Dear Sole Subscriber,

So here's a question that emerges after Senator Joyce's first working week as a serious politician: can flawed authenticity succeed at the top level of Australian politics? This morning, after ducking the issue yesterday, his leader Tony Abbott presented the case for the defence on the Seven Network:

Barnaby is on a learning curve but ... he is an authentic. I think people are sick of politicians who just use the kind of polly-waffle that we so often hear. Sometimes he's going to have to be corrected because he'll get it wrong.

The case for the prosecution, meanwhile, has been unfolding in technicolour all week:

-- "Joyce appears to have wandered off into policy whacko-land" -- Damien Kingsbury, The SMH

-- "There is not a single colleague in the Liberal Party that has any faith (in Senator Joyce). Everyone is just going tick, tick, tick, tick". -- anonymous Liberal MP, Herald Sun

-- "A freak show ... the bearded lady of Australian politics, he's taken charge of economic policy. If he ever gets control of the public finances of this nation, God help Australia.'' -- Finance Minister Lindsay Tanner

If Abbott is right, Australian voters are prepared to reward political leaders who display unvarnished naturalness ahead of those who stick to highly disciplined behaviour. If he's wrong -- and the judgement will apply to Abbott and Joyce -- there's no place for loose cannons at the top of major political parties.

As for Crikey's coverage of the man Wayne Swan dubbed Barnaby Rubble yesterday, we'll try to stick to the substance -- with one exception. Today we're launching a regular item called Barnabyisms.

Here's the first one. Right about the same time Abbott was defending Barnaby's "authenticity", Barnaby was saying this:

"I talk to Tony all the time, we have a very constructive relationship, we have a very open relationship ... it's ... not a s-xual relationship ..." -- February 5,  ABC Radio National Breakfast.

A Minister bagging his or her bureaucrats to the press is one of the great Canberra tradition but rarely has there been a more egregious example than the attack on Stephen Conroy's former secretary, Patricia Scott, by Jennifer Hewett in today’s Australian.

In a response to the ANAO’s report on the NBN tender process, Conroy has evidently let rip. According to Hewett,

The new minister was always hamstrung by the inept and legalistic process foisted on him by his department and former departmental secretary Patricia Scott… his complaints and attempts to change the process were overruled by the Department of Prime Minister and Cabinet and its acting-secretary, Jenny Goddard, Scott's partner.

Forget dry and dusty stuff about probity, accountability and good procurement practice -- there was a lesbian cabal at work to stymie Conroy.

Conroy's office has denied backgrounding Hewett for the story, telling Crikey this morning neither they nor Conroy spoke to The Australian about this piece. That makes Hewett Australia's best investigative journalist, since she is evidently privy to high-level discussions about one of the most tightly guarded non-national security tender processes, in the Departments of Prime Minister and Cabinet and Broadband.  She also appears to have divined Conroy's state of mind about the procurement process without input from him. Great stuff.

The article might make sense if you think Government procurement is a matter of picking up a phone and ordering stuff. For anyone versed in how Governments go about tender processes -- or how they should go about it, it’s a staggering reflection on Conroy -- or whomever the source was.

But first, let’s note what the audit didn’t say. The audit began life as an attempt by the Opposition to suggest the NBN tender process was somehow dodgy, especially after Telstra was booted out for non-compliance. This was Nick Minchin in high dudgeon after Telstra got the boot in December 2008:

I ask the Australian people how can the Government possibly have a legitimate, competitive tender process for this $4.7 billion infrastructure project without the largest telecommunications company involved in any way? And the grounds on which Telstra has been excluded are spurious in the extreme… This seems utterly extraordinary and again raises real doubts about what is going on. Are Telstra being deliberately excluded and if so, why?

Minchin then wrote to the Auditor-General demanding he "conduct a full audit of this failed process and take necessary steps to ensure such a poorly conducted procurement attempt is not repeated".

Perhaps one of the reason we haven’t heard much from new Communications shadow Tony Smith on the report is that it shows Minchin to be a complete goose. The ANAO has nothing to say about the decision to exclude Telstra. It finds the department conducted the whole process "well and in accordance with the Commonwealth Procurement Guidelines" despite the "complexity and short timeframe" it was given (more of that, though, in a moment).

Telstra and its media cheerleaders might now wish to recant their hysterical claims from back then that the company had been unfairly kicked out, but don’t hold your breath.

The ANAO’s main criticism of the department is that it didn’t adequately quantify to Conroy just how much compensation Telstra might need to be given for access to its network under the original FTTN proposal, in the event another bidder won the tender.  Given the department made clear that compensation was likely to be very, very large, it’s unlikely Conroy was ever under illusion that it wouldn’t cost billions.

After all, the entire process for which the Government was seeking tenders was based on a Telstra proposal.  It was probably clear to Conroy well before he got into Government that if Telstra didn't win, the whole thing would be a fizzer.

The other issue that crops up continually in the report is that, despite being extended by nearly six months from the Government’s original six-month deadline, the tender process was materially harmed by the short timeframe imposed by the Government.  Bidders complained about the tight timeframe (they always do, but here there were real reasons).

The department went for a shorter, single-stage process when advisers recommended a multi-stage process that might have improved the quality of the bids.  The ANAO supported a multi-stage approach, and believes it would have improved bids and reduced bidders’ costs (which were in the millions).  But that would have taken much longer. It also meant that much work had to be undertaken in parallel, and suffered accordingly.

The real culprit here is never named by the ANAO. It’s not Stephen Conroy, it’s his boss, Kevin Rudd, who persisted in the fantasy that one of the Commonwealth biggest-ever procurement processes could be done and dusted in a few months.

Modern Commonwealth procurement processes were fundamentally reshaped by the Hughes Aircraft case in 1997, when the aircraft company won massive compensation from the Commonwealth because of the way the Civil Aviation Authority had conducted, or rather misconducted, a tender process. The need for rigour, transparency, high levels of probity and most of all fairness of treatment for all bidders is now built into procurement process everywhere, to the chagrin of many a bureaucrat.

It means that high-value procurement processes, which have a good chance of ending up being litigated by aggrieved failed bidders, are done with all the "legal knots" and "bureaucratic protocol" to which Hewett refers.  They have to be, otherwise you get the Hughes case.  And it takes time.  It's taxpayers' money, after all.

I don’t have a brief to defend Patricia Scott (or to attack Conroy -- the ultimate NBN decision will, I believe, become one of the major economic reforms of this decade). I didn’t deal with Scott much in my former life but when I did I found her decidedly unpleasant.  And there were constant rumours she and Conroy loathed each other.  It was no surprise when, last August, she was shunted off to the Productivity Commission, replaced by Peter Harris, the high-performance whirlwind of activity originally from PM&C and Transport and latterly the Victorian Public Service.

Nevertheless, the idea that Scott deliberately "foisting" on Conroy an "inept and legalistic process" is astonishing and bordering on defamatory.  Scott was simply doing her job, which is to comply with the Commonwealth Procurement Guidelines and ensure disastrous outcomes such as the Hughes case don’t get repeated, especially in high-value, high-profile procurements such as the NBN. Maybe Conroy would have prepared a quick and dirty tender process that could have kept Commonwealth lawyers and Opposition senators busy for the next few years.

And suggesting that PM&C’s Jenny Goddard -- who has since left the Public Service but was filling in for several weeks between Peter Shergold and Terry Moran -- blocked his attempts to fix things because she was Scott’s partner is particularly low.

Responsibility for the problems in the NBN tender process lie up the corridor from Conroy's office, in the PMO. Blaming bureaucrats who can't defend themselves won't change that.

Bernard Keane worked in the the Department of Broadband and its predecessors from 2000-2008.

So what are we to make to today's $30 billion hit to stockmarket values, falling oil, oil and other commodity prices, good sales and profit news from retailer Harvey Norman and airline Virgin Blue and the Reserve Bank's first Monetary Policy Statement of the year.

Well, the first point is that the market gyrations again prove that the headless herd is off, charging around the world as monetary authorities start to take away the punchbowl of low-cost money, the unfortunate weaknesses of the eurozone are now exposed for all to see, and there are the usual jitters in the US about tonight's monthly employment figures.

After being burned badly a month ago when the December figures were worse-than-expected, US investors are fretting, with the added frisson of a bailout of risky investments such as commodities and shares by hedge funds and the like.

As well, the sell down is probably a good thing because it could rid investors (and especially the big US and European banks) of the notion that the good times, and bonuses, are back.

It has nothing to do with the outlook for Australia over the next one-to-two years, as detailed by the RBA this morning. In fact the RBA points out that while the risks to the economy are finely balanced at the moment, it is a touch more worried by the possibility that our recovery might grow more strongly than expected, causing rapid wages growth, higher inflation and bottlenecks.

"Perhaps the most likely scenario in which growth and inflation are both significantly higher than expected is one in which confidence continues to build on the back of a further pick-up in commodity prices and there is a larger increase in investment in the resources sector than currently expected."

And on the downside:

"The most likely scenario in which growth turns out to be much weaker than the central forecast involves a significantly slower recovery in the world economy than currently expected."

A classic example of economic "on the one hand, on the other" forecasting. But the bank sees a better quality growth with inflation up a touch, but still under control and within the central bank's target range of 2-3% over the cycle.

Despite this, there now usual the knee-jerk reaction in some reports was along the lines of "rate rise looms," again.

The RBA lifted its growth and inflation forecasts for the next year to 18 months by a touch and its central forecast is for the economy to grow at about 3¼–3½% in  2010 and 2011. According to the central bank:

Private demand is likely to strengthen through 2010, with growth in the early part of the year being supported by strong public demand. The improvement in the global economy and the increase in commodity prices are expected to support continuing high levels of investment in the resources sector, and dwelling investment is expected to grow strongly.

While overall growth in the economy is forecast to be reasonably strong, the appreciation of the Australian dollar that has taken place as the outlook for the resources sector has improved will restrain activity in a number of industries that are exposed to international competition.

Underlying inflation is expected to continue moderating in year-ended terms to reach a low of a little under 2.5% in the second half of 2010, before rising a little thereafter.

Inflation expectations remain contained and the effects of the significant slowing in wage growth seen last year and the appreciation of the exchange rate have yet to fully work their way through. Notwithstanding this, these current forecasts represent a modest upward revision to those in the November Statement, with recent data suggesting that the economy starts the current upswing in activity with somewhat less spare capacity than earlier thought likely.

Year-ended CPI inflation is expected to pick up over the next couple of quarters, as the temporary factors that have held it down drop out of the calculations. By late 2010, CPI and underlying inflation are expected to be running at similar rates and consistent with the medium-term target.

No mention in any of this or the risks of a housing price breakout, despite the 13.6% rise in prices last year as outlined in Monday's ABS house price index.

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I hate those little memes that political journalists run where they use one politician to describe another, usually with some qualification. Like Kevin Rudd = Tony Blair or Tony Abbott = John Howard.

Except when I use them, when of course they’re far more nuanced and evocative, a feat normally achieved by using a more obscure, and preferably American, politician as comparator.

Nonetheless, Tony Abbott  has been doing his level best to give substance to the John Howard comparison, dipping into the Howard-era lucky dip of greenhouse handouts for his climate change policy, and dog-whistling to the right-wing conspiracy theorists with an unfilmed meeting with Chris Monckton.

