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Monthly Archives: February 2009


The Daily Telegraph

February 27, 2009 12:01am

SHAMELESS executives at Bonds owner Pacific Brands awarded themselves pay rises of up to 170 per cent last year – at the same time as they were hatching plans to sack nearly 2000 workers.

The Daily Telegraph
 has revealed that the total remuneration for 13 directors more than doubled in 2008, from just over $7 million to $15.5 million.

The bill, which was approved last June, includes a rise in CEO Sue Morphet’s package from $685,775 to $1,860,649, including a staggering seven-fold increase in her “incentive payments” – blood money for slashing nearly 1850 jobs.

Her bonus was approved despite her overseeing a 45 per cent fall in the share price in the six months leading up to the pay deals.

The company’s annual report also details a payment of almost $6 million to former CEO Paul Moore, partly made up of a retirement pay-off, up from less than $2 million in 2007.

I don’t know why everybody’s so surprised.. Bonds hasn’t been “Australian” for some time now.. Every pair of Bonds I own has a “made in CHINA” labe…

(Read More)

Terry of Brisbane

The news will be a hammer blow to the families of the 1850 workers told that high costs meant their jobs were no longer viable.

Stock market analysts expressed “horror” at the pay rises.

“It is impossible to justify pay increases of this magnitude,” said Sven Restel of share analysts Wise Owl.

“The share price has plunged by about 90 per cent from its high and the dividends have been cut, so shareholders are being wiped out. Now nearly 2000 workers have been sacked.

“The only people who are benefiting are the board.”

Another expert has predicted that the company’s value will fall to zero in the next year as the result of a customer backlash.

Pacific Brands is no longer a leading Australian producer but a mere importer,” said David Errington of Merrill Lynch.

“The equity value of Pacific Brands could soon be close to zero.”

The news will fire up the debate about excessive executive pay and short-term incentives influencing directors’ decisions.

A spokesman for Corporate Law Minister Nick Sherry confirmed the Government is investigating.

“The Government is very concerned about executive remuneration and are keeping a watching brief,” he said.

John Bracun, 45-year-old father of two, and who works as a team leader, has been with the company 26 years.

He believes the directors should have waived bonuses to help the company survive.

CareerOne 27

February 2009 6:55am

There are seven segments of the so-called “passive” workforce that simply require a combination of the right triggers to consider a new job, research by CareerOne has found.

According to CareerOne chief executive Dr Stephen Hollings, the traditional view of jobseekers falling into broad categories of “active” and “passive” is out of date. He says that at any one time, more than 60 per cent of employed workers are “keeping their options open” and just need the right triggers to consider a new opportunity.

CareerOne’s research – conducted last year and in early 2009 to take into account changed market conditions – found that currently, 19 per cent of the workforce are actively looking to change jobs (up from 10% in 2008) and a similar number plan to stay put (up from 13%) – the “truly passive”. But the remainder – a group that hasn’t been studied in detail before – are actually happy in their job but “very open to a better opportunity if it came along”, Hollings says. “They’re the latent job hunters and the group that recruiters have always wanted to reach.”

CareerOne divides this large portion of the employed community into seven segments, each of which responds to different triggers to move jobs and wants different outcomes from their careers:

Personal ambition – Now representing 15 per cent of the market (up from 10% last year), these are very career-focused, predominantly white-collar employees who value recognition and the benefits that come from progressing through the larger companies, Hollings says. “You’ll generally find them in an upper-medium to large company. They’re very career savvy, they cast a wider net when searching for jobs. They move from job boards to newspapers to specialist recruiters; they use websites for research and once they’ve moved into job hunter mode they get their CVs out.”

Some 86 per cent of this group can be triggered into changing jobs with the right combination of temptations or “pull” factors, some specific ones being: more holidays; a substantial pay increase; benefits such as a gym, insurance or healthcare; and overseas work travel or transfer opportunities.

The biggest triggers for leaving a company include a delay in receiving a pay rise and limited opportunities for advancement.

