Switch to safety worked

Good returns … after feeling the sting of the GFC, pension funds are coming good.Spare a thought for investors in pension products. While all super fund members copped a flogging during the global financial crisis, pension fund investors don’t have the luxury of being able to rebuild their retirement savings.
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Quite the reverse, in fact, as they still need to draw down money to live on.

Perhaps that’s why, while accumulation fund members have largely stuck with the more traditional balanced and growth funds in the wake of the GFC, pension fund investors have been more inclined to switch into more defensive investment options.

The the chief executive of SuperRatings, Jeff Bresnahan, says there has been a ”massive swing” by pension fund investors into capital-stable and cash options in recent years.

The GFC, he says, forced them to face the reality that it is up to them – not solely their super fund – to determine the right level of risk for their needs.

That switch certainly paid off in the past financial year with capital-stable funds outperforming balanced options fourfold. The average capital-stable pension fund surveyed by SuperRatings returned 4.8 per cent for the year, compared with a 1.2 per cent return for the balanced funds.

Balanced funds have between 60 per cent and 76 per cent of their investments in growth assets such as shares and property, whereas capital-stable funds hold more defensive investments such as bonds and limit their growth exposure to 20 per cent to 40 per cent. That still provides some upside when sharemarkets are rising, but protects investors from the full impact of a market fall.

Pension funds performed better over the year than accumulation funds, though this difference is largely due to favourable tax treatment. Pension funds pay no tax on their investment earnings.

Accumulation funds are taxed at 15 per cent, or an effective rate of 10 per cent on capital gains where the investment is held for 12 months or more.

SuperRatings says the top-performing capital stable pension funds returned more than 8 per cent last year, largely on the back of an 8.3 per cent return from fixed-interest investments. LGSuper’s defensive allocated pension topped the list with a solid 8.6 per cent return, followed by Commonwealth Bank Group Super with 8.1 per cent.

For those still in balanced options, the best return in the SuperRatings survey was 6.2 per cent with ESSSuper.

But thanks to the strength of bonds over shares, all other balanced pensions returned less than the top 10 capital stable funds.

Russell Investments’ director of client investment strategies, Scott Fletcher, says the GFC has highlighted the huge ”sequencing risk” faced by people nearing retirement.

This is basically the risk that they will need to draw on their money at the worst point in the investment cycle.

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Mind the gap

Steep climb … if you take contributions out of the picture, chances are your super balance hasn’t really budged.Here’s the good news. Your super is clawing its way back after the ravages incurred during the global financial crisis. But don’t hold your breath. If it wasn’t for contributions coming into your fund, chances are your retirement savings have gone absolutely nowhere during the past five years.
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And if your fund has been performing below par, you’re still likely to be sitting on substantial losses.

The 2011-12 financial year was a real roller-coaster for super funds. Up one month, down the next. In early June, there was a real chance that we were looking at another year of losses, but the average fund managed to scrape through with a return of 0.4 per cent.

The chairman of SuperRatings, Jeff Bresnahan, says while that might seem like a poor return, funds actually fared well considering Australian shares were down by 6.4 per cent over the year and international shares fell by 3.3 per cent.

Balanced funds, as measured by SuperRatings, hold between 60 per cent and 76 per cent of their assets in so-called ”growth” investments, such as shares and property, but sharemarket losses were offset by an 8.3 per cent return from fixed-interest investments, such as bonds over the year, and positive returns from property, cash and alternative assets, such as infrastructure and private equity.

Bresnahan says non-profit funds, in particular, have been gradually reducing their reliance on shares for their returns and have benefited from holding unlisted investments.

”There has been a drop of about 4 per cent in their exposure to shares over the past decade and it has gone into unlisted assets,” he says.

”But that raises the issue of whether all balanced funds are comparable and, unfortunately for consumers, they’re not. One balanced fund will behave quite differently to another and that’s unfair on consumers because they get put into these funds but there can be a 10 percentage point difference in performance

”That’s what happened this year and, over the longer term, a performance difference like that is a hell of a lot of money.”

While the top balanced fund, LGsuper, returned 5.1 per cent for the year, SuperRatings says the worst fund in the survey lost 3.5 per cent – a difference of close to 9 percentage points. First State Super’s Health Super Division medium-term growth fund returned 3.3 per cent, but the rest of the top 20 returned between 0.7 per cent and 2.8 per cent (see table on page 6).