As an aside, Abbott is a far more interesting and engaging political figure when he strays out of the Howard shadow – Battlelines, for example, is best when it leaves Howard behind on issues like federalism. Abbott said when he launched that book that the Howard Government’s success was peculiar to its time, a lesson he appears to have either forgotten or changed his mind about.  Abbott has a very changeable mind, and that's not always a bad thing.

There was an interesting observation offered by an anonymous Coalition figure during the early moments of the Hanson phenomenon; to wit “Hanson’s a bigger problem for Beazley than she is for us.”  That turned out to be one the less insightful observations of modern Australian history, as One Nation proceeded to wreak havoc on the conservative vote and deprive the conservatives of office in Queensland, a situation that remains unrectified many years later.

Now of course we have a new version of Hansonism, in climate denialism, and the same observations are being made – that this is a problem for Labor, not the Coalition.  And maybe that’s right.  Or maybe not. We'll see.

For years the consensus has been that Hansonism, or rather Hansonites, One Nation voters or those tempted to vote One Nation, were mishandled by the mainstream media, which insisted on mocking them and their red-headed leader, when in fact it was a cry for help from a demographic group struggling to cope with a decade and a half of economic reform – older blue-collar workers and members of regional communities that had seen economic opportunity swing away from them and their neighbours, off to newer classes and new forms of economic activity.

It wasn’t until after the Tampa and September 11 that these people decided Howard - hitherto associated with aggressive economic reform - really was one of them, and swung back behind him. Even as Pauline Hanson was declaring the Americans might take a long hard look at themselves, her followers, the geriatric army she’d assembled, was turning to Howard – whom they’d derided only a couple of years earlier as “Jackboots Johnny Howard” for his gutsiest and most important reform, the gun control laws.

Howard became their Lord Protector, with a sword of righteousness in one hand and a cricket bat in the other, ready to smite the swarthy who had designs on coming here, either to enjoy or destroy our way of life.

I’ve always thought Hansonism-as-economic-reform-fatigue was a convincing analysis, but I wonder if climate denialism demonstrates a basic flaw in that thesis. The geriatric army is on the march again, and it’s the same crowd as One Nation (and for that matter the same crowd as the monarchists get).  What are they objecting to in the climate change thesis?  It won’t affect them, for the most apart.

Moreover, doing something about climate change won’t affect them either – they’ll all be compensated.  There’s no economic plea for help here. It’s simple, arbitrary crankiness. The crankiness of older, conservative, Anglo-Celtic, lower and middle-income people who grew up in an era when people like them ran things – everything from the corner shop to the Government.  What they’re really angry about is that they’re no longer in control.

The opening of the economy in the ‘80s and ‘90s began the shift of economic control out of their hands, off into international markets and faceless overseas investors, aided and abetted by politicians who insisted that market forces be allowed to hold sway, that “the markets” prevented them from doing what politicians used to do – prop up local industries and provide gold-plated infrastructure regardless of the cost.

Pauline Hanson articulated -- to the extent she could be ever said to have articulated anything -- their fury at this rebalancing of their economic world.

Now, for these people, climate change is the ultimate insult.  The idea that the climate is changing affronts their control-centred world-view.  And it’s entirely international in flavour – all that filthy Chinese carbon coming here – and the solution is even worse – more markets, more international activity. That’s why they simply refuse to accept it, like they refused to accept the immigration might be economically beneficial, or that economic reform had made Australians richer.

There’s no reasoning with such people, because no one can give them what they really want, the sense of control and order they grew up with.  The world has changed. Only the people trying to claim it hasn’t get listened to.

Spare a thought, then, for Warren Truss and the Nationals, who face the same problem that they faced a decade ago all over again – a large and disaffected segment of their base threatening to walk. Like Tim “bucketloads of extinguishment” Fischer, Truss needs to convince these people he’s on their side, or lose his job.  Tony Abbott faces a smaller version of the same problem with his blue-rinse base.

Howard got lucky, and was gifted (ironically) foreign-sourced mechanisms for luring these people back into the Liberal and National column while not upsetting – indeed, attracting – more mainstream voters.  Abbott, who as yet has only a fraction of Howard’s political skills – needs something similar to achieve the same feat.  The geriatric army is on the march – and dragging the Coalition with them.

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After yesterday’s Federal Court decision clearing iiNet of responsibility for copyright infringement by their customers, the Australian Federation Against Copyright theft is considering its next steps.

As well they might. Woven through Justice Dennis Cowdroy’s ruling is a comprehensive slapdown not only of AFACT’s conduct in this case but, I believe, the movie industry’s whole approach of, as tech blog Ars Technica put it, forcing ISPs to play copyright cop.

As Crikey reported, Justice Cowdroy noted "The exact nature of the relationship between the applicants and AFACT is not clear". But that’s just the beginning of his criticism.

"The AFACT notifications [to iiNet of alleged copyright infringement] are not statutory declarations, nor do they have any statutory basis," he said.

"The tone of the letter …  seeks to imply that AFACT is some form of quasi-statutory body whose requests required compliance."

The applicants also appeared to be trying to equate high-volume internet use with copyright infringing behaviour, something Justice Cowdroy described as "one of the more adventurous submissions".

He also noted that AFACT "blurs the distinction between tortuous copyright infringement and criminal acts involving copyright, as seen in its name: Australian Federation Against Copyright Theft."

Justice Cowdroy rejected attacks on iiNet CEO Michael Malone’s credit as a witness, describing his cross-examination as "gruelling and unnecessarily hostile" and "intemperate".

"Merely because the views expressed by Mr Malone did not accord with the interests of the applicants does not render those views 'extreme'," he said. "Such posture tended to convolute these proceedings.

“The applicants appear to premise their submissions on a somewhat binary view of the world whereby failure to do all that is requested and possible to co-operate with copyright owners to stop infringement occurring, constitutes approval of copyright infringement. Such view is not the law. It is possible to be neutral. It is possible to prefer one’s own interests to those of the copyright owners."

There’s more in this handy compilation on Melbourne lawyer Robert Corr’s personal blog.

"Obviously AFACT is disappointed by the decision," their spokesperson told Crikey this morning. "They are still reviewing the judgement and they will respond in due course.

"AFACT’s membership has always been clearly identified on their website," they said.

"The judgement makes clear that infringements were occurring on a large scale, that iiNet were aware of these infringements and did not take any action to stop or deter these infringements."

However, Justice Cowdroy did rule, effectively, that chasing copyright infringers isn’t an ISP’s job. Even if he had found that iiNet had "authorised" the infringing acts of its customers they would still, as a carriage service provider, have "safe harbour" under Division 2AA of Part V of the Copyright Act.

Yesterday AFACT chief executive Neil Gane said in a statement, "We are confident that the Government does not intend a policy outcome where rampant copyright infringement is allowed to continue unaddressed and unabated."

Globally, the movie and music industry has in parallel been pursuing another strategy: persuading governments to introduce "three strikes and you’re off the internet" laws, requiring ISPs to act upon infringement notices such as AFACT’s.

New Zealand has re-introduced  such legislation for the second time. The first was overturned following public outcry over the law’s "guilt by allegation" stance. France has already passed revised law after the first version was ruled unconstitutional. And they’re not alone.

While there have been concerns that three-strikes laws were on the agenda at the secretive Anti-Counterfeiting Trade Agreement (ACTA) negotiations in Mexico, a spokesperson for the Department of Foreign Affairs and Trade has denied any such idea  was on the table.

Nevertheless, in March last year communications minister Senator Stephen Conroy derided iiNet’s defence as something that "belongs in a Yes Minister episode". While Senator Conroy has so far only said that his office would examine the iiNet finding, can it be inferred that he would smile upon a three-strikes law?

Or is that too heady for an election year?

Disclosure: Stilgherrian is a customer of iiNet, as well as Telstra and Virgin Mobile. He has not communicated with iiNet about this case, nor they with him.

There's a lot of things that make the British parliament unique -- Black Rod, the hideous mock-Tudor cladding around the Big Ben bit, the opportunity to go and hear a sub-committee on cloud nanotechnology in a thousand-year-old stone room in the old bit -- and high among them is the place it finds for people such as Gerald Kaufman, a Labour stalwart first elected in the dark days of 1983.

Journalist, comedy writer (for That Was The Week That Was), habitually clad in a white suit, with a tie like a tart's window box, Kaufman has been on his hind legs in the Commons several times in the past two weeks hammering a Manchester firm in his constituency because they sacked two people who were organising industrially.

A Labour loyalist, he's nevertheless the grandchild of Holocaust victims, who's compared Israel to the Nazis and Hamas to the Jewish resistance. He's written The Left: A Symposium and a critical study of the film Meet Me In St Louis. He's ... well you get the picture. We're not talking about Peter Dutton here.

So it is sad to see that the great Kaufman has been brought down by the purchase of that most ancient of temptations, to have the public pay for two grapefruit bowls. The Legg report on expenses rorting by members of all parties, reveals that Sir Gerald paid 240 for the items, and then charged the public for the pleasure, money that he must now pay back.

The items are merely example of the Legg report raising more questions than it answers. I mean which one of many possible things is a grapefruit bowl -- something for grapefruit? Isn't that just a big bowl? Made to look like a grapefuit? Out of grapefruit? Is it some fiendish British particularity, like hunting pink, which is meant to just know is exactly what it says it isn't.

Charging for the grapefruit bowls -- in Australia, the term would be slang for a scrote, which captures the cultural difference nicely --  isn't the most egregious of sins revealed afresh by Legg, but it has become the obsessive object of focus for the media, who sense a combination of boredom and disgust at the whole spectacle on behalf of the public.

After all, when the scandal broke last year -- courtesy of a US freelancer who simply did an FOI request on expenses claims that would have been public record elsewhere -- the Brits were driven to a white-knuckle fury over a series of expenses that seemed to express neatly the underbelly of each party, its shadow self.

Thus the Cameroonian Tories, attempting to make themselves over as hip suburban types, were pinged by various members of the old guard, who charged for their moat cleaning, and an island for their ducks to hide from the foxes.

Meanwhile, labour types like Hazel Blears, the midget ginger Gillard-Pomeranian love child, presenting herself as "wine ov thuh nyormal peeeble eh oop" had been caught in some complex mortgage scam designed to have the public pay off her house, rather than pay for digs in London.

By the time Jacqui Smith, the mildly Dworkinite bluestocking Home Secretary had been got because her husband had ordered p-rn (Raw Meat VI) and Ocean's Twelve (twice!) on government-provided pay-per-view, it was clear that something stranger was going to be needed to re-engage public ennui.

Grapefruit bowls appears to be it, not because the loose whack of the plastic is all too easy to understand, but because it's close to incomprehensible. There is something zen about a grapefruit bowl -- it is an object beyond use, beyond desire, beyond purpose. Its essential absurdity appears to mirror the widespread sense of futility that the expenses scandal represents in British politics.

Though it began as a huge blow to Labour, the revelation of Tory wrongdoing quickly cancelled out any gains they might have made.

Now, with the police about to announce that fraud proceedings may be undertaken against as many as half a dozen MPs and Lords -- chiefly for charging for mortgages that had already been paid off in full, a pure benefits rort -- what continues to surprise is the general glee with which pollies of all parties took to dipping their beak, in an atmosphere that Sir Thomas noted that public servants had been "overly deferential to Mps claims" yah can say that again.