Recognise me – Grown from11 per cent to 14 per cent of the employed market since the economy turned, this group is looking for a motivating environment which recognises their potential. “They want to progress faster; they want to be rewarded for their effort. “They’ll go either directly to employers or recruiters to get what they want. They’re also a more impulsive group.” The right triggers will tempt 93 per cent of this group into making a job change, for example being paid overtime for extra hours worked; 25-per-cent higher pay; and on-the-job training opportunities. They will consider leaving a job when they don’t feel motivated by management or their career path isn’t clearly mapped out.

Rewarding challenge – Consistent in size since 2008 at around 11 per cent of the workforce, this group is mainly middle-income and hard-working, often with family responsibilities and skewed towards men. According to Hollings, “they have a high level of dissatisfaction in their current job and they do weigh up the rewards being offered by other employers, but weigh them up very carefully before they move. “So for example they have a job cycle of about 12 weeks, so they’re very careful as they move through the process. They use job boards to keep up to date with the market, but they’re also strong on face-to-face discussions with people about the roles.” Key triggers to move for this group are a company car; benefits like gym and insurance; overtime pay; and company-paid training courses. Some 88 per cent say they would be tempted to consider moving by these facts, while their “push” triggers are management that isn’t motivating and a lack of new challenges.

Supportive environment – A large group at almost a quarter of the working population, workers in this category “what we call ‘every day Australians’, across a broad range of industries and roles. They move in jobs but they lack confidence in the moving process. They’re particularly looking for support in the process. “They’re very strong on a team-based, friendly environment. They look for training; they look for mentoring – they’re very important triggers for this group.” Some 94 per cent of this group say they could be tempted to move by factors such as a shorter commute, a more friendly and supportive team, significantly higher pay (25%) and the opportunity to have excellent mentors. Unmotivating managers and “too much politics” at work will push them to leave their job.

Drifters – Arguably of limited interest to recruiters, and representing about seven per cent of the workforce (down from 9%), this group tends to lack ambition. They often work in industries where there’s shiftwork or weekend work, and they look for a supportive team when choosing a job. Often, pressure from their partner is what drives them to move, as they tend not to move proactively forward in their careers, Hollings says. Work that’s closer to home, more money and a friendly team are their main triggers to move to a new job, with their primary reason for leaving a job being unachievable hours or partner pressure.

Flexibility – Another large group (23% up from 21% last year), and skewed towards females, these people tend to have family responsibilities, be more in middle-age and earn lower incomes. “They’re looking for recognition and challenge in the workplace,” Hollings says. “They want a sense of achievement away from home; they want to drive their careers forward. But because of other responsibilities, the workplace needs to fit in with that. They are prepared to have a very long job search – at least 15 weeks – and look more broadly in order to find the right role.” Some 93 per cent of this segment say they will consider moving for the right combination of factors such as local work (or short travel time), opportunities for quick promotion, and childcare benefits. They are most likely to leave a job if their achievements are being recognised or a pay rise is too slow in coming.

Contented – Not to be confused with the group who are happy to stay in their current job and not move, this group has grown significantly from nine per cent to 15 since the economy turned. “They are largely content, and loyal to their existing employer. They tend to move – when they do move – on their own terms, but they’re the least moveable group, and they don’t generally do it for monetary reasons,” Hollings says. “They will do it for career if it’s a good opportunity, they’ll certainly do it for training, and they tend to like networking in order to find those roles.” Only 59 per cent say they would move for the right tempting factors, which include the ability to work from home; a job that involves helping others; and opportunities to travel for work. The findings, Hollings says, demonstrate that even now, in more difficult times, 62 per cent of the currently employed workforce can be triggered into becoming job hunters.

And he says that while there are common triggers that tempt someone to move, “the weighting of the triggers is different in each segment – you’ve got to understand the segment that your candidates are likely to come from in order to understand their triggers”.

Hollings notes that the market is probably “yet to be hit” by the full effects of the economy, and CareerOne intends to keep the research up to date to measure how the segments are moving.

The research will be presented at an RCSA luncheon in Sydney next week. Click here for details.

