Israel Trade Commission

ISRAEL TRADE COMMISSION Commercial News from Australia January 2007

NEWS ECONOMIC OVERVIEW TELECOMMUNICATIONS IT WATER MEDICAL DEFENCE

Dear friends and colleagues, With the current draught worsening in Australia, especially in the eastern states, public and government sentiment on the issues of recycling and clean water production has intensified. With the recent appointment of Malcolm Turnbull as Federal Minister for the Environment, it will be interesting to monitor his involvement in these discussions due to his intimate knowledge of Israeli water technologies through several visits to Israel in the past few years. (See news items under the heading of WATER.) Also, Prime Minister John Howard announced last week a $10 billion national water management plan that includes a commonwealth takeover of Australia's biggest river system. The 10-point plan includes the biggest modernisation of irrigation infrastructure in Australia's history, pumping almost $6 billion into improving structures like pipes and channels in a project aimed at saving 3000 gigalitres of water a year. (More under heading of WATER below.) On 18 March, Binyamin Ben Eliezer, the Israeli Minister for Infrastructure will lead a Business delegation to Australia. Mr. Ben Eliezer was invited to Australia by the Israeli Export and International Collaboration Institute and by the Australia Israel Chamber of Commerce. The emphasis of the visit will be Water, Energy and Clean Technology - relevant topics for Australia at the moment. Nili Shalev Israel Trade Commissioner Israel Trade Commission 6/37 York Street, Sydney, NSW 2000 Tel: +61-2-9262 3943 Fax: +61-2-9262 5242 E: info@israeltrade.org.au

NEWS

Free-trade talks between Australia & Japan begin in 2007

Prime Minister John Howard announced this month that formal negotiations for a free-trade agreement with Japan would add nearly AUS$40 billion a year to Australia's economy. Japan is Australia's largest trading partner; with two-way goods and services trade worth almost AUS$54 billion 2005-2006.

ABC Learning Group continues its expansion globally

A $680 million spending spree has made Queensland-based ABC Learning the second largest child-care provider in the United States, and has given it a foothold in the United Kingdom. Global chief executive, Eddy Groves, said this month that both the UK and US markets were fragmented, and the acquisitions would pave the way for further expansion in those countries and through Europe.

Amdocs signed for Sensis upgrade

Telstra has signed a five-year deal with US-based Israeli company Amdocs to spend $100 million on a major technology upgrade for its Sensis directories business. The group, which publishes the Yellow and White Pages, has a project under way involving more than 100 people to install a new information technology platform focused on improving its growing internet business.

"We have a new agreement with Amdocs to seriously upgrade our platform, which will provide us with a new back end," Sensis strategy general manager and chief information officer Gerry Sutton said. "This will seriously upgrade our content management, improve our ability to define our products and sell them in a bundled way, and give us more flexibility on pricing and go-to-market strategies."

Another record year ahead for mines

Australia's mining exports are forecast to increase by 20% this financial year to a record $111 billion, as commodity prices continue to rise, thanks to demand from China and India which have fuelled the four-year resources boom.

Australian companies feature strongly in AsiaPac Fast 50 list

Australia is re-emerging as a technology leader in the Asia Pacific region according to the results of Deloitte’s annual assessment of Australia’s fastest growing technology companies, the 2006 Deloitte Technology Fast 50. Deloitte Technology Media and Telecommunications (TMT) Partner Julia Bickerstaff reported that this year’s results were so strong, that the top 70 Australian companies would be included in the ranking of the Deloitte 500 fastest growing companies in the Asia Pacific region this year.

The top five companies in 2006 would have headed the Australian list in each of the past five years, with the exception of 2004, when Bill Express topped the ranking in Asia Pacific with over 54,000% growth. Wireless broadband carrier Unwired Australia secured the top spot for 2006, which achieved a growth rate of 6,846% over three years. Bickerstaff said Unwired’s winning growth rate was the second highest growth rate ever recorded since the program began in 2001. Internet based companies emerged as the fastest growing industry segment for the second year running, with 34% of the companies coming from this sector.

ECONOMIC OVERVIEW

General

The 3rd quarter (to 30 Sept) DGP growth was 0.3%, and the annual growth remains at 2.2%. This outcome reflects a larger than expected depressing impact from the nationwide drought, and a larger hit to real estate activity (lower property sales) from higher interest rates.

