The NSW economy – Australia’s largest – will fall into the
red next year, says the Financial Review
(not online), with a projected budget deficit of more than $500 million, after
this year’s budget surplus has been wiped out by a property slump and higher
health and education costs. NSW Premier Morris Iemma admitted for the first
time yesterday that his state’s budget would be unlikely to return to surplus
until 2008-09.

After former Premier Bob Carr and his treasurer Andrew
Refshauge talked vaguely about savings and synergies, but effectively did
nothing, Iemma is now left to face the reality, says Alan Mitchell in the Fin – a budget weakened by soft real
estate prices, slow economic growth and a $180 million hole left by the
abolition of vendor duty on investment property.
And while Iemma has ruled out a slash-and-burn approach to
the public service, says Mitchell, he can’t solve the state’s budget problems
without cutting deeply into the growth of the government’s wages bill.

The Telstra investor-relations fiasco has worsened, says
John Durie in the paper’s Chanticleer – after the extraordinary contempt shown
in what can only be described as a stunt: the suspension of trading in Telstra
shares yesterday – apparently due to an uninformed market, following conflicting
news reports prior to Communications Minister Helen Coonan’s speech yesterday.

And while Telstra may have avoided enforcement action,
Australia’s largest company nevertheless received a black eye as a result
of ASIC’s investigation into its disclosure practices, says Bryan FrithThe Australian. The corporate regulator found that Telstra engaged in
selective leaking of information, provided information to analysts which was
not released to the share market, and that it also provided ambiguous if not
misleading information to the ASX by
implying an earnings downgrade was, at least in part, attributable to an
estimated $850 million cost of regulation, when that was not the case.

That’s
pretty damning, says Frith, and it prompted ASIC chairman Jeff Lucy to publicly
warn the Telstra board and senior management to “lift their game” on
continuous disclosure. ASIC’s “unacceptable” declaration about Telstra’s
disclosure to the markets is more than a wrist slap, says Malcolm Maiden in The Sydney Morning
Herald. It amounts to a yellow card, issued in the absence of a voluntary
undertaking from the telco to lift its game.

But Lucy is wrong to have decided to take no more serious
action against the company beyond showing a yellow card to the diminishing
telco’s chairman Don McGauchie, says Matthew Stephens in the Oz. If Telstra fails to meet
the standards of public disclosure again, Lucy’s response should be to hammer
the telco. If ASIC fails that test, then its yellow cards mean nothing and any
authority Lucy has left will be fatally undermined. It will be time for a
change.

Meanwhile, Helen Coonan is nothing if not obdurate, says
Stephen Bartholomeusz in The Age. In the face of aggressive
Telstra lobbying material, she hasn’t flinched. Which means the conflict
between Telstra and the Government won’t subside and most of Telstra’s proposed
high-speed fibre-to-the-node network may never be built. Obviously,
it would be in everyone’s best interests if the government was removed from the
share register entirely, says Durie, and right now, the only way this will happen is if
Telstra management gets on with the business of making the company run better.

In other news, Coopers Brewery shareholders jettisoned
hostile predator Lion Nathan from the company’s constitution yesterday,
effectively killing off the trans-Tasman brewer’s $420 million takeover bid
despite threats of continued legal action, reportsThe Australian. More than 93% of
shareholders voted to retain Coopers’s South Australian family heritage and
keep the company local at an extraordinary meeting at its Regency
Park headquarters.

And Qantas has vowed to slash fares to the US, announcing
the planned expansion of its budget carrier Jetstar to US routes and a massive
$10 billion investment in 65 new-generation Boeing 787 Dreamliner aircraft from
2008, reports the SMH.

On Wall Street, US stocks ended mixed Wednesday after broker
downgrades for Apple Computer weighed on the technology sector, but the broader
market rallied, with the S&P 500 hitting a four-and-a-half-year high, amid
easing interest-rate concerns. The Dow Jones closed up 59.79 points at
10,883.51. MarketWatch has the full report here.