But though the lesson that's been drawn is one of anti-politics, in reality it says two different things about two different parties.

The Tories were sunk in the mire of opposition and a lot of them have a sense of entitlement, that makes petty corruption as common as syph during eights week (I dont know what eights week is). But Labour was ostensibly part of a living movement devoted to real change -- the sort of purpose that tends to minimise such a free-for-aall.

The fact that the party caved from the inside, that the exception became the rule, is a measure not of human venality, but of political collapse. Labour rotted at the middle a long time ago -- it's only know that people notice the furniture sliding through the hole in the floor. Grapefruit bowls and all.

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Questions are being asked as to the undisclosed nature of the relationship between the editor and new design team responsible for the re-launch of the Meat and Livestock publication Chef’s Special. Angry meat producers are yet to be told why an entire issue of the long-established magazine was commissioned and paid for by MLA, yet never printed, before  the appointment of the new agency. And despite the significant additional cost involved in its production, the new look is considered highly unlikely to resonate with either the target market or those whose hard-earned dollars fund it.

Penrith and Lindsay: Karyn Paluzzano looks set to face the Marie Ficarra protege and leader of right wing David Clarke faction in Penrith, councillor Ben Goldfinch at the state election. Although he is much less experienced and unlikely to defeat Paluzzano, Goldfinch with the support of Clarke and Ficarra should have the numbers to win a preselection contest against well known local and former newspaper editor Bernard Bratusa. David Bradbury is considering a move to the safe seat of Chifley to avoid a contest with current Liberal Senator Marise Payne, who, after conducting several fundraising events in 2009, has recently moved to the Lindsay.

NSW Police have banned access to Crikey from its computers. Bureaucrats, police officers and even the media unit are required to fill in a special "request" form for access -- unhelpful with prominent stories running on the force's cosy relationship to tabloid TV.

Terrific find by @Loquacities, providing an opportunity for some bemused self-deprecation down at Crikey ... "Over the past few weeks the Canberra Times newspaper has taken to not running anything other than the first few paragraphs of a story on its website, then finishing off with a [...]"

Re. soil carbon and biochar. You only have to look up biochar on the website of the Grains Research & Development Corporation (the authority on such exploratory research) to see that the jury will be out for a while on the benefits, i.e. the science has yet to be done, so it is at the end of the day yet another agripolitical stunt.

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The Proposition: See famous French masterpieces in Canberra

If you're looking for a lovely way to pass an afternoon in our nation's capital, may I suggest a sojourn to the National Gallery of Australia's "Masterpieces from Paris" exhibition. It's French, it's post-impressionism, it's all from the famed Musee d'Orsay in Paris, it's a bunch of painters with names you recognise -- like Vincent van Gogh and Cezanne -- and even paintings that you will instantly know -- like, van Gogh's Bedroom in Arles. And today, the exhibition is open til 7pm.

I can only assume that it's good, I attempted to go the day after Boxing Day with my 89-year-old grandmother and the line was so long that we decided not to bother waiting all afternoon for tickets. Instead, we went to the special Masterpieces from Paris gift shop and admired the branded wine and champagne, the lacy underwear, quirky jewellery and even some French alphabet flash cards for children. My grandma bought some postcards. Since everything is so branded, it was almost like actually seeing it. Plus, I've been to the Musee d'Orsay in Paris and seen all the original paintings there and can assure you they were wonderful.

Artist's representation of the kind of merchandise for sale

The Musee d'Orsay is currently undergoing renovations until March 2011, so save your pennies for a later trip to Paris and head to Canberra's NGA instead. I'm sure the line will be much shorter now as well.

The details: National Gallery of Australia, 10am-5pm Monday to Sunday, 10am-7pm Friday and Saturday. Runs until April 5. For real night owls, on selected nights in March, the exhibition will be open til 9pm followed by music from the likes of Renee Geyer and Claire Bowditch.

Each day, Crikey will suggest one thing to do for the night ahead, once you've clocked off from work and free time beckons. It might be an opera to put on the mink stole for, theatre to see, a TV show to download or plonk to drink, but if we're suggesting it, we'd like to think it's a certified boredom killer. Got a Daily Proposition of your own? Email boss@crikey.com.au.

The much anticipated appearance of Jon Stewart on The O'Reilly Factor. Watch as the funny man of the "liberal" media crosses swords with Fox's favourite conservative.

View our Video of the Day gallery

According to the spin doctors, governments should never let a crisis go to waste. And of course the best crises are the ones you invent yourself. Done well, they ensure others spend a lot of time worrying about the wrong things.

Of course the latest intergenerational report, like its predecessors, is full of doom and gloom. What with rising health costs, aged care costs and now climate change we will be lucky if we have two sticks to rub together in 2050 unless we all knuckle down, work smarter and vote for the incumbent.

The only problem for the Government, and its predecessors faced the same predicament, is that these reports show nothing of the sort. Consider what the 2010 intergenerational report actually says.

First, Gross Domestic Product is set to rise much faster than was expected in 2007. Indeed, GDP is now expected to be 18 per cent higher in 2050 than we thought it was going to be at the last election.

Second, GDP per person is projected to rise at such a rate that, on average, we will all be 80 per cent better off, per person, than we are today. Of course I suspect that high paid bankers might do a bit better than average and indigenous Australia might somehow miss out again but, collectively, we are set to be a lot richer.

Third, we will be living a lot longer with life expectancy for women tipped to increase from 84 today to over 90 by 2050. Oh no, our public health campaigns and new medicines are actually working!

In an attempt to scare us into agreeing with him the Treasurer warns that “faced with these budget challenges, we essentially have three options”, one of which is to “increase taxes”. But what he doesn’t say is that it is our incomes that will be rising, not tax rates, which will be falling.

That’s right, despite all the hand wringing about the blow outs in the budget the fact is Treasury is explicitly assuming that governments will be cutting tax rates every year for the next 40 years.

Fifth, the rate of petrol tax is going to fall substantially. Because the level of fuel excise is fixed at 37 cents per litre as the price of petrol rises over time the actual tax rate falls. For example, if petrol cost $1.00 per litre then the effective tax rate would be 37 per cent but if it rises to $2.00 per litre the tax rate would fall to around 18 per cent. Given that Treasury projections are based on the assumption that the rate of excise will never increase the steady impact of wage and price rises will mean the tax rate of petrol will steadily dwindle over the next four decades.

So, there you have it, a much bigger economy, an 80 per cent increase in average incomes, longer lives and lower taxes. Are you scared yet? You should be, but not for the reasons outlined in the intergenerational report.

Even if the flawed CPRS was to be passed by the Senate the amount of climate change we are likely to experience in the next 40 years will still impose enormous costs on our infrastructure, health system and emergency services.

A heat wave in Melbourne last year buckled tram lines and killed dozens of people. Sea level rises will not sink too many houses in the coming decades, but higher tides and stronger storm surges are tipped to destroy billions of dollars worth of roads and other infrastructure. Bigger bushfires, and more of them, will require a massive investment in both fire fighting capacity and preventative structures such as community fire bunkers.

The Rudd Government has been waving tens of billions of dollars around to compensate big polluters for the cost of the CPRS, and households get the odd mention, but it has not offered the state governments a single cent to help them with the enormous costs of adapting to climate change. The intergenerational report follows the same path, including detailed assessments of the likely impact of rising pharmaceutical costs but nothing on rising seal level costs.

Despite the hype, the intergenerational report provides clear evidence that Australian Governments, like the apocryphal army generals, are busy fighting the last war. Treasury’s own analysis shows that, on average, we will have lots of money, lots of stuff and be living long healthy lives.

It’s time we started to worry less about the red ink in the budget papers and more about the red ink on the climate maps. The intergenerational report is, like most set pieces in modern politics, simply a distraction from the real story.

Dr Richard Denniss is Executive Director of The Australia Institute, a Canberra-based think tank.

News Corporation’s Australian online news site has given ample column space to unsubstantiated claims by Queensland Liberal Senator Russell Trood that the federal Government is placing national security at risk by publishing a list of more than 3000 individuals and organisations suspected of terrorism.

The Senator’s claims refer to a "Consolidated List" published on the Department of Foreign Affairs and Trade website, which provides details of known international terrorism suspects subject to financial sanctions.

Crikey can reveal that the articles published by News Corp went to print the day before the rest of the Australian media were sent the press release by the Senator, which was used as a source.

The press release, entitled "DFAT Intelligence Blunder", landed in the electronic mailboxes of media organisations yesterday morning, including Crikey’s.

It is worth replicating in full:

Senator Russell Trood

4th February

DFAT Intelligence Blunder

Queensland Senator, Russell Trood, has demanded the Government reveal why it has released detailed information about hundreds of suspected terrorists around the world.

A list of over 3000 individuals and organisations has been posted on the DFAT website revealing passport numbers, social security numbers and residential addresses of hundreds of people, some of whom are UK and EU nationals.

"National security must be a priority for any government, including Australia’s," Senator Trood, the Chair of the Senate Foreign Affairs, Defence and Trade References Committee, said.

"Clearly, the keeping of such a list serves a very important national security function, but surely it should be kept confidential.

"The Government needs to explain why this list has been published and the compelling reasons for revealing such delicate intelligence information.

Six Canadian, 16 British, eight French and 18 US nationals are accompanied by hundreds from Iraq, Tunisia, Egypt, Morocco, Malaysia, Indonesia and Syria on the document which also lists front companies suspected of working with militant organisations including al-Qaeda and al-Shabbab.

In addition to providing personal details and security information, the list offers intimate comments about individuals, such as employment history, and if they have had plastic surgery.

"It is very likely that making this list public is highly dysfunctional in terms of national security," Senator Trood said.

"There appears to be no good reason to have much of this information in the public domain, not least because it is highly possible that the published information could be subverted."

While some individuals and organisations listed have been convicted of involvement in terrorist activity, many appear not to have been charged with any crime.

"Given that some individuals on the list have not seem not to have a criminal record, the Australian Government should be careful about compromising our diplomatic relationships with their countries.

"Keeping such details out of the public forum might be a well-considered and simple start," Senator Trood concluded.

Trood’s sensationalised claims, however, were picked up by AAP and published on the Courier Mail website and News.com.au in identical articles at 7.10pm and 8.10pm February 3 respectively.

The articles utilised several of the quotes provided by Trood in his media release, including the following:

"The Government needs to explain why this list has been published and the compelling reasons for revealing passport numbers, social security numbers and residential addresses of foreign nationals,'' Senator Trood said today.

And

"The Australian Government should be careful about compromising our diplomatic relationships with their countries,'' he said.

"Keeping such details out of the public forum might be a well-considered and simple start.''

It appears, however, that little attempt was made to contact the Department of Foreign Affairs and Trade, who published the list of individuals and organisations in question.

The only reference to the department is made in third paragraph:

"The department says the information has always been available."

When Crikey contacted DFAT, however, substantially more information was provided regarding the publication of this material and the reasons behind it.

According to a DFAT spokesperson, the Consolidated List is published pursuant to:

"Australia’s obligations under a variety of legally binding UN Security Council resolutions to freeze the assests of persons and entities whose actions threaten international peace and security, and to prevent assets being made available to them."

This information in not secret  nor could be called intelligence as it is publicly available from a variety of other sources, said the spokesperson.