Business investment declined slightly in the 3rd quarter, but is expected to continue to increase for a long time to come with strong profits forecast across the board.

The massive ramp in mining investment over the past few years appears to be finally paying dividends. Higher oil and gas production pushed total mining output up by 7% in the 3rd quarter. The increase in mining output offset the decrease in farm output due to the drought.

Unemployment

Of all the economic statistics, the labour market best highlights the underlying resilience of the Australian economy. Over the last year, employment growth has very been strong, participation has increased and the unemployment rate has fallen to three-decade lows. The current unemployment rate remains low at only 4.6%. Strong employment growth has been an important factor supporting consumer spending and housing activity.

ELMMUNICATIONS

IT & TELECOMMUNICATIONS & MEDIA

Optus plans $800m 3G network

Australia's second largest telco Optus plans to spend up to $800 million to build a new third generation (3G) mobile network which it says will reach 96% of the population. Optus chief executive Paul O'Sullivan said the telco would build a new communications network with a national footprint far beyond its existing 3G network, with services to commence in early 2008.

The new network would operate in the 2100 megahertz (MHz) frequency range, with Optus looking at using the 900MHz frequency range to address smaller regional centres as well as rural and remote locations. Optus said the new network would replicate the coverage of its existing national second generation (2G) network which covers over 650,000 square kilometres of Australia's landmass.

Source: Australian IT Internet Edition

Telstra to improve its broadband coverage in rural areas

Telstra has indicated this month that it will bid for $600 million in subsidies under the government's Broadband Connect program that is aimed at improving rural broadband infrastructure and lowering charges by introducing competition into regional markets.

Firewalls block the spread of Web 2.0

Australia's large enterprises and governments are slowing take-up of next-generation web services by keeping their data locked behind firewalls, according to a leading proponent of Web 2.0 technology. Peter Williams, chief executive of Deloitte's corporate web business, Eclipse, said access to government and corporate data would help developers to create Web 2.0 tools. Web 2.0 developers could build useful web applications for the travel, real estate and gambling sectors if organisations such as the Australian Bureau of Statistics and large government and enterprise agencies would provide it in XML feeds, Mr Williams said.

ADSL2+ plan puts pressure on Telstra

Corporate telecommunications provider PowerTel has launched its ADSL2+ broadband service ahead of schedule, increasing pressure on Telstra to lift speed caps on its copper network. PowerTel, which shares its network with Perth internet service provider iiNet, began its service last month, accelerating its broadband from a maximum of 1.5Mbps to 24Mbps.

Online banking moves to security upgrade

The Commonwealth Bank has signed off on Australia's largest deployment of two-factor authentication, which will enable its 2.3 million internet banking customers to use a mix of SMS and token passwords to foil scammers. Starting early next year, NetBank customers will need to enter the extra single-use password - sent either to their mobile phone or via a token - to authorise third-party payment transactions, providing additional security aimed at stopping password theft, viruses and key-logging software. Two-factor security is part of an aggressive IT investment by the bank aimed at protecting customers from the growing number of phishing attacks. 'Phishing' is a term used to describe any method of fraudulently attempting to acquire sensitive information from computers.

CityRail to use remnants of One.Tel

The NSW government has announced plans to spend $200 million on a digital train radio system using the abandoned OneTel network. RailCorp has reached an agreement with the receiver of telecommunications company OneTel to buy necessary digital bandwidth to provide coverage of the state's train network.. The digital technology would allow CityRail to monitor a train's location and automatically activate its brakes in an emergency. Tenders for the design of the new system will be called early in 2007

Landcom calls for FTTH network proposal

The NSW government's commercial housing development arm, Landcom, has called for proposals to supply and operate a fibre-optic broadband network at its Prince Henry village project in Sydney. Landcom has called on bidders to outline plans to run fibre connections to 752 dwellings on the estate and offer broadband internet, video-on-demand pay TV, free-to-air TV, telephony and security services to its residents. A spokeswoman for Landcom said that the developer was aiming to make the FTTH network open to multiple third-party content and service providers.