The difference between the best and worst was even more spectacular for growth funds (holding between 77 per cent and 90 per cent in growth assets), with the top performer (ESSSuper) returning 4.9 per cent, versus a 5.7 per cent loss for the lowest-ranked fund.

And even in the more conservative capital-stable funds (which are 20 per cent to 40 per cent invested in growth assets), the difference between the best and worst was more than 7 per cent.

The top-ranked Commonwealth Bank Group Super option returned a solid 6.4 per cent, while the worst in the category made just 0.7 per cent.

But it’s the longer-term returns that tell the real story of how the global financial crisis is still affecting retirement savings.

Bresnahan says that while this year’s return isn’t anything to write home about, it has at least consolidated the recovery of the past two years.

”Funds have earned about 20 per cent over the past three years, which is a pretty reasonable result,” he says. Some of the better funds (the balanced options listed for First State Super’s Health Super Division, Recruitment Super, Commonwealth Bank Group Super and LGsuper) have all returned more than 8 per cent annualised during the past three years, which would push their recovery in this period to more than 25 per cent.

However, during the past five years, the picture is much uglier. SuperRatings says the average balanced fund has lost 0.2 per cent a year during this period and only three balanced funds (LGsuper, Commonwealth Bank Group Super and First State Super’s Health Super Division) managed to return more than 2 per cent a year.

Indeed, if it wasn’t for contributions coming into our funds, most fund members would be wondering why they had bothered. ”A lot of people wouldn’t have noticed the [poor] five-year returns because with contributions, they still see their account balance growing each year,” Bresnahan says.

”But you’ve also got to remember that we’ve been through what was arguably the biggest financial and economic crisis of our lifetimes. A year or two back, the three-year returns looked horrible, and the seven-year numbers will eventually look bad, too. It’s a timing issue.”

To put it in perspective, Australian shares have lost 4.2 per cent a year during the past five years. International shares have lost 2.15 per cent when hedged against currency movements or, thanks to the rising Australian dollar, 6.65 per cent a year unhedged.

Diversification has shielded fund members from the full extent of these losses, however, once again, some funds have done much better than others.

While the best balanced fund returned 2.6 per cent a year over the past five years, the worst lost 4.5 per cent a year – outstripping the losses of the local sharemarket.

Over the 20 years since the introduction of compulsory super,

Bresnahan says, the average balanced fund has still managed to beat its targeted return of 3 per cent to 3.5 per cent above the inflation rate.

The average fund has returned a solid 6.6 per cent during this period, while inflation has been about 2.8 per cent.


The problem is that many fund members had become accustomed to the double-digit returns of the boom period. As the graph on the previous page shows, annual returns during the past 20 years have been as high as 18 per cent, and returns in the four years before the GFC were 13 per cent to 15 per cent. Losses were rare and, up to 2008, had been limited to less than 4 per cent.

The director of client investment strategies at Russell Investments, Scott Fletcher, says returns in the mid- to high teens between 2003 and 2007 set unrealistic expectations.

”When you have returns which are completely out of line on the upside, you have to expect a period that will disappoint for a while,” he says. ”The depth and scope of this downturn is what has taken everyone by surprise, but it is a classic deleveraging market.

”Normally you’d expect the peaks and troughs to be over and done with in 12 to 18 months, but deleveraging can be more extended.”

Bresnahan says 6 per cent returns are much closer to what should be expected over the longer term, as balanced funds returns in the high single digits are actually pretty good.

But this doesn’t mean fund members have to accept poor returns.

The range of returns between funds shows that some funds manage market cycles better than others.

While it would be dangerous to ditch your fund after one year of poor returns, Bresnahan says if it has been underperforming similar funds during a five- to seven-year period you need to ask questions.

It may have chosen the wrong investments (funds with high weightings to international shares have been dragged down during this period) and fees can also play a role.

While recent research for the Financial Services Council by Rice Warner Actuaries shows average fund fees fell from 1.27 per cent to 1.2 per cent between 2010 and 2011 (and from 1.37 per cent in 2002), costs can still vary dramatically.

While the average fee for corporate, public sector and large corporate trusts was less than 1 per cent, and the average fee for industry funds was 1.13 per cent, the average for personal super funds was 1.87 per cent and members of small corporate master trusts were paying an average 2.21 per cent.