"DFAT has been obliged since December 2002 to produce the consolidated list of all persons and entities subject to targeted financial sanctions and to make an electronic version of the list available to the public on the internet," said the spokesperson.

A large proportion of the information in the list is also freely available on websites maintained by committees established under the relevant UNSC resolutions. The remaining information was provided by other governments under the UN Security Council Resolution 1373 on terrorism and can be seen on similar websites in the United States and the United Kingdom.

According to DFAT, publication of this kind of information is "critical to the fair and effective implementation of the UNSC-mandated targeted financial sanctions".

Crikey hopes this can help put Senator Trood’s concerns to rest, and highlight to News Corp the need to find out both sides of a story, no matter what the press release says.

The media’s lack of scepticism is all the more puzzling since the list has long been a useful tool for any journalist covering national security issues.

Send your tips to boss@crikey.com.au or submit them anonymously here.

Bagging a green vote. The fascinating thing about the Tasmanian State election is that almost certainly there will not be a winner. While the Liberal Party looks like easily getting the most primary votes it is unlikely to win the 13 seats it needs to govern in its own right from the five electorates which each return five members. Labor, although likely to record one of its lowest votes in history, is still favoured by the market to continue in office with some kind of support from the Tasmania Greens.

It is bound to be a very unstable arrangement because on forestry matters, the preservation of which is the fundamental issue for the Greens, Labor parliamentarians cannot do a deal without splitting their own party. As for the Liberals they will not even countenance talking with the dreaded Greens.

The best the Liberals can come up with is to attempt to lure a few potential environmentally concerned voters to their side by raising the spectre of government chaos if they do not manage a majority in their own right and by tossing in a few green policies of their own. So it was that yesterday leader Will Hodgman promised plastic bags would be banned within two years if he wins power in March. In a Liberal Tasmania shoppers would be able only to use biodegradable plastic bags, re-usable or paper bags.

Naturally Mr Hodgman dismissed suggestions that the announcement, and another Liberal policy to resurrect the axed Department of Environment, Parks, Heritage and the Arts, was an attempt to grab the green vote.

"This is mainstream, sensible policy," the Hobart Mercury quotes him as saying. "There are all sorts of reasons why this sort of policy is about delivering practical outcomes, protecting our waterways. "The Greens don't have a monopoly on environmental policy."

Protecting the pizza. It won't be long now before the European Union starts attacking your local pizza parlour for using the word Neapolitan to describe its offerings. The pizza producers of Naples this week succeeded in getting their local speciality given the Traditional Speciality Guaranteed label by the EU bureaucrats. The label is designed to stop pesky outsiders from using the word Neapolitan unless their product is vetted by a special commission that will check standards. These include using only San Marzano tomatoes and fresh buffalo mozzarella cheese.

South Australian Labor Shouldn't be Too Worried. SA Premier Mike Rann should not be too worried that the Adelaide Advertiser's latest opinion p0ll shows the election race getting closer. The biggest problem for a long term government often is the public perception that it will win easily. The Tiser poll now has the gap on a two party preferred basis closing from 14 points to four -- 52 Labor to 48 Liberal.

I am not aware of the track record of these polls, which have a relatively small sample size of 539 voters, but that there has been some narrowing of the gap was suggested by the speed with which Labor moved to defuse the controversy over internet blogging.

A little warning from Treasury. It is unusual for the Paris-based OECD to make a comment about one of its member countries without having the view vetted first by the member's own officials. Thus we can perhaps conclude that there is within the Treasury in Canberra a growing concern about Labor's national broadband roll out. The Australian this morning had the head of the Organisation for Economic Co-operation and Development's Australia desk, Claude Giorno, calling on the Rudd government to apply more rigorous cost-benefit analysis to its infrastructure spending, including the $43 billion broadband network. The paper quoted Mr Giorno saying "questions need to be answered" about the network because of the amount of spending involved and the apparent lack of any cost-benefit analysis.

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The story about violence and racism against Indian students in Melbourne will not die. The lead story in the Indian magazine Outlook accusing Australians of racism has been receiving lots of coverage here, including a live interview with Outlook editor Venod Mehta on ABC Lateline on Monday night. As much as one has a slight distaste in one’s mouth, old left-baiting Gerard Henderson in Tuesday’s SMH may be broadly correct that it is arguable whether racism is the principal factor behind the attacks on foreign students.

In any case these discussions appear to be a distraction from the real issue, which is, at bottom, the great Australian complacency allied with political opportunism to offset the conservative right’s peculiar reluctance to invest in education (and I’m looking at you, Gerard). For the Howard Government it was a win-win policy to encourage large numbers of fee-paying foreign students to Australian institutions. Not only was it a cheap "export" industry requiring very little effort, not to mention money, from the government, they could simultaneously reduce federal funds to universities in direct proportion to their income from this new source. The universities were coerced and essentially blackmailed into maximising their revenues from foreign students.

This predictably led to disputes over falling academic standards even in the top tier of institutes and dubious credentials in the bottom tier of private technical colleges, including in some cases outright fraudulent promises of easy Australian work permits. It also led to escalating fees to the point today where it is a fine point as to whether Australia presents a good deal when compared with the other English language countries, especially the US, Canada (read Greg Barnes) and the UK.

But in the short-termist view of our political class, the benefit to our perpetual trade deficit has been reported to be up to $12.5 billion annually with about half of that attributable to educational fees, closely paralleling the decline in direct federal funding. There is no accident that in the Howard epoch Australian universities dropped down the international ratings but, of course, expert spin could be applied to claim ever-increasing student numbers and increasing university budgets.

If Australian governments want to consider foreign students as a business then, like any business, it needs to make investments for future sustainability instead of its apparent expectation of a perpetual free-lunch or magic pudding. If the income figures are correct, then Australia may have benefited by about $100 billion over the past decade, yet the Australian authorities are so miserabilist they will not even allow student concessions on public transport, as discussed by Greg Foyster in Crikey.

By better planning and sustained funding of our universities, treating the extra student fee income as additional rather than as a substitute, the educational sector, especially the critical tertiary component, could have grown substantially and partially caught up with our international peers. Anyone with experience in the leading English language countries is rendered gob-smacked by the huge resources evident in their tertiary institutions -- and not just Harvard, Stanford, Oxford or Cambridge -- compared to ours. Looking at the funding differentials, it is astounding that Australian universities manage as well as they do. Even in the once vibrant student union supported sports, performing arts and politics a regressively minded Howard government has managed to cripple that, too.

In the Asia-Pacific educational market that Australia must appeal to, there were indeed huge opportunities. In addition to fee income -- and the early strategy that it should be perceived as much better value than the expensive American alternative -- it should also have been a great cultural opportunity for all concerned, repaying in trade, business, tourism, the arts and diplomacy for decades into the future. But what goes around comes around and now we have the deputy Prime Minister eating crow, probably to no avail, in the largest English-speaking country in the world. No doubt the Chinese are taking note and all the other developed Asian countries, Japan, Korea, Taiwan, Hong Kong, Malaysia and the world’s largest Islamic country and our closest neighbour, Indonesia. The likely growth hemisphere and future of the world for this century.

In addition to the obvious -- much better regulation of the academic standards, accreditation and general student support services -- some creative thinking could have been applied to the accommodation issue that exists almost everywhere in the developed world but has grown in difficulty due to the great Australian self-inflicted housing affordability crisis.

An interesting case is Paris, which had long-standing ambitions to be a leader in educational "exports" to the world -- "mission to civilise" and all that. Early in the 20th century when the problems of availability and affordability of appropriate accommodation were becoming serious, the state, helped by a rich benefactor, used part of the redundant old-walled defences at the southern limit of the city to create the Cite Universitaire. Conceived as a residential campus to provide affordable digs specifically for foreign students and provincial French enrolled in the plethora of universities spread around the city, it was modelled on the garden city and also partly the Oxford/Cambridge college system.

The idea was that each country would design and build a residential hall for its students although in the end the French had to heavily subsidise the scheme. Ideally the buildings would be in the style of their country and use some of their best star architects. Most of the campus was built in the years 1923-1939, with another burst after the war. As a consequence the campus is a rather curious modernista museum -- the brutalist aesthetic* is not everyone’s favourite style but it includes several seminal masterpieces, including two by Le Corbusier -- but typical of what makes this true world city an architectural wonderland.

It was also conceived with ideals of the mixing of nations and fostering of international relations. Residency was mandatory for first-year students and was intended to provide -- in addition to a lower cost entree into an expensive city -- orientation, collegiality and peer-group support for this often very disorienting and stressful period for young foreigners. Such a facility in Melbourne would go some way to, as Greg Barnes said last September in Crikey: "Attracting students to Australia’s universities requires convincing them, and their parents, that they will be secure and not face the prospect of being racially abused ..."

Just imagine how fabulous such a campus in Australia could be, consisting of a dozen or more of the rich Asian styles potentially reflecting 5000 years of history and associated cultures. A campus that would promote integration, provide social supports and reasonable accommodation -- at least for the first difficult year -- compared to the over-crowded near-squalor that some students now live in. But that would require that our politicians thought their policies through a few decades into the future and showed a bit of imagination.

Michael R. James is an Australian research scientist, writer, and alumnus of Cite Universitaire, Paris.

* Speaking of brutalist aesthetic, Australia does have an example of a modernista palace in Paris, not a student’s palace at the Cite U. but just next to the Eiffel Tower. It is our embassy designed by Harry Seidler, Marcel Breuer and Pier Luigi Nervi, commissioned by Gough Whitlam (who later became the occupant of the opulent penthouse when he was UNESCO ambassador) and our most expensive embassy in the world. It is easy to adopt the "outraged taxpayer" stance but if you visit there, and especially if you score an invite to cocktails to the penthouse, it kinda swells the beating Aussie heart.

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Peter Allen and Barry Manilow have a lot to answer for. Copacabana's long curved beach, with its nondescript high-rise hotels and apartments might look the goods in a touched-up post card or retro MTV clip, but on the ground, the tepid seawater is not that clean, nor is the sand, you trip over potholes in the pavement and I haven’t seen a wave all week. Add to that the fact that no "baby has smiled at me", and they call this paradise? Heavily armed tourist police patrol the beach, supposedly for reasons of security.

The wider city, however, is extraordinary. The sheer physicality of its topography, with its high-density living, its frantic pulsing samba beats, its mega energy, its kamikaze bus drivers, its smouldering heat, its tropical downpours, its blizzardly cold beers, its poseurs and pretenders constantly parading along promenades, all make it feel like you’re living in a permanent fast lane with no drop-off zone in sight.

In one of the many little kiosks along the beach, a barman took a green coconut and held it upright in the palm of his hand and with a very sharp, shiny machete he lashed down at the top of the coconut and sliced off a section, then he did it again but from a different angle, taking another wedge off the top to make an opening, and if the machete slipped down the side of the coconut, his hand would have been separated from his wrist, but this didn’t happen. After that, he added some ice cubes and a straw and charged three real (about $2) for a coco drink. It was not very refreshing, and so I only ordered Caipirinhas after that (smashed limes, sugar syrup and cane liquor, shaken over ice) because they are extremely refreshing in the heat, but more than four can make you a bit tiddly, which is why it’s wise to have some acaraje (spicy prawn croquettes) as well, for reasons of sobriety.