Vodafone partners IBM

Vodafone's Australian operation will begin working with IBM as its outsourced applications management partner from next year. The news came as part of a global announcement that saw Vodafone divide up the management of its applications development and support functions between IBM and EDS. The company's operations in its home market of Britain, as well as Germany, the Netherlands and Hungary will work with EDS, while Australia, New Zealand, Spain, Portugal, Ireland, Greece and the Czech Republic will work with IBM. Work in Italy is also expected to be awarded to IBM, subject to board approval.

Contracts with IBM and EDS have been set at seven years, although Vodafone has reserved a right to early termination. Vodafone said the change to outsource application services would cut costs by 25 per cent to 30 per cent over three to five years. In its last financial year, the company spent £560 million on applications support and development.

Optus mobile business slowing down

Optus's mobile business continues to weaken, recording its worst quarterly performance in more than five years. Australia's second biggest telco added only 46,000 new customers in the September quarter, compared with 59,000 in the same quarter last year and 69,000 customers in the June quarter. Some analysts believe weaker mobiles growth will lead to a downgrade in the group's forecast profit margins. Mobiles is Optus's strongest division by far, accounting for about 70 per cent of its profits.

Music downloads to double in 2007

Australians will spend nearly $60 million on digital music downloads in 2007, new research has predicted. Business information analysts IBISWorld say digital music distribution is the key to the future success of the music industry. "This year we'll spend about $30 million on digital downloads," said IBISWorld's Australian general manager Jason Baker. Next year this figure will almost double and by 2010, it is forecast we will be spending an incredible $200 million on our favourite downloadable tracks."

"Over the same period, the (mobile phone) ring tone market is expected to post double-digit growth, compared to low single digit growth for the total recorded music industry," he said. Increasingly, consumers are turning away from traditional forms of music such as CDs, Mr Baker said. He said much of the growth in the digital download market was focused on the independent music market, adding that the take-up of technologies such as myspace.com provided an avenue for unsigned and amateur artists. A growth area yet to take off in Australia was that of satellite CDs, where consumers compile their own CDs by downloading songs from a central database beamed into a music store via satellite.

Coonan releases digital action plan

On 23 November 2006 the Minister for Communication, Information Technology and the Arts, Senetor Helen Coonan, released 'Ready, Get Set, Go Digital - A Digital Action Plan for Australia', in the lead-up to the digital TV switchover which will commence in 2010-12. The switch will see the emergence of new digital TV channels, and an extension of services provided by free-to-air TV broadcasters through additional digital channels.

The plan commits $20 million to the transition to digital television and outlines the key steps that the government is expected to take. The plan creates a dedicated switchover body, Digital Australia, which will be responsible for the coordination of government, manufacturer, industry, consumer and regulator action in the lead-up to the switchover.

IT Companies in $7 billion outsourcing scramble

Technology suppliers are flying in over seas experts to Australia as they gear up to compete for $7 billion in outsourcing and services contracts due to hit the market in 2007. Specialist outsourcing executives will join local staff in the rush for the lucrative federal government and corporate contracts that are expected to be renewed next year.

WATER

$10 billion national water plan

Prime Minister John Howard has announced a $10 billion national water management plan that includes a commonwealth takeover of Australia's biggest river system. The 10-point plan includes the biggest modernisation of irrigation infrastructure in Australia's history, pumping almost $6 billion into improving structures like pipes and channels in a project aimed at saving 3000 gigalitres of water a year. Other investments include $1.5 billion to boost water efficiency on farms, and $3 billion to address over-allocation of water in the drought-ravaged Murray-Darling Basin.

The Government also plans to take control of the ailing river system, which is currently jointly managed by NSW, Victoria, South Australia and Queensland. Mr Howard said state governments had to recognise that the "old way" of managing the basin had "reached its use-by date". Mr Howard flagged a government buyout of water entitlements in the Murray-Darling basin, saying the over-allocation of water in the parched river system had to be confronted.

"Enhancing the overall viability of irrigation districts will require structural adjustment,'' he said. "The Government stands ready to provide structural assistance and, if necessary, to purchase water allocations in the market.