Controller thought plane that ditched was doomed


By JOAN LOWY and MICHAEL J. SNIFFEN, Associated Press Writers Joan Lowy And Michael J. Sniffen, Associated Press Writers  Tue Feb 24, 4:09 pm ET


Sully: Pay cuts drive out best pilots Play Video AP  – Sully: Pay cuts drive out best pilots

Air Traffic Control Specialist Patrick Harten, right,  is all smiles as US AP –  Patrick Harten, right, is all smiles as US Airways flight 1549 Capt. …Air Traffic Control Specialist

WASHINGTON – The air traffic controller who handled Flight 1549 thought ditching in the Hudson River amounted to a death sentence for all aboard. Now the veteran pilot who pulled off the feat safely says harsh pay cuts are driving experienced pilots from the cockpit.

“People don’t survive landings on the Hudson River,” 10-year veteran controller Patrick Harten told the House aviation subcommittee Tuesday in his first public description of how he tried to land the jetliner that lost power in both jets when it hit Canada geese after takeoff from New York’s LaGuardia Airport.

“I thought it was his own death sentence,” Harten said of the moment when US Airways pilot Chesley “Sully” Sullenberger radioed that he was going into the river. Defying the odds, Sullenberger delicately glided the Airbus A320 down in one piece and all 155 people aboard survived the Jan. 15 water landing.

Sullenberger, a 58-year-old who joined a US Airways predecessor in 1980, and his copilot, Jeffrey B. Skiles, told the panel that experienced pilots are quitting because of deep cuts in their pay and benefits.

Skiles said unless federal laws are revised to improve labor-management relations “experienced crews in the cockpit will be a thing of the past.” Sullenberger added that without experienced pilots “we will see negative consequences to the flying public.”

Harten, the 35-year-old controller, riveted the hearing with his account of the 3.5 minutes during which he spoke with the crippled jetliner after the bird strike at an altitude of 2,750 feet.

When Sullenberger said he couldn’t make it either back to LaGuardia or to Teterboro Airport in New Jersey and would ditch in the river that separates New York and New Jersey, Harten testified, “I believed at that moment I was going to be the last person to talk to anyone on that plane alive.”

But Sullenberger safely glided the jetliner into the water near ferry boats that picked the passengers off the plane’s wings before it sank in icy waters.

Harten, who has spent his entire career at the radar facility in Westbury, N.Y., that handles air traffic within 40 miles of three major airports, struggled vainly to help guide the airliner to a landing strip.

In lightning-quick decisions, Harten communicated with 14 people after the bird strike to divert other airplanes and advise controllers elsewhere to hold aircraft and clear runways for 1549.

First, Harten tried to return the plane to LaGuardia, asking the airport’s tower to clear runway 13. But Sullenberger calmly reported: “We’re unable.”

Then Harten offered another LaGuardia runway. Again, Sullenberger reported, “Unable.” He said he might be able to make Teterboro.

But when Harten directed Sullenberger to turn toward Teterboro, the pilot responded: “We can’t do it …. We’re going to be in the Hudson.”

“I asked him to repeat himself even though I heard him just fine,” said Harten. “I simply could not wrap my mind around those words.”

At that moment, Harten said he lost radio contact with flight and was certain it “had gone down.”

“During the emergency itself, I was hyper-focused,” Harten said. “I had no choice but to think and act quickly and remain calm. But when it was over it hit me hard.”

Harten was replaced at the radarscope after the plane went down. Isolated down the hall, Harten thought the worst had happened. “It felt like hours” before he learned everyone survived.

Afterward, Harten told his wife, “I felt like I had been hit by a bus.”

Sullenberger testified that his pay has been cut 40 percent in recent years and his pension has been terminated and replaced with a promise “worth pennies on the dollar” from the federally created Pension Benefit Guaranty Corp. These cuts followed a wave of airline bankruptcies after the Sept. 11, 2001, terrorist attacks compounded by the current recession, he said.

He said the problems began with deregulation of the industry in the 1970s. Then “the bankruptcies were used by some as a fishing expedition to get what they could not get in normal times,” Sullenberger said of the airlines.