In the favela slums, which account for more than 20% of Rio's official metropolitan population of about 12 million, drug barons and their armies keep the peace (and everything else) because the police don’t go there much, unless a gang war breaks out, which is usually for control of territory.

The last war was in 2004 and it lasted 40 days. Only marijuana and cocaine is traded; there is little or no heroin at all. The drug boss of the largest slum (120,000-plus residents) has a nickname that translates from the Portuguese to baby in English; this, according to Simone, the guide of the excellent favela tour I took. Apparently Baby moves house every week or so, for reasons of security.

Read the full story on our website

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The famed Edinburgh military tattoo is currently in Australia -- and this Saturday night, more than 1,500 performers from around the world are due to take part over a four-day run at the Sydney Football stadium. It's only the third time in the Tattoo's history that this breathtaking event has been performed outside of Edinburgh. Today The Scotsman quotes Major General Euan Loudon, the tattoo's producer:

"Australia has always been good to the Tattoo. I can think of no better way of kicking off our diamond jubilee year in 2010 than by returning to the city and country which opened their hearts to us so warmly when we visited last time round."

And in amongst the feverish preparation, gruelling rehearsals and endless publicity merry-go-round, one man has been tweeting the story behind the story of the Tattoo. A little jaded, a little weary, this band member's musings, including labelling the squadron leader "tone deaf" have been entertaining us, oh, for days now:

-- I am now part of the problem. I just saw an unattended set of bagpipes and didn't feed them into a combine harvester.

-- Elderly gent: Were you on the HMAS Penguin in 1957? 25 y/o Navy musician: No Elderly gent: You look like you've had a hard life.

-- We've arrived 2 1/2 hrs before the gig and the are PEOPLE ALREADY LINING UP! They'll be pissed when they find out it's not Rose Tattoo.

-- First actual performance this evening. Tone Deaf has waxed his 'tache and is looking his best. Which isn't saying much.

-- Tone deaf Sqn Leader seems fazed on the big stage, forgetting where Waltzing Matilda finishes. No doubt due to it being an unfamiliar tune.

We approached the underground member of the Tattoo to give us a sense of the anticipation surrounding tomorrow's night performance.

Crikey proudly presents, @edintattoo2010:

The Edinburgh Military Tattoo. It's the only show in town with a cast bigger than Beijing, a suspected tone deaf musical director, and firearms. You adore it. We abhor it. Perhaps the only other affair where the level of enjoyment between audience member and performer is so vastly different, is a circus animal act.

But even they get drugs before being mistreated. For the Australian contingent’s 5 ½ minutes of marching glory, there’s been 13 hours of solid rehearsal. 13 hours. Military efficiency.

If anything goes awry, it won’t so much be for lack of rehearsal, as lack of spirit. But that’s just the Oz display. The entire grueling two hour plus show has had no less than eight complete rehearsal runs, adhering to the ancient military maxim: “Leave nothing for the gig.”

Also, throughout the daily grind, complete strangers seem compelled to yell at you. If you’re in a uniform, you’re apparently fair game. I suggest we all need a gentle briefing from Sergeant Manners.

And then there’s the bagpipes. Dear God, the bagpipes. Just one of them is about as pleasant as a dentist’s drill but approximately 271 times louder. They have neither predators nor a conscience. Who ever invented them should be buried next to J. Robert Oppenheimer. You get the idea. It’s an horrendous affair.

But enough with the negativity. As Crikey strives to be ‘fair and balanced,’ it's time for some edifying reportage.

A little bit on the cast:

-- Massed pipe bands: see previous bagpipe reference and multiply it to the power of nausea.

-- ‘Top Secret’ Drum Corps: The Swiss should think a little more about who they employ to carry these top secret messages. A precision drum corps will almost always give the game away.

-- Chinese People’s Liberation Army: Visually stunning, with a virtuosic trombone rendition of Flight of the Bumblebee. You will not hear that everyday.

-- Norwegian Guard and Drill Team: Scandinavian Jarheads. Remarkably hygienic.

-- USA Fifes and Drums: Very high-pitched instruments. If playing their CDs, don’t be surprised to find your dog gnawing off his own leg.

-- Massed British Military Bands: Conservative marching display but a wall of sound so formidable, it could knock the genitals off a bronze statue.

-- Australian Military Massed Bands: Token gesture by the organisers. Finale – Slightly longer than Wagner’s Ring Cycle. Trite.

The new castle replica is a 1:1 scale model of the original in Scotland. Quite impressive and intimidating until you get closer to it and discover that it could be destroyed by butting your cigarette out on it - as probably happened to the previous one.

They've labelled it "Celebrating 60 years of Valour, Mateship, Glory" for reasons of which I'm unsure. In my camp at least, there's very little celebration, referred glory, valour. Mateship however, comes in droves. Misery loves company.

One upside to the bagpipe plague is the associated garment. The kilt. The mystique around its contents is astonishing. You won't see a kilt wearer demonstrating the limbo, or Cossack dancing, oh no. They just tease you, aided by the occasional revealing gust, and strategic placement of the sporran.

The event has huge appeal, so drink it all in, but when you’re singing Auld Lang Syne into your warm pint of Bishop’s Finger, all I ask is you spare us a thought. Remember the little people.

For those following my work on Twitter and would like to identify me on the ground, I will be the one in a military uniform, carrying either a musical instrument or a weapon. Or a horse.

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The immediate reaction by the Hollywood film companies to yesterday’s Federal Court ruling that ISP iiNet is not liable for its customers downloading pirated films appears to indicate that, like the music recording industry, the film industry has not woken up to the fact that their business model is no longer valid.

Instead, threatening revenge against individuals who download pirated copies, and seeking legislative protection, film studios should take a look at themselves and wonder what is it about the way they go about their business that has spawned free or cheaper product.

The music recording industry in fact provides the film studios and their advisers with a neat case study in how not to react to copyright infringements.

At the turn of the century, the music recording industry was dying.  One of the major reasons for this was that it had indulged its recording artists a little too much, the royalties structure was expensive, and the marketing of CDs had driven prices up to about $30.  Along came file sharing and download sites, which enabled consumers to choose songs and works they liked without having to buy a whole CD.  And it was cheap.  You could download say 10 songs by one artist for about half the price of a CD.

The music companies didn’t like this one little bit.  They reacted hamfistedly by, in the case of Sony, for example, charging a whopping $3.50 a song for a "legal download", and by pursuing penniless university students.  They would have these hapless individuals sued for copyright breaches and urge the courts to impose swinging fines, costs and damages on 21-year-olds who were living in a garage at the back of mum's and dad's.

But still CD sales continued to decline.  In the US, new media expert Kirk Biglione has observed that despite the music recording industry pursuing more than 17, 000 cases through the courts, and another 4000 through legal letters, CD sales almost halved from 2000 to 2007.

And as Biglione also says, the one download service that does work is Apple’s iTunes because it listens to the consumer.  And because it took control of the product the music industry was selling.  It made music accessible and affordable to the consumer because it did not have the big overheads of the recording companies.

In the world of CDs the iTunes equivalent is Naxos, the classical music label.  It pays artists a flat fee, refuses to indulge their expensive lifestyles and makes product available at a third of the price of the traditional companies.

The lesson for the film studios then is this. Having lost an expensive case against iiNet, do some soul searching and change the way you deliver product to consumers.  There is a reason pirated copies of films and TV programs exist -- there is consumer demand for it, just as there was for music.

Instead of suing the average Joe who electronically transfers 10 pirated copies of Avatar to his friends,  or running to governments seeking industry protection through the mechanism of harsh penalties for those who facilitate pirated film distribution, focus on what you are doing wrong.

Stop paying actors and others in the industry such gargantuan amounts of money.   Reduce input costs such as labour and equipment and reflect the savings in offering cheaper product to consumers that can compete with pirated material.  And instead of raving about the evils of piracy to consumers and behaving like corporate bullies, acknowledge that the consumer is right.

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And this week’s Wankley goes to ...

The SMH, the Daily Tele and the Oz for their fawning coverage of the amazing Packer "male heir".

With all the attention little Jackson Lloyd received, you’d think Indigo, Jamie and Erica’s daughter and eldest child, didn’t exist.

Poor Indigo.

"Australia's richest baby has come into the world, with the male heir to James Packer's $4.5 billion family fortune born early on Monday evening," heralded the Daily Tele.

Although to be fair, the article did give some mention to the "feminists" who had some sort of problem with the overwhelming media focus on the baby boy broadcaster and family friend Alan Jones has fondly dubbed the "lump".

SMH columnist Andrew Hornery also kindly pointed out that Jackson would probably over-shadow his big sister;

The Packer dynasty is a patriarchal one. James took the reins of the family's multibillion-dollar empire following the death of his father, Kerry, four years ago. Kerry had taken over from his father, Sir Frank Packer.

The baby is now set to take over from James.

However, a special mention should go to the Oz’s Strewth, who was terribly affronted by all the media attention being paid to baby Jackson.

Thing is, this indignation was not caused by the focus on the baby boy being dubbed the "male heir", but by the fact that he’s too small to be worried about his forthcoming fortune.  Strewth wrote in response to Hornery’s article;

He's got breast-latching tuition, circumcision, reflex checking and heel pricking ahead of him before he can even start thinking about casinos, yachts and media empires.

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As News Ltd boasts unironically of its "new era of profitability" for its clunky websites, The Guardian has just upped the pace, with the launch of its new "zeitgeist" (OK, they're dorks) interface -- a simple re-arrangement of the news site into a grid. Crude and basic at the moment, it nevertheless marks the moment at which a newspaper website goes decisively beyond the pseudo-paper form of most websites as they exist.

It's only an option at the moment, but eventually something like zeitgeist will replace the newspaper website form altogether -- with the old "classic" view retained as an option for a couple of years before being switched off altogether.

Indeed it's amazing it hasn't happened earlier. Fifteen years ago, when newspapers launched their websites, they aspired to do no more than replicate the broadsheet layout onscreen. But broadsheet layout is suited to, well, broadsheets -- the crazy paving style of newspaper layout made possible by offset printing creating a maximum exposure of as many stories as possible in a single sweep of the eye. It was always ungainly for screens, and with the rise of the iPhone as a reading device obliged news sites to resort to a simple list form.

Zeitgeist is clearly designed to maximise the opportunity to "scope" stories with a single glance -- especially with the rise of "touch and tap" screens.

Presumably the zeitgeist form will develope rapidly -- in five years the grid will look as crude as the pre-Google search engines look now. The next stage is presumably a sort of pseudo 3-D form in which dozens of stories hang suspended in a space one glides through by various types of touch.

For poor old Rupe and his struggle with the e-nerds, it's all a terrible nightmare. He wants to live to a 100, but he wants to keep publishing newspapers like wot they used to be done. Yet his hold on the global market is being hurt by the sclerotic progress of his online development. Whether a paywall is put up or not, News titles look terrible on the web and the old cash cows -- his UK and US tabloids -- have derisory readerships online. In the past decade, The Guardian has leapt from having the second lowest circulation of all UK dailies, to being the de facto UK news website. The only fly in the ointment is that they're losing 60 million a year doing it, a figure beyond even the broad resources of the Scott Trust, which has always underwritten the losses of the paper Grauniad.

