation for a launch.
In November, iTNews revealed the company was advertising for a data centre operations manager based in Sydney. The Australian Financial Review reported at least 12 staff had already been hired by January.

The Sydney Morning Herald reported that, in accounts previously lodged with the corporate regulator, Amazon Corporate Services said the company had "commenced conducting business in the form of the provision of marketing and other corporate services for and on behalf of an associated company, Amazon Web Services LLC" during the year to June 30, 2011.
The actual location of the facility was not revealed in this week's announcement, but it has been known that AWS has been scouting for facilities in Sydney for months.
Amazon's chief technology, Dr Werner Vogels, was in Sydney last month but refused to talk about the company's local plans.

Australia is awash with data centre activity at the moment. HP opened a $200 million facility - Aurora - in Sydney's Eastern Creek last week, while NextDC - a data centre landlord - is officially opening its first Melbourne facility on July 4. It already operates one in Brisbane and is building others in Canberra, Perth and Sydney. Macquarie Telecom, which provides managed hosting and cloud services, is opening a $60 million facility - Intellicentre 2, in Sydney's North Ryde, next month.

While an "edge location" may not be a fully-fledged data centre, it may be seen by the market as an Amazon offering towards a more comprehensive local service that may satisfy some clients' need for keeping data onshore.
Australian-based clients already using the company's CloudFront and Route 53 services offshore will not need to change anything. The company said their requests would automatically be routed to the new location where appropriate.


Jun 21, 2012

Engineers build smallest, fastest digital gigapixel camera – The Express Tribune

Engineers in the United States have built a prototype gigapixel camera the size of a bedside cabinet that can capture an image in a single snapshot with 1,000 times more detail than today’s devices.
It is not the world’s first gigapixel camera, but it is the smallest and fastest and opens up prospects for improving airport security, military surveillance and even online sports coverage, its developers say.
A pixel is a small light point in a digital image, concentrations of which together form a picture.
Today’s cameras capture images measured in megapixels — a million pixels — normally between eight and 40 for an average consumer device. A thousand megapixels make a gigapixel, which is thus comprised of a billion pixels.
Most of today’s gigapixel images are made by digitally merging several megapixel pictures.
“Our camera records a one gigapixel image in less than a 10th of a second,” project member David Brady told AFP of the project reported in the journal Nature.
Gigapixel imaging captures details that are invisible to the human eye and can later be examined by zooming in without losing clarity.
Dubbed AWARE-2, the device is housed in a box of 75 cm X 50 cm X 50 cm — most of which comprises electronic processing and communication equipment.
The optical system consists of a six-centimeter (2.4-inch) ball-shaped lens surrounded by an array of 98 micro-cameras each with a 14-megapixel sensor.
Brady said the optical system on its own weighs about 10 kilograms (22 pounds), but with the case about 45 kg.
“The electronic system shrinks by a factor of four in the next generation, however.”
In use today are highly specialized gigapixel astronomical telescopes and airborne surveillance systems, which are comparatively large and have a narrow field of view, said Brady of Duke University in North Carolina.
There are also some film-based gigapixel cameras.
“Our technology is most interesting as the first demonstration of high pixel count and wide field of view imaging at finite focal ranges,” said Brady.
The cost of such a camera today would be similar to that of a high-resolution digital movie camera, he said — about $100,000 to $250,000 (80,000 to 200,000 euros).
But as the electronics improve, the price should become affordable for professional and serious amateur photographers within about five years, followed soon thereafter by hand-held gigapixel cameras entering into widespread use.
Brady said the technology could be used, for example, to stream sporting events over the Internet — enabling viewers to zoom in and watch the game from whatever perspective and resolution they choose.
Similarly, cameras mounted in game parks or at scenic lookouts would allow online tourists to examine a scene in much more detail than if they were actually there.
“Ubiquitous gigapixel cameras may transform the central challenge of photography from the question of where to point the camera to that of how to mine the data,” said the Nature report.

Engineers build smallest, fastest digital gigapixel camera – The Express Tribune

Engineers in the United States have built a prototype gigapixel camera the size of a bedside cabinet that can capture an image in a single snapshot with 1,000 times more detail than today’s devices.
It is not the world’s first gigapixel camera, but it is the smallest and fastest and opens up prospects for improving airport security, military surveillance and even online sports coverage, its developers say.
A pixel is a small light point in a digital image, concentrations of which together form a picture.
Today’s cameras capture images measured in megapixels — a million pixels — normally between eight and 40 for an average consumer device. A thousand megapixels make a gigapixel, which is thus comprised of a billion pixels.
Most of today’s gigapixel images are made by digitally merging several megapixel pictures.
“Our camera records a one gigapixel image in less than a 10th of a second,” project member David Brady told AFP of the project reported in the journal Nature.
Gigapixel imaging captures details that are invisible to the human eye and can later be examined by zooming in without losing clarity.
Dubbed AWARE-2, the device is housed in a box of 75 cm X 50 cm X 50 cm — most of which comprises electronic processing and communication equipment.
The optical system consists of a six-centimeter (2.4-inch) ball-shaped lens surrounded by an array of 98 micro-cameras each with a 14-megapixel sensor.
Brady said the optical system on its own weighs about 10 kilograms (22 pounds), but with the case about 45 kg.
“The electronic system shrinks by a factor of four in the next generation, however.”
In use today are highly specialized gigapixel astronomical telescopes and airborne surveillance systems, which are comparatively large and have a narrow field of view, said Brady of Duke University in North Carolina.
There are also some film-based gigapixel cameras.
“Our technology is most interesting as the first demonstration of high pixel count and wide field of view imaging at finite focal ranges,” said Brady.
The cost of such a camera today would be similar to that of a high-resolution digital movie camera, he said — about $100,000 to $250,000 (80,000 to 200,000 euros).
But as the electronics improve, the price should become affordable for professional and serious amateur photographers within about five years, followed soon thereafter by hand-held gigapixel cameras entering into widespread use.
Brady said the technology could be used, for example, to stream sporting events over the Internet — enabling viewers to zoom in and watch the game from whatever perspective and resolution they choose.
Similarly, cameras mounted in game parks or at scenic lookouts would allow online tourists to examine a scene in much more detail than if they were actually there.
“Ubiquitous gigapixel cameras may transform the central challenge of photography from the question of where to point the camera to that of how to mine the data,” said the Nature report.