The reduced compensation has placed “pilots and their families in an untenable financial situation,” Sullenberger said. “I do not know a single professional airline pilot who wants his or her children to follow in their footsteps.”

Sullenberger himself has started a consulting business to help make ends meet. Skiles added, “For the last six years, I have worked seven days a week between my two jobs just to maintain a middle class standard of living.”

Investigators have found remains of Canada geese in both engines of Flight 1549.

Sullenberger and Skiles said bird strikes are common but this one was exceptional in knocking out both engines. This “was a bigger bird than I’ve ever hit before,” Skiles said.

The bird problem has been growing. Since 1990, the number of Canada geese that live year-round in the country rather than migrating has grown from 1 million to 3.9 million, John E. Ostrom, chairman of the Bird Strike Committee-USA, testified. 

Mark Reis, Seattle-Tacoma International Airport managing director, said radar being testing at his airport can detect birds but the ability to process the information quickly enough to help pilots won’t come “any time soon.”

By Sue Dunlevy

February 24, 2009 12:00am

WOMEN waiting for government-funded paid maternity leave to help fund the birth of their next child may have to wait until 2010.

Senior ministers have been privately warning interest groups the $40 billion hole in the Government’s budget will make it too difficult to fund the proposed $450 million scheme in this May’s Budget.

More than 100 prominent female leaders will gather in Canberra this morning to fight attempts to push the issue on to the backburner.

In a sign there are divisions within the Government over the timing of the introduction of the scheme, the Minister for the Status of Women Tanya Plibersek will be among speakers who will argue for the policy to be funded in the next Budget.

Far from hindering the economy, the women will argue a paid maternity leave scheme is a good way for the Government to stimulate the economy by giving new families money to spend on items for the baby.

“This would help thousands of families experiencing financial uncertainty at a time of greatest need,’ ACTU president Sharan Burrow said.

The Government will this weekend receive the final Productivity Commission report on the proposed paid maternity leave scheme.

The commission’s draft report, issuedin September last year, called for working women to be paid $540 a week for 18 weeks after their child was born. Fathers would be eligible for two weeks leave at the same rate.

The scheme would cost $450 million and businesses would be required to spend $74 million on superannuation contributions to women on maternity leave.

Ms Plibersek said the precise timing of the scheme’s introduction would be considered after the commission’s report was delivered. “The Government is paying attention and we remain committed to the introduction of a national paid parental leave scheme,” she said.

Finance Minister Lindsay Tanner last November said paid maternity leave had been “kicked off” the Government’s agenda by the global financial crisis.

He said the Government had made a promise to have a review into a scheme but had made no explicit promise to introduce it.

The Government will also this week receive a review it commissioned into the age pension.

The review is expected to recommend lifting the single age pension rate by $30 to $35 a week. The Government has committed to delivering this increase in the Budget.,22049,25097384-5006009,00.html

Naomi Watts in her best role yet Jet Girl

Naomi Watts in her best role yet Jet Girl

AUSSIE star Naomi Watts says actors should be immune from pay cuts in the financial crisis – because the world needs escapism.


Asked in an interview with Cinema Confidential whether Hollywood actors are making too much money at a time when the economy is in tatters and people are being laid off, the actor responded:

“I think we may be more open to negotiations and things like that but I think the art world tends to thrive in times of recession.

“We need the escapism,” she said.

“We need stories to be told to take ourselves away from the reality of our situations of circumstance. So I don’t think it’s (Hollywood) gonna stop. I think money is gonna be tight, definitely.”

Good point, but easily said when you get paid more for one film than most people do in their entire life.,22606,25100231-5012985,00.html

Retirement by 70 a fading hope for many

  • Tim Colebatch
  • February 25, 2009



MORE than a third of older Australian workers now plan to work until they are at least 70, in an astonishing cultural change, the Bureau of Statistics reports.

A bureau survey taken in mid-2007, but released yesterday, reports that 15 per cent of Australian workers aged 45 and over say they don’t plan to retire, but just keep working until they drop. Most intend to ease down to part-time work. But, overall, less than 30 per cent of middle-aged and older Australians now intend to retire before they turn 65.