Zeitgeist in its current form is no oil painting either -- more a Warhol screenprint -- but eventually you'll click onto it, and never click back to the old version. It is clear that not only is media change accelerating, but, now, the acceleration is accelerating. True. I read it in zeitgeist, bottom left in orange.

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Malcolm Turnbull jumps back into the list mainly on the back of media reviews of what happened in 2009 as the 2010 political year starts, plus a little bit of pretend shock and horror that he doesn’t think the new Opposition climate plan is all that flash. Who’d a thunk that?

Tony Abbott up around 75% of Kevin Rudd’s coverage in what most media would usually call the honeymoon period, although they’ve managed to hold that cliche down to a dull roar so far. Will 12 months or so become the standard optimum time to be leader before an election? Worked for Rudd and Abbott and Keneally seem to be going well ... so far.

Steve Fielding has managed to get himself up into the first real top 20 of the year with his Christmas Island visit, it's going to be tough to maintain that level of coverage in a very election-heavy year though.

Talkback top five:

Very similar list to last week, top three the same, with Abbott far closer to Rudd in mentions than Turnbull usually was and the Treasurer and Queensland Premier taking the place of the NSW and Victorian premiers. That seven looks like being the core list for 2010.

Comparison:

The royal fascination continues through a polo temper-tantrum and some white man’s overbite dancing. Well on telly it continues, other media seem to have managed to remain strong in the face of such fascinating developments.

There’s more on the Media Monitors website.

News won't ruin their Nine pals: Over at News Limited, online editors appear to be lacking some ticker when it comes to exposing their close friends at Channel Nine. On Wednesday afternoon, just hours after Crikey revealed the now notorious fake ACA hoon story, Perth Now, the Daily Telegraph, the Herald Sun and The Australian all posted a follow-up under the headline "A Current Affair hoon crusade 'a fake'".

An hour later, they were gone. Could News have been leaned on by Nine heavies anxious at a looming wave of bad online PR?  News.com.au editor David Higgins told Crikey he was not responsible for individual sites' content and couldn't comment. Strangely, the Courier Mail and the News-owned Carsguide stories appear to have survived the cull. -- Andrew Crook

We have the answer but do we know the question? With the rest of the media dutifully following up Crikey's tip yesterday that Central Coast academic and former state election candidate Deborah O'Neill would be taking on Belinda Neal for preselection in Robertson, Daily Telegraph readers were already laying the groundwork for an internal revolt. Or were they? Check out the following series of screen grabs from yesterday's Tele story which included a yes/no poll asking the question "Should Belinda Neal stand?" Problem being, that hours later the question had mysteriously changed to the somewhat different "Should Belinda Neal stand down?".

Late this morning votes were running at 4499 yeses to 1096 noes. But in which direction, nobody knows. -- Andrew Crook

Win a holiday (oh, and a million dollars). It appears the Australian Financial Review has gone very cold on its "win a million dollars" promotion following Crikey's story that exposed the real odds of walking away with the cash. For those who missed it, the Fin splashed last week with a promotion promising new or renewing subscribers the chance to become a "millionaire". But the fine print revealed that the winner, in addition to being drawn out of a hat, also had to negotiate a secret room containing 100 envelopes -- only one of which contained the moulah. The other 99 contained a much-less-alluring Maldives Holiday. The odds of grabbing the $1 million assuming 1000 subscribers take up the offer? 100,000:1. Guess which scenario the Fin decided to focus on this week?

-- Andrew Crook

The Oz: small picture on News Corp 2Q Yesterday The Oz crowed that the 2nd financial quarter showed the news biz to be a lucrative feather in News Corp’s cap. In the story, entitled 'The News is good for papers' profits' , The Oz reported: "... the WSJ recorded a 5% rise in advertising revenue for its print edition and 17% growth for its digital network."

However, even the WSJ concedes that there may be a knee-jerk reaction in the US ad market: "Publishing executives attribute the recent influx of ad money in part to marketers hurrying to spend the remainder of their annual ad budgets after doling out those funds sparingly earlier in the year amid fears of an economic collapse."

Although the Oz does acknowledge that News Corp’s British ad revenues are "flat", it fails to mention that its "circulation revenues declined 5%", as outlined in the December 31 News Corp report. And while the Oz’s citation of News’s "30 per cent growth in earnings before interest and tax" seems impressive, it is somewhat diminished by, as MediaMemo paraphrasing Rupe puts it, "a $2B debt repayment due next year, so pile isn’t as big as it looks." -- Crikey intern Tristan Price

Who is editing Street Talk in today's AFR?

-- Anonymous Crikey reader

There's an "Only in the NT News" moment every day. Today's doesn't involve a croc or a UFO though. The paper recently started a new feature called The Fixer, which takes various authorities to task, naming and shaming them, over things that need fixing. They've had a great success rate since launching it. Last week they got a lift -- that had been broken for three years in a housing commission block -- fixed the day after they named and shamed the department and person responsible.

Yesterday, the editor has put his own name, phone number and private email in the paper, naming and shaming himself over the fact that readers have complained that the paper's TV Guide is out of date. Can you imagine any other editor in the country making all their private contacts available to Joe Public? Not bloody likely.

This is the same bloke who wrote his own court report when he got done for DUI last year. Just another reason to love the NT News. -- Anonymous Crikey reader

YouTube not the way of the future for Sky. Sky News Australia has dropped its two-year experiment with uploading key content to YouTube in favour of carrying video on its own site, which is shortly to be unveiled. -- mUmBRELLA

'Demon Sheep' the new political currency "Chuck DeVore is looking to get as much mileage as possible out of fellow GOP Senate candidate Carly Fiorina's bizarre "demon sheep" ad, the one that accuses Tom Campbell of being a FCINO. He's set up www.demonsheep.org in the name of the "Society for the Eradication of Demon Sheep From Our Political Discourse," where he vows his campaign will "forever be a demon-sheep-free zone" -- though that didn't stop him from posting an equally bizarre demon sheep "poster" on the site.” -- newser

Xinjiang’s iSolation “Following the ethnic unrest in Xinjiang in July 2009, internet access in the province has been severely restricted -- far more than in other parts of China. The situation is gradually improving, but an American blogger living in the area says many sites are still strictly censored.” -- BBC

Google best browser, a win for surfers "I like to think of myself as the Dick Cheney of the Browser Wars -- an unyielding proponent of greater and greater hostilities between the developers working on Chrome, Firefox, Safari, Internet Explorer, and Opera. As all these programmers compete with one another to make faster, more stable, and more intuitive browsers, we Web surfers keep winning.” -- Slate

FB Doppelganger week: HuffPo has published a very po-faced interview with the "creator" of Facebook's Doppelganger week. What? There's a creator?:

ALEX: Bob, let's jump right in-- what is "Doppelganger Week"?

BOB: It's the week when everyone on Facebook replaces their profile photo with a celebrity that looks like them.

ALEX: So fun. And you came up with this?

BOB: Yeah. It all started when the guys at work started teasing me that I look like Tom Selleck. They're like, "Hey, Tom Selleck, what are you doing?" Or, "Yo, Tom Selleck, we're talking to you."

ALEX: Pretty on the nose, huh?

BOB: I.T. is a notoriously ruthless department.

Gee Bob, comedy genius, there. As one Facebook commentor put it:

"INSERT NAME HERE finds that 'doppelganger week' is gathering in pathos as it reveals itself to actually be 'What I would look like if I was significantly better looking' week.

The winners: Seven News was tops with 1.269 million viewers, with Today Tonight second with 1.225 million. So You Think You Can Dance Australia at 8.30pm on Ten was next with 1.154 million and Nine News was 4th with 1.070 million. Home And Away won 7pm with 1.056 million and A Current Affair averaged 1.053 million in 6th spot. Two And A Half Men at 7pm averaged 916,000 people. The Biggest Loser at 7.30pm on Ten, 874,000 and the lightweight 20 to 1 (AO) averaged 864,000 for Nine at 8.30pm. Mighty Ships on Seven at 7.30pm faded to average 844,000. It was programming filler.

The Losers: Medium on Ten at 10pm, 606,000, but it did beat CSI New York on Nine at 9.30pm, 592,000 and 10.30pm, 477,000. There's a feeling Nine and Seven are going through the motions until after the Winter Games finish at the end of the month.

News & CA: Seven News and Today Tonight again won nationally and in every market but Melbourne, a change from the night before when Seven lost Sydney to the News and ACA. The 7pm ABC News averaged 920,000 nationally, the 7.30 Report, 616,000. Lateline, 219,000, Lateline Business, 126,000. Ten News 797,000, the late News/Sports Tonight, 266,000. 6.30pm SBS News, 191,000, 110,000 for the late edition. 7am Sunrise, 360,000, 7am Today, 319,000.

The Stats: Seven won 6pm to midnight All People with a combined overnight share of 28.5% from Nine with 27.1%, Ten with 25.5%, the ABC with 14.0% and SBS was on 4.9%. Nine won Sydney and Melbourne, Seven won Brisbane, Adelaide and Perth. Seven leads the week with a combined overnight share of 29.7% from 23.7% for Nine.

With pay TV included, free-to-air TV had an 82.4% share for 11 channels, the 100-plus pay TV channels shared 17.6%. Seven had 22.7%, Nine, 21.6%, Ten 20.3%, Pay TV, 17.6%, the ABC, 11.2%, SBS, 3,9%.

In regional areas, WIN/NBN won with a combined overnight share of 30.3%, with Prime/7Qld on 27.6%, Southern Cross (Ten), with 21.1%, the ABC 15.6% and SBS, 5.5%.

Digitally: Nine's GO won with 3.0% (Nine's main channel, 24.1%), from 7TWO with 2.9% (25.6% for Seven's main channel). ABC2 was on 1.3% (ABC3, 0.4%, ABC1, 12.5%. Ten's ONE was on 1.4% (Ten's main channel, 24.1%, equal to Nine). SBS TWO was on 0.4%, SBS One was on 4.4% (And fighting with Ten over the use of ONE, silly people). Nine's GO leads the week with 3.3%, with 7Two on 2.5%. Seven's main channel, 29.7%, Nine, 27.0%.

Glenn Dyer's comments: Seven won last night, but again was very weak in Sydney. Overall it was a close night (Ten was far more competitive than earlier in the week). But the offerings were mostly weak. Ten says it won 6pm to 10.30pm prime time in 16 to 39s, 18 to 49s and 25 to 54s.

Apart from SYTYCDA at 8.30pm, Getaway was the highlight of the post-7.30pm night for viewers. Although TBL was a bit better than Wednesday and Tuesday nights. Seven's Bones ran for two hours and averaged 853,000. Viewers are not prepared to settle down and play favourites, yet.

TONIGHT: Cricket. Silent Witness is back with more rubbish on the ABC at 8.30pm. Seven has a Touch of Frost at 8.30pm, Ten has TBL, plus a repeat of NCIS. Nine has a movie after the cricket.

TOMORROW NIGHT: Really, really dull. Seven has another Touch of Frost at 8.30pm. Ten has two Star Wars movies and the ABC had The Bill and Taggart. Go out.

SUNDAY: More cricket on Nine, Australia versus the West Indies. Ten has TBL, Talkin' 'Bout Your Generation returns at 7.30pm and a new series, The Good Wife starts at 8.30pm. The last two are worth a glimpse. Seven has Airways at 8pm, but the big tear jerker of the night is the doco on the conjoined twins separated in Melbourne last year: Trishna and Krishna at 6.30pm. The ABC has a doco on the 2009 Victorian bushfires that is also worth a look at 8.30pm.