As with returns, fees also ranged widely within sectors. The cheapest industry funds, for example, charged less than 1 per cent, while the most expensive cost more than 3 per cent.

In the personal super segment, fees ranged from a little more than 1 per cent to about 3.7 per cent.

”A lot of retail funds and some not-for-profit funds need to review their fees and bring them down, especially in some of the cash options,” Bresnahan says. ”They’re returning 2 [per cent] to 2.5 per cent a year, whereas most other cash investments are doing 4 per cent.

”That’s because they’re taking 150 to 200 basis points out of the return in fees before any money goes to the member. Some of the investment platforms charge the same fees whether the money is in a low-cost investment like cash or something like international equities.”


Bresnahan says fund members also need to take ownership of their returns, rather than setting unrealistic expectations for their fund. He says they need to understand where their money is invested and what sorts of returns they can expect in different market conditions.

While most members remain in their fund’s default option, he says there are ”scores” of investment options to choose from if they are not happy with the risk they’re taking or the returns they are getting.

Fletcher says funds have also been working to manage risk more effectively. Before the GFC, he says, most assumed a mix of shares, bonds, cash and property would provide enough diversification to reduce risk.

But there is now a recognition that they need broader diversification to handle GFC-style risks where most of these traditional assets can all be hit at once.

”To maintain the same risk profile for investors, super funds are a bit like ducks swimming on water,” he says.

”Above the water, everything looks the same, but a lot more work is going on under the water to reduce the level of risk.”

Fletcher says funds are realising that it’s not enough to understand the particular risks of each investment class; they also need to understand how different investments interact, how those interactions have changed and how to achieve genuine diversification within each asset class.

”If you mention alternative investments, for example, people often think of airports and tollways,” he says. ”But different infrastructure investments have different levels of liquidity and other features that need to be managed.”

Bresnahan says funds are also reviewing their objectives, which, until the GFC, had not been tested thanks to 15 years of outperformance.

”They’re asking what sort of time period their objectives should be measured against,” he says.

”It obviously needs to be over the longer term. But if you say they should be measured over 20 years, it becomes a marketing ploy. They can underperform for several years and still say they’ve got plenty of time left before they’re held to account.”

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Don’t be caught napping

Deprivation … money under the mattress might be safe, but like fixed interest, the returns are poor. Illustration: Karl HilzingerTrustees of self-managed superannuation funds have a strong preference for investing in shares, cash and fixed interest. According to the Australian Taxation Office, SMSF trustees invest 32 per cent of their money in equities and 28 per cent in cash and term deposits.
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A strong weighting towards cash and fixed interest would have helped produce a good investment return in the year to June. The median return of the capital-stable funds surveyed by SuperRatings was 4.1 per cent for the year to June.

The ATO’s figures are based on a survey of self-managed accounts at the end of the 2009-10 financial year.

More recent research shows not much has changed. According to the SMSF administration company Multiport, as of June 30 this year, self-managed funds had 35 per cent of their money in Australian equities, 27 per cent in cash and term deposits, and 10.5 per cent in fixed-income securities.

SuperRatings says the average asset allocation in a capital-stable super fund is 40.2 per cent fixed interest, 22.6 per cent cash, 12.1 per cent Australian shares, 10.1 per cent international shares, 9 per cent alternatives, and 6.1 per cent property.

Growth portfolios in the SuperRatings survey lost an average of 1 per cent in the year to June, while balanced funds were up an average of 0.5 per cent.

The return for capital-stable super portfolios over the past five years is an average of 3 per cent a year, compared with an average loss of 1.7 per cent a year for growth portfolios, and a loss of 0.2 per cent a year for balanced funds over the same period.

Defensive assets have produced good returns throughout the financial crisis but now investment strategists are warning that cash and fixed interest may not be the best assets to be holding in the period ahead.

The head of investment strategy at AMP Capital, Shane Oliver, says: ”Throughout 2010 and into 2011, there were very attractive rates of interest being offered on bank term deposits.

”The trouble now is that the cash rate is falling as the Reserve Bank has cut rates to deal with softer than expected economic conditions. And just as term-deposit yields have fallen, so too have government bond yields.”

As bond yields fell over the past 18 months, bond prices went up, producing capital gains for fixed-income investors.