Malcolm Turnbull appointed Federal Environment Minister

Solving Australia's water crisis will be the top priority for newly appointed federal environment minister Malcolm Turnbull. The MP was promoted to cabinet in January in a wide-ranging ministerial reshuffle by Prime Minister John Howard.

Mr Turnbull was elevated to cabinet as Environment and Water Resources Minister, replacing Ian Campbell who was demoted to the human services portfolio. Mr Turnbull said he felt honoured by his appointment and said water issues would be at the top of his list of priorities.

He stated that Australians needed to become more efficient users of water, and that the country had the technology to ensure that this could happen. Mr Turnbull said part of Australia's water problems were a result of penny pinching by state governments which had failed to invest in key infrastructure such as dams.

Beattie decides to recycle waste water

Queensland Premier Peter Beattie has decided to drop plans for a March referendum on waste water recycling and will introduce the controversial measure regardless. In a stunning policy turnaround, Mr Beattie said this month that the continuing drought, falling dam levels and the turning tide of public opinion in favour of recycled drinking water have forced him to take this action.

Recycled waste water will be added to south-east Queensland's drinking supplies which means residents will be drinking recycled sewage by late next year. New South Wales Premier Morris Iemma says drinking recycled waste water in Australian capital cities is not inevitable. He said that there were many things the state could do before it needed to consider drinking recycled waste water, and that New South Wales was not in the same position as Queensland when it came to the current drought. South Australia already uses treated effluent to irrigate crops, but that state's Premier, Mike Rann, will not go further at this stage. Victoria's Acting Water Minister, Justin Madden, is just as adamant. He recently stated that while it might be safe to drink the recycled water, he did not believe that his state needed to go down the same path as Queensland.

NSW Plan for Desalination Plant

The 2006 NSW Metropolitan Water Plan identified desalination as part of the NSW Government's approach to managing drought. With dam storage levels falling below 37 per cent, the NSW Government has taken the important decision to move to the next stage of preparedness for constructing a desalination plant.

In December 2006, Sydney Water commenced a competitive procurement process to identify companies with the skills to construct a desalination plant. A Blueprint Design has been developed which will assist a desalination plant to be deployed in approximately 2 years.

State draws line over fresh water plan

A potential new source of water for Sydney has become a political football, with the State Government dismissing a report that shows water underneath the city is clean enough to drink. The billions of litres of water sitting in the Botany sands aquifer could be increased by injecting storm water and highly treated waste water into the aquifer, say academics from the University of NSW and the University of Technology, Sydney, and the federal Parliamentary Secretary for Water, Malcolm Turnbull.

Research for the National Water Commission found that water in the north of the aquifer, under Centennial Park, was cleaner than Sydney tap water. But more work needed to be done to assess how much extra water could be injected into the system, and from where it could be extracted. The existing water could add between 1 and 2 percentage points to Sydney's supply.

MEDICAL

EFENCE

Trans Tasman Mutual Recognition Arrangement (TTMRA)

The TTMRA is an arrangement established between the Australian Commonwealth, State and Territory governments and the government of New Zealand. The TTMRA seeks to remove regulatory barriers and facilitate trade between Australia and New Zealand. The differences between the New Zealand and Australian systems for regulating therapeutic products were sufficient to necessitate a special exemption to the TTMRA that allowed officials time to assess options to resolve the need for a special exemption.

Australian and New Zealand Health Ministers have agreed that harmonisation of regulatory systems was likely to be the best option. The establishment of a trans Tasman therapeutic products agency will deliver a harmonised approach with the flow on benefits of lowering trade barriers between Australia and New Zealand and enhancing CER.

DEFENCE

DEFENCE

Acquisition of Tactical Unmanned Aerial Vehicles for Army

The Defence Materiel Organisation has signed contracts with Boeing Australia Limited for the delivery and support of a Tactical Unmanned Aerial Vehicle (TUAV) capability for the Army. Boeing Australia, teamed with Israel Aircraft Industries, will provide the I-View UAV system. I-View has a wingspan of 6.7 metres and has a fully automatic take-off and landing system that dramatically increases operational reliability. Its catapult launcher and unique parafoil landing concept enable it to be deployed and recovered from an uneven area smaller than a football field. This capability will enable 24 hour surveillance for the protection of Australian forces and identification of enemy targets