Source: OzTAM, TV Networks reports.

Brussels, we have a problem. The eurozone is on the nose as investors, especially hedge funds, are in a frenzy over what might become the next sovereign debt disaster.

Greece, of course, is top of pops, but overnight Spanish shares suffered their worst fall in 15 months , Portugal's bonds dropped sharply and the euro fell to its lowest level against the greenback since last May and the Aussie dollar fell by around 2 US cents. And other markets tanked by 2% or more. There's an old fashion market pack hunt underway, just as there was in the wake of Lehman's failure that saw some of the world's biggest banks (Goldman Sachs, Morgan Stanley) protected from failure by the American Government, UK, German and other Governments.

The European Central Bank left interest rates at 1% overnight, and President Jean-Claude Trichet tried his best to sell the line that the region shouldn't be punished for Greece's decade of statistical fudging and budgetary deception. He was talking but no-one was listening -- they were too busy shorting Greece, Spain and Portugal, and eying the UK and US. There's easy money to be made in euro-pessimism at the moment .

Short everything? Even gold, the perceived store of value in uncertain times, plunged a nasty 4% and more, oil was down 5%, copper, 4%. The smarty pants speculators are heading for the sidelines and parking their money in US dollars. Even booming sugar (in genuine short supply) fell 3.3% as punters took their profits and ran. Wall Street fell 2.6%, ending below 10,000 points for the first time since last November. 2010 has opened miserably.

The problem? Spain’s public debt will rise to 74% of GDP by 2011 from 54% in 2009, Greece’s debt will increase to 135% of GDP from 113%, and Portugal’s will increase to 91% from 77%, according to EU estimates. And then there are the real "whales" -- Japan (closing in on 200%), the UK, 71% and rising and the US, 83% and also rising. Moody's warned this week that the US AAA rating was in real danger if the country couldn't get more growth from the economy in the next few years to lift revenues and cut the deficit and debt. For a insight, read this piece from The Financial Times about the background to this emerging battle between hedge funds and speculators -- many of whom are American -- and the European financial and political establishments.

Go long Australia? The AMP's chief economist, Dr Shane Oliver has provided this helpful table covering the major budget and sovereign debtors of the world. As you can see, Australia is best placed of the major economies, a fact that may interest Messrs Abbott, Joyce and Hockey, who seem to find it politically inconvenient that debt and deficits are not a concern in Australia:

Another latte, please. Yesterday's retail sales figures for December contained the usual headline material -- sales down 0.7% -- but as usual there's a wealth of info buried underneath. For instance: the performances of cafes and other eateries, with original sales jumping 16.8%, or more than $400 million, from December 2008 to $2.896 billion in December 2009. Apart from a near half a billion dollar rise in food retailing sales, cafes and other eateries was the best performing retail sector. There was a 2.5% rise in December alone in spending in cafes, restaurants and takeaway outlets. Other significant increases in the December quarter, seasonally adjusted, were household good retailing (2.3%), clothing, footwear and other personal accessory retailing (1.2%) , department stores (0.6%) and food retailing (0.3%). That's an awful lot of lattes, pastries and BLT's, not to mention Big Macs, Whoppers and fish and chips.

So ignore the 0.7% fall in December's retail sales. Instead focus on the bigger picture. Retailing is solid, not booming like it was in 2006-07. Look at the original sales figures for guidance (not seasonally adjusted ones) Original sales figures are too raw to be used in stats because they can distort, that's why seasonal adjustment is used. The difference between the original and seasonally adjusted figures is enormous. December 2009 saw original retail sales estimated at $25.94 billion, compared to the seasonally adjusted figure of $19.9 billion. In other words Christmas was worth, according to the ABS, an estimated $6 billion to the retailer sector as a whole. Comparing spending last December with spending in December, 2008, we find there was a $760 million rise, or around 3% (around $400 million seasonally adjusted). That extra $760 million will be sprinkled onto the profit reports of retailers large and small, starting with the current market darling, JB Hi-Fi early next week.

Oh, What a Recall! Ever the optimist, Toyota reckons it will make a profit in the Japanese financial year ending March 31 of 80 billion yen ($US880 million), down from the previous estimate of a 200 billion loss (almost $US2 billion). This includes an estimated $US2 billion cost for the recall and lost sales, mostly in the US and Europe, which is now up to 8.4 million vehicles. That's more than a year's production for the world's biggest car maker. The company lost $US5 billion in the 2009 year. So far investors have chopped $US30 billion off the company's market value because of the recall debacles. Now Toyota has been forced to add 270,000 of its Prius hybrid to the recalls in Japan and the US after the Japanese government told Toyota to investigate complaints about braking problems. The same car is sold in Australia and Toyota here is investigating. One person who had a problem in the US was Steve Jobs, the man behind Apple, who said his Prius accelerated without explanation.

Why Warren Buffett is clever, Chapter XMCLI. This week the big German reinsurer Munich Re revealed a 66% jump in 2009 profits. And guess who's in there making a killing? Warren Buffett's Berkshire Hathaway, which picked up 3% of Munich Re cheaply, with options to go to more than 5% and become the German giant's biggest shareholder. Buffett already owns 3.2% of rival, Swiss Re, which he purchased at the Swiss group's invitation when it needed a friend during the GFC, much in the same way as he snapped up shares in Goldman Sachs and General Electric as the shareholder of last resort. Berkshire already owns its own reinsurers such as General Re, so Buffett and his managers would have known that 2009 claims were running well under previous years -- no Katrinas or Twin Towers, and not too many plane crashes. But not even clever deals like this could stop Standard & Poor's from cutting Berkshire's AAA credit rating, joining Moody's and Fitch in downgrading it to a lower level. All three don't like the fact that Berkshire is taking on more debt to buy the Burlington Sante Fe railroad. Toot, toot.

A lot of money for a stickman. A world record price for the sculpture “L’Homme qui marche I", by Alberto Giacometti, has made it the most expensive work of art ever sold at auction when it fetched $US104.3 million at Sotheby’s London on Wednesday night. It had been estimated to sell for 12-18 million pounds, but instead it went for 65 million pounds, beating Picasso’s painting “Garcon a la pipe” by $US100,000 which sold in May 2004:

But the vendor is the interesting story. Commerzbank AG, which acquired it after it took over Dresdner Bank last year. Commerzbank is 25% owned by the German Government. Commerzbank said proceeds from the sale are to be put towards supporting its charitable foundations as well as selected museums. "Charitable foundations" is not understood to mean executives short of a bonus, or the Merkel Government, but the question arises, why charity and not repaying German taxpayers from this windfall?

Send your tips to boss@crikey.com.au or submit them anonymously here.

The private equity tax row continues as lobbyists and one of the richest men in the US lash the Australian Taxation Office’s attempts to levy income tax on certain private equity profits. The dispute stems from the ATO’s attempt to collect $678 million in tax from the former vendors of the Myer department store, TPG Capital.

The ATO, which acted a little late (sadly for taxpayers, TPG had cleared its bank accounts of all but $45, the equivalent of police bursting into a room only to find the safe empty), is claiming that the profits made are ordinary income, rather than capital gains. TPG, being a foreign entity, would need to pay tax on the profits if it is deemed "ordinary income", but not if the gains were deemed to be "capital" in nature.

The ATO’s argument, which makes a lot of sense (to everyone except private equity investors) is that private equity firms are not long-term holders of assets. Rather, they acquire assets with the sole intention of selling that asset in a relatively short period (in TPG’s case, it held Myer for only three years). This is no different to a trader purchasing inventory and selling it years later.

This claims attacks one of the key premises of private equity -- its considerable tax advantages. PE purchases are usually made with a large amount of debt -- that means the firm will pay little or no tax while the hold the asset (as the bulk of accounting "gross profits" are usually paid as interest charges, which are tax-deductible). When they sell the asset, they pay either a discounted rate of capital gains tax (for Australian-domiciled owners)  or no CGT at all (foreign-domiciled entities). This means that PE investors (and PE managers, who usually receive 20% of any out-performance) are able to make over-sized profits at the expense of other businesses (who are required to pay tax) and the federal Government, which loses tax revenue.

It is no surprise that PE investors are unhappy with the ATO's decision. Stephen Schwarzman, who is the CEO of the publicly listed Blackstone Group, told the World Economic Forum last week that "what [the ATO decision] will do, of course, will be to dramatically chill any future investment until this matter is resolved one way or the other".

The Australian Private Equity and Venture Capital Association (which is the paid lobbyist of private equity firms) was even more damning -- in a submission to the ATO, it claimed that the ATO’s position "represents a change in application and interpretation of previously accepted practice which undermines confidence for future investment".

The claims of the private equity lobby are based on what appears to be a somewhat flawed premise -- that private equity investment is, on balance, a good thing for Australia’s economy. That is not to say there are no benefits from PE investment -- for one, privately managed businesses will usually be more efficiently run than public companies, with better remuneration structures and less administrative red tape. (Stephen Bartholomuez in Business Spectator took an even more supportive line, ostensibly agreeing with the lobby’s claims that PE firms domicile in tax havens to "to enable the funds to marshal and deploy funds efficiently around the globe. The Cayman Islands, or Guernsey, are staging points and conduits, not end destinations".)

However, the benefits of private equity are often outweighed by the enormous leverage used (which increases the risk of the business going bankrupt) and inevitable job losses that result from taking a business "private". Under TPGs control, Myer sacked 6000 of its 22,000-strong workforce. That is despite increasing its store numbers from 59 to 65. Not only did thousands of relatively low-paid Australians lose their jobs, but Myer customers experienced far worse service. This human misery, however, allowed TPG to walk away with a $1.5 billion profit.

Meanwhile, the use of (mostly foreign-sourced) debt with minimal equity contributions means that the "investment" has less of a benefit to Australia. Private equity firms buy an asset with the intention of selling it for a higher price in 3-5 years. They have no intention (and no incentive) to make long-term efficiency gains or invest in research and development that will provide sustained benefits to the economy. Their business model is the high-finance equivalent of a used-car dealer buying a car, giving it a new paint job and selling it a short time later for a windfall, ignoring the fact that the engine didn’t work before, and still doesn’t when it is re-sold.

Meanwhile, it is not merely Australian taxpayers (and workers) who suffer from private equity investments -- those who purchased shares in Myer when it was floated in November 2009 are already realising why it is often foolish to purchase shares from a private equity vendor. As this column foreshadowed before Myer’s float, an investment in the retailer has proved, so far, to have been a complete disaster. Yesterday, Myer’s shares slumped to $3.25 after the retailer released disappointing sales results for December. Myer shares have slumped by more than 20% since its IPO -- slicing almost $500 million from its market value in a little over three months (over that period, the All Ordinaries index fell by less than 1%).

That investors in the Myer float have lost a bundle shouldn’t have come as a surprise to Crikey readers, well aware that buying as asset from private equity (like buying something from the Packers) is almost always a bad idea (JB Hi-Fi being one notable exception). Quite simply, private equity managers exist to make as much money from buying and selling businesses as possible. To do so, they will seek to profit at the expense of taxpayers and any future owners of the business.