Bond yields have fallen to record lows. Anyone getting into bonds now will get a yield of not much more than 3 per cent if they hold the securities to maturity. And if bond yields start to rise again, investors will be exposed to the risk of capital loss.

Oliver says investors who are looking for the defensive qualities of a fixed-income security as well as a higher yield should consider corporate credit. Investment-grade corporate bonds are yielding about 6 per cent.

Investors have had plenty to choose from in the corporate bond market. About $8 billion in subordinated notes and convertible preference shares have been issued over the past 12 months, and all of them have been listed on the ASX. The leading banks have been big issuers and so have companies such as Woolworths, Tabcorp and, most recently, Caltex.

Typical of the returns on offer in this market is an issue of Westpac subordinated notes, launched last month and closing on August 16, paying a floating rate of 2.75 per cent above the 90-day bank bill rate. With the bank bill rate about 3.5 per cent, the notes will pay more than 6 per cent.

Compared with this, the best six-month term-deposit rates on offer at the moment are about 5 per cent. Westpac’s notes have a fixed maturity date of August 2022 but may be redeemed at the bank’s discretion in August 2017.

The executive director of fixed-income strategy at JBWere Wealth Management, Laurie Conheady, agrees investors need to take care with their cash and fixed-income investments.

Conheady says most of the recent fixed-income returns have come from capital gains, as the price of bonds and other fixed-income securities have rallied strongly.

The yield on a 10-year Commonwealth bond has been below 3 per cent this year, reflecting strong demand for the securities. Conheady says these long-term government bond rates are at levels last seen in the 1950s.

”While a repeat of the double-digit returns on government bonds is possible, we believe it is unlikely,” he says. ”Even if capital values remain at current levels, the relatively low running yields associated with current inflated values point to better risk-reward opportunities elsewhere.

”We suggest investors look to floating-rate corporate bonds and better-quality hybrids as a way to improve returns and diversify portfolios.”

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Bradken posts $100m profit as foundries fire up

BRADKEN Limited, chaired by New South Wales Infrastructure head Nick Greiner, has ridden the resources boom to post a $100 million profit from its cast steel products in the mining, energy and rail freight industries.
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The result exceeded guidance given in April when the company announced an earnings downgrade due to one-off costs. The shares rose 11.2 per cent, closing at $5.74.

The company said its profit after tax was up 15 per cent after minorities, which consisted of write-downs in goodwill of some UK assets. Statutory net profit was up 49 per cent.

Managing director Brian Hodges said Bradken’s order book was at record levels, its foundries ”are pushed to full capacity” and it had added capacity at foundries in Australia, Canada, Malaysia and the US.

”Bradken margins are strong and will remain very defensible,” he said. Accounts showed its overall gross profit margin was 29.8 per cent, with mining consumables, engineered products and industrial posting margins in the low 30s. Rail’s margin was 13.6 per cent.

But the company would minimise its capital expenditure in 2012-13 ”until the outlook becomes clearer”, Mr Hodges said.

Revenue from the mining products division was up 22 per cent at $648 million, boosted by acquisitions. Rail freight sales were up 56 per cent to $330.2 million. The US-based engineered products division was up 20 per cent, to $347 million. Earnings before interest, tax, depreciation and amortisation were $220.4 million.

Mr Hodges said he expected the past year’s softness in the energy sector to ease in the fourth quarter.

”There is quite a lot of expansion in land-based oil, and expansion in gas fracking and low-cost energy, which seems to be having such a positive impact on the US economy,” he said, and Bradken would get a spinoff.

Moelis Research noted the global uncertainty with coal, which represents 9 per cent of Bradken’s sales, but thought a GFC-type slowdown was unlikely. Bradken will pay its fully franked final dividend of 21.5¢ on September 4.

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Xstrata ramps up austerity to defer $1bn spending

Coal comfort.SWISS miner Xstrata has swung into austerity mode in the face of falling commodity prices, targeting cost savings of $US970 million and deferring $US1 billion worth of spending this year.
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Xstrata overnight reported a 31 per cent drop in interim earnings before interest, tax, depreciation and amortisation to $US4 billion, compared with the previous corresponding half-year, due to a severe drop in commodity prices in the first half of 2012, blamed on renewed turmoil in the eurozone and a slowing growth rate in China.

Attributable profit fell 23 per cent to $US2.2 billion, or US75¢ per share, before exceptional items which reduced earnings by $US253