If this eventuates, it will transform the Australian workforce and concepts of retirement. The bureau found people already retired, on average, did so aged just 52 (58 for men, 47 for women).

That change is now under way. Bureau figures show that in November, 60 per cent of men aged 60 to 64 were still in the workforce — as were 29 per cent of men aged 65 to 69 and 7 per cent of men 70 and over. Women are catching up: 39 per cent of those aged 60 to 64 are still at work, as are 15 per cent of those aged 65 to 69, and 2 per cent of the over-70s.

One reason people are working longer could be inadequate superannuation.

The bureau survey found that in mid-2007, the median superannuation balance reported by Australian workers was just $23,698. Even among workers aged 55 to 64, the median balance was just $71,731. Men average almost twice as much as women, and public servants almost twice as much as those in the private sector.

The mean or average superannuation balance was much higher, but only because some have very large superannuation assets. Only 20 per cent of men and 11 per cent of women said they had $100,000 or more in their super account.

Ross Clare, research director for the Association of Superannuation Funds of Australia, said the figures might be understated, but were consistent with other data showing that most Australians had inadequate super balances.

“In 30 years time they will be substantial, but the harsh reality is that most people don’t have a long history of superannuation, and if you’re on an average income, it takes a long period for assets to build up,” he said.

Mr Clare said that while the sharemarket crash had reduced superannuation assets, the deepest losses were borne by those with substantial balances, while the median balance had probably risen a little after two years of high employment.

ASFA estimates that under the present regime, someone working 30 years on average wages is likely to retire with a super nest egg of $180,000.

  • Peter Hartcher and Phillip Coorey
  • February 25, 2009



KEVIN RUDD, saying there is no end in sight to the global economic downturn, has called on chief executives to join workers in exercising wage restraint.

In an interview with the Herald Mr Rudd also began preparing the ground for a multibillion-dollar infrastructure package to be delivered from next month by decrying the Howard-Costello years as Australia’s “lost decade”.

He singled out the former treasurer Peter Costello as especially negligent for failing to invest the proceeds of the mining boom.

The Prime Minister called for sacrifices to be shared equally: “We have to see those who are earning the largest, the multimillion salaries in this country evidencing a wider sense of responsibility.”

Broadening his call beyond the financial sector, he said: “Wage moderation is important for the general economy and needs to be paralleled by those who run large corporations.”

He said governments around the world would act on executive pay, by “calibrating” their responses “to how firms and their executives actually perform and behave”.

The Federal Government would be particularly troubled by companies that “abuse” the downturn to gouge profits or to aggressively “slam the door” on their workers.

“That would distress the Government enormously,” he said. “The core challenge is for everyone to recognise that we seriously are in it together.”

Mr Rudd said that it was impossible to know when the global economy might recover: “The international problems remain acute.” And it would take “some considerable time” for governments to solve them.

“Internationally there are problems of collapsing domestic demand … and parallel with that is the problem of the management of toxic assets in systematically significant global financial institutions in the US and Europe,” he said.

So long as big global banks were still threatened by their bad loans, they would be unable to resume lending.

Mr Rudd offered two points of hope: “Watch the Chinese stimulus package work over time,” he urged, and, in Australia, there were “many firms still investing positively”.

The Prime Minister was harsh on his predecessors. He said the failure to invest the proceeds from record commodity prices from 2000 to 2007 meant “we are starting from a zero base”.

“I regard it as a significant lost decade in infrastructure planning, development and investment by the federal government,” he said.

“Australia would be in a radically different place had that occurred.”

Mr Rudd would not be drawn on speculation that the projects to be announced next month would cost more than the $12.6 billion set aside in the Building Australia Fund.

“We intend to be cautious, prudent but entirely attentive also to two things – the long-term infrastructure needs of the nation and the long-term trajectory of the global economy.”

Altogether, there is $26 billion budgeted for long-term infrastructure projects. Apart from the Building Australia Fund, there are two other funds, one for health and the other for education.