Caveat emptor indeed.

Myer isn’t the only private equity debacle currently transpiring. The Financial Times yesterday reported that Terra Firma, the firm that recently acquired EMI, is begging investors for more capital after admitting that it won’t be able to pay the interest on its massive loan from Citigroup.

EMI, the record label responsible for the Beatles and Coldplay, was purchased by Terra Firms, a private equity firm run by former Goldman Sachs banker Guy Hands for 4.2 million at the height of the credit bubble in 2007. Last year, EMI’s EBITDA was negative 1.5 billion -- with Terra Firma writing off 90% of its investment.

Send your tips to boss@crikey.com.au or submit them anonymously here.

Our market is having a shocker down 116. The SFE Futures were down 134 this morning.

Wall Street fell 268 points (2.68%) overnight on high volume. The Dow Jones index went below 10,000 for the first time since November but closed just above it at 10002. It was the worst single session percentage loss since April last year. The fall came on concerns for the US economic recovery after poor jobless numbers and on concerns that Spain and Portugal will have their own Greek Tragedy. Gold dropped a massive $48 to $1064 and oil fell 5.09% to $72.86. The Aussie dollar fell to 86.57c compared to 88.25c yesterday morning.

Making the news headlines today:

• Harvey Norman (HVN) down 10c to 362c - 2Q sales increased 6.8% from a year ago. On a like-for-like basis Australian sales were up 6.5% for the quarter. They have reiterated guidance of a 40% increase in pre-tax profit for the half year. HVN reported total group sales growth of 4% for the half and 2.5% LFL.
• ResMed (RMD) doing well - up 6% to 635c - after reporting a better-than-expected 36% rise in 2Q net profit to $US45.9m. One broker predicted $US41.5m.
• TABCORP Holdings (TAH) management says a demerger involving their gaming and casino businesses is not on the cards. They announced a better than expected earnings result yesterday. TAH up 5c to 710c.
• Street Talk says both Extract Resources (EXT) and CuDeco (CDU) are lining up for capital raisings to help them with project development. EXT down 3.7% to 728c and CDU down 8.9% to 356c.
• AED Oil (AED) acquires stakes in two Indonesian oil and gas properties from Canadian company Nations Patroleum, paying $US1.5m and issuing 12m shares. AED down 5.8% to 56.5c.
• Ramelius Resources (RMS) expects a net profit (before income tax) for the half to be approximately $15m compared to the $1.03m next loss at the same time last year. RMS down 0.5c to 55c.
• Sonic Healthcare (SHL) acquires Medhold Group in Belgium. SHL up 15c to 1443c.
• Virgin Blue (VBA) announced last night that it expects a pretax profit of $80m-$110m for the financial year. VBA down 1c to 54c.
• Eden Energy (EDE) up to 14c from 5.7c after signing terms sheet with Indian Oil Corp, India’s largest commercial enterprise.
• The Australian performance of construction index hit its highest point in 2 years last month, up 8.4 points to 57.7.
• Stocks hitting fresh yearly lows include: Dominion Mining (DOM), Elders (ELD) and Apex Minerals (AXM).

The Dow Futures up 12 at midday

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No greenie dealings here:

Alex White writes: Re. "Kohler: Abbott's clever climate change policy" (Wednesday, item 23).  Kohler wrote: "Prime Minister Kevin Rudd will now have to quickly do a deal with the Greens to get a government scheme through parliament, or else simply give up and blame everyone else."

Unfortunately, this kind of commentary is completely misleading, unhelpful and uninformed. For a business analyst, it shows a concerning naivete in the political process and the dynamics of the Australian Senate. For the record, the Labor Government needs seven (that’s seven) additional votes in the Senate to pass legislation. Seven votes.

The Greens Party has five (that’s five) votes in the Senate. There is simply no possible way for a "deal with the Greens" to deliver a carbon tax or anything else. A "deal with the Greens" would deliver an extra five (that’s five) votes in the Senate, falling two (that’s two) short of a majority. Even if Senator Xenophon voted with Labor and the Greens Party, Senator Fielding is an avowed climate denier (and so wouldn’t vote for a carbon tax or an emissions trading scheme). "Dealing with the Greens" would not deliver a two-year carbon tax. It would deliver precisely nothing at all.

Abbott joins the climate change cage match:

Peter Lloyd writes: Re. "Abbott to the lunatic fringe: it's OK, I'm one of you" (yesterday, item 10). Expect Abbott's climate change plan to see further vast subsidies for Gunns and, therefore, the CFMEU in Tasmania.  Creative accounting will see the release of carbon in cable-logged-and-burnt old growth forest* ignored, the carbon absorbed by the resulting, ecologically barren plantations exaggerated.  This is the payoff for the enthusiastic support of the Tasmanian Liberal Senators for his ascent, and, indeed, the key role Eric Abetz played in felling Turnbull with the Grech email "mistake".

Incidentally, just as Abetz and crew put the party interest last and their personal forestry fortunes first in the months before Turnbull's ousting, the ALP has named Scott MacLennan on its ticket for Bass in the impending state election.  That's right, the one who told his men (and they are all men), to vote for Howard in 2004.  Down here, the parties are just another thing to hijack in the course of maintaining absolute power for a few mates.

* and when the forest mafia deny they cut down "old growth", look for a creative definition to allow such a claim to be made.

The Australian on the Kindle:

Bob Joyce writes: Rupert's Aussie flagship is now available by subscription in mobile format, which can be read on the Kindle reader. The Australian is one of the papers offered by PressDisplay.com, and costs $US9.95 for 31 issues -- about $AUD0.37 per issue. Very affordable. The downloading to Kindle is clunky, however, requiring the use of a cable from the PC to the Kindle. The Australian is not yet available wirelessly from Amazon.

On the Kindle you get a thumbnail sketch of each page, and the ability to view the articles in text format. The easiest way to read it is to skim through the whole paper in text format, stopping to read the items of interest. There is also a table of contents available, allowing you to go straight to a favourite section.  Reading it this way, there are no advertisements visible. You can zoom in on pictures, but on the Kindle they are monochrome. If you want something to read on the train/tram/bus on the way to work, this is the least expensive option, providing you already own the Kindle.

Is this a viable subscription model? Advertisers won't like it. Do PressDisplay.com subscriptions count in circulation figures? 37c per day -- isn't that about what we pay for the ABC?

Barney Barnaby:

Kim Lockwood writes: Re. "When good sense can't hit the broad side of a Barnaby" (yesterday, item 1). In regards to "Jethro" Joyce, the illustrious Bernard Keane offers "the Coalition has the weakest economic line-up in modern political history."How memory fades. Remember Hawke's short-term treasurer, John Kerin? Well, come to think of it, Barnaby makes him look like JM Keynes.

Apples and oranges for Farmer:

Mark Reydon writes: Re. "Richard Farmer's Chunky Bits" (yesterday, item 13). Reluctant as I am to enter the Climate Change Cage, with respect to Richard Farmer's line about how confident we can be with climate modellers forecasts when economists' models get it so wrong:  the key difference I think is that climate models have an underlying basis in physical laws.

Yes, there are many factors and interactions in the system that climate scientists have an imperfect or even appalling understanding of, but fundamentally, if more energy is entering the system than is leaving it, the system has to heat up.

Economics on the other hand, is a social science and seeks to forecast the vagaries of a human based system. There are no physical laws underlying the system's behaviour, merely economists' guesses as to how the future might unfold based on how things have happened in the past, so there is necessarily a much greater chance of economists' models being completely wrong.

Comments on Conroy on censorship:

Stilgherrian writes: Re. "Conroy: we know filtering isn't a silver bullet solution" (Wednesday, item 17) He closes with the observation that "Filtering is one component of the [cyber safety] policy but unfortunately the rest of the policy is largely ignored by those who oppose it."

Well, I can't speak for anyone else, but in my case that's because the rest of the policy is sane and sensible, if under-funded. Ninety-one more federal police to chase the bad guys? Excellent! Double it! Same for the "additional funding for prosecution of offenders". $32.8 million for education and outreach programs? That's less than $12 per child. Shouldn't we care more than that?

Research into cyber bullying and online threats? Well, that should have come before deciding to waste money on a magic filter, but at least we've started now. And a Youth Advisory Group on cyber safety? Good. As long as it isn't a token effort for the sake of a photo opportunity.

I agree with those who say it's great to have a Minister discussing the issue. More please. But can we please drop the "no silver bullet" line? It doesn't have to be in every media piece.

Enough trolleys, let's talk population:

Tim Deyzel writes: Re. "Isn't growth and sustainability mutually exclusive?" (yesterday, item 14) I find the lack of debate about Australian population (and immigration) targets/forecasts both in the wider media and in Crikey puzzling and disturbing. In the lead-up to Australia Day, Dick Smith (Australian of the Year 1986) called for limits to growth based on a sustainability perspective. Around that time we had three days of Crikey letters about abandoned shopping trolleys yet nothing about the population debate. Unless, of course, you count your own Richard Farmer's vituperative gibberish about an "inherent selfishness" in NOT increasing the population as a meaningful argument.

So it was refreshing to see Dr Douglas Goudie's  piece on the need for a sustainable population in Crikey yesterday. Could I suggest you contact Federal Labor MP Kelvin Thomson for a contribution? This careful and considered politician popped up in November from relative obscurity advocating a population target of 26 million. A bold move when both major parties seem content meandering towards a vague forecast of at least 35 million.

Not just trying to kill people:

Denise Marcos writes: Some readers have failed to absorb a vital word in my suggestion on voluntary euthanasia paring health care costs: the essential word is "voluntary". Jenny Morris (Wednesday, comments) plays mischief with her paraphrasing. Nor do I, as Jackie French opines, (yesterday, comments) mistake surgical prevention of death with palliative care -- in this context the differences would be irrelevant if the patient opted for an early, legalised, departure. If the patient opted... elected ... volunteered.

The imperfect art of economy:

Robert Johnson writes: Re. Drovers Cat’s (yesterday, comments) on "Clueless Economists". Resorting to astrologers for improved economic forecasting may be a bit desperate, although the US government budget forecasting graph from the NYT in Richard Farmer’s chunky bits column yesterday illustrates why they may be better than economists.

However, a report I recall (probably imperfectly) in The Economist sometime around 1994 about a study of the predictive accuracy of three groups and a control on monetary rates may be helpful. A sample of European treasurers fared worse than economics professors who, in turn, fared worse than their students.  The most accurate results came from the control group of garbage collectors. Not that there’s anything wrong with economists; some of my best friends…  Perhaps the garbage collectors were economists rendered unemployable due to a lack of the excessive optimism that seems, from the NYT graph, to be mandatory.

Medibank reply:

James Connors from Medibank Private writes: Re. "Tips and rumours" (yesterday, item 6). Medibank welcomes our customers paying up to 12 months in advance. However, if a payment is received after the due date our system will automatically default the member to a lesser payment period for the next payment -- this is designed to help members manage payments, rather than as a policy to deprive them of rate protection or prevent them receiving the full benefits of paying in advance.

Seven may be sly but they can't spell:

Tim Villa writes: Re. "Media briefs" (yesterday, item 19). In 'a notable absence from the Macquarie cross today', it looks like Seven have some trouble spelling "Macquarie" as well, despite of it being plastered all over the screen behind Martin Lakos!

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