Mr Rudd also told the banks that in return for the guarantees the Government had provided them, it was their responsibility to ensure the flow of credit to viable small businesses.

“The major banks will continue to need to step up to the plate. Remember that these banks were the beneficiaries of two separate guarantees.”

He revealed there had been “a number of cases” where the Government had intervened on behalf of a business unfairly denied credit by a big bank.



February 25, 2009 12:30am

ONE in five women in part-time work need more hours than they can get – and nearly half of all working women fear a job loss in 2009.

Two new surveys highlight the insecurity many women feel about their employment.

Australian Bureau of Statistics figures show 655,100 people – or six per cent of the nation’s workforce – reported they were “under-employed” last September. Of those, 65 per cent were women.

That is, they were among the 2.1 million women who worked part-time but wanted more hours or usually worked full-time and had been given fewer hours because their employer had scaled back their work.

Another female-only survey conducted by leading cosmetic brands showed 46 per cent of women are insecure about their jobs and 63 per cent do not plan to ask for a pay rise this year.

An overwhelming majority, however, were willing to do something about this fear with 84.6 per cent aiming to be top performers in their workplace to avoid redundancy. Workplace harmony, however, does not exist across the board when it comes to females in the workplace, says Republic Resumes director Malcolm King, who says he has had at least five female clients complain about workplace bullying from other females.

While none wanted to go public with her plight, Mr King said the stories followed a similar pattern.

“Women bullies quickly perceive a victim’s emotional weaknesses, such as a lack of confidence or a small social network and they target those weaknesses like a heat-seeking missile,” Mr King said.

At the Adelaide offices of Entree Recruitment, all employees are female and, says general manager Nicole Underwood, bullying never has been an issue.

“I am surprised by this statistic, as in my working career across a range of industries and especially now in an all-female work environment, it is not something that I have witnessed,” Ms Underwood said.,22606,25102779-2682,00.html

Ben Packham

February 24, 2009 12:00am

THE Rudd Government is poised to announce a major cut to the nation’s immigration intake to protect Australian jobs.

Immigration Minister Chris Evans said the global financial crisis would slash demand for labour and the need to import foreign workers. “The Rudd Labor Government’s clear policy is to provide opportunities to Australians first in the labour market,” he said.

A record 190,300 migrants were allowed in this financial year because of the rapidly growing economy. But unemployment is tipped to hit 7 per cent midway through next year, pushing 300,000 Australians on to the dole queue. “The economic situation confronting us at this next Budget will be almost the reverse — reducing inflation, reducing demand for labour,” Senator Evans said. “I expect the numbers of our program to drop next year . . . as a reaction to economic circumstances.”

Occupations such as chef and hairdresser had been struck from the nation’s critical skills list but workers in key fields such as health would always be needed.

Accountants, IT professionals, engineers, pharmacists, plumbers and motor mechanics are also in demand. ACTU president Sharan Burrow said trimming the quota was a good idea. “Australia was built on the backs of migrant workers,” she said. “But in the current climate, we need to be careful there are jobs for all. “It is prudent for the Government to review the intake of skilled migrants so labour demand can be matched to supply to protect jobs.” But she said the Government should proceed cautiously, given Australia was struggling with skills shortages less than 12 months ago.

A final decision on the 2008-09 immigration intake will be made by Cabinet ahead of the May Budget. Senator Evans said about half those granted permanent residency each year were already in Australia as students or temporary skilled workers.

The move to cut the intake follows a Monash University report calling for immigration to be slashed. Dr Bob Birrell said the Government’s economic stimulus plan was in danger of being compromised.,21985,25097305-662,00.html

February 23, 2009

Barack Obama said last month that Americans should get used to “trillion-dollar deficits for years to come”. Then he sent Hillary Clinton to Beijing to see if the Chinese could get used to it. She may be the US Secretary of State, but Clinton was in China in the past few days as a high-powered bond saleswoman.

China is America’s biggest creditor. While the US banks and car companies go to Washington cap in hand to plead for emergency funds from Uncle Sam, Washington goes to Beijing cap in hand to ask China to provide Uncle Sam’s emergency funds.

That’s why Clinton pushed human rights aside, much to the outrage of activists around the world. The issue “cannot interfere” with economic and diplomatic priorities, she said in China at the weekend.

That’s why she asked China’s leaders to keep buying US Treasury bonds. After meeting her Chinese counterpart, the Foreign Minister, Yang Jiechi, she said: “I greatly appreciate China’s continued confidence in US Treasuries.”

And that’s why she went on a popular Chinese TV show and told the host, Yang Lan: “It’s a good investment, it’s a safe investment.” Pressing her case, she said: “By continuing to support American Treasury instruments, the Chinese are recognising our interconnection. We are truly going to rise or fall together.”

Clinton’s three days in China provided an explicit acknowledgment of the power shift between the two nations. And that shift has been all one-way.

China has the world’s biggest foreign exchange reserves, at $US2.3 trillion ($3500 billion), said the leading expert on this rather opaque subject, Brad Setser of the Council on Foreign Relations in New York. Of that, $US1.7 trillion is invested in US debt of various types.

To finance his $US787 billion economic stimulus package, Obama wants China’s money. To manageably fund the US budget deficit this year, which the Congressional Budget Office estimates to be $US1.2 trillion, more than double last year’s, Obama wants China’s support. And to continue its annual military spending of $651 billion, Obama wants China’s goodwill.

Will he get it?

A debate is raging among China’s policymaking elite. Should the Chinese Government really be lending America the money to build missiles which may be later aimed at Beijing?

Should the Chinese be expected to continue taking losses like the $5.6 billion in the collapse of Morgan Stanley or the $5.4 billion at risk in the stricken Reserve Primary Fund?

Influential voices argue not. An editorial in a government mouthpiece, the China Daily, said in December that Washington “should not expect continuous inflow of more cheap foreign capital to fund its one-after-another massive bail-outs”.

A former member of the policy board of China’s central bank, Yu Yongding, urged a sell-off: “China should sell some of its US Government bonds and increase its euro and yen assets” to diversify risk, he wrote for a newspaper last month. And Beijing should seek guarantees that its holdings would not be eroded by “reckless policies” in Washington.

Chinese confidence in the US was not helped by the new US Treasury Secretary, Tim Geithner, who, seeking to win popularity on Capitol Hill, accused China of “currency manipulation”. US trade law mandates retaliatory action if there is a formal finding of currency manipulation; the Obama Administration immediately tried to play down the remarks by Geithner, a walking liability for the new President.

The Chinese Premier, Wen Jiabao, has been uncharacteristically critical of the US, blaming it, accurately, for the global economic crisis. Last month he attacked America’s “unsustainable model of development” – with low savings and high consumption.

It is that gap that Clinton was asking China to pay for. Did she succeed? Clinton claimed to have won assurances that Beijing would keep financing the US deficit. But publicly China’s leaders gave no commitment.

The two countries are in a symbiosis. Citigroup economists estimate that for every 1 per cent that US growth rates slow, China’s economy slows 1.3 per cent. China depends on US export markets. For this reason, China will not make any sudden moves against the US.

But it will most certainly use its fiscal leverage to influence US policy. Top officials asked for, and received, an assurance from Clinton that the US would reject protectionism. Tellingly, China’s senior officials will travel to Washington next month to craft a joint US-China position for the key Group of 20 meeting in London in April, a meeting to recast global financial systems.

As Clinton said: “We are truly going to rise or fall together.”

Her husband, Bill Clinton, had a moment of revelation about US government finances in his earliest days as US president, and it came with a shock: “You mean to tell me that the success of the program and my re-election hinges on the Federal Reserve and a bunch of f—ing bond traders?” His cabinet colleagues said “yes”. So, with utmost reluctance, he cut his government’s spending plans and announced a timetable to cut the federal deficit.

Barack Obama has evidently had his moment of revelation, too. A future account of Obama’s first 100 days may well record him saying something like: “You mean to tell me that the success of the program and my re-election hinges on the Federal Reserve and a bunch of f—ing communists?”

Peter Hartcher is the Herald’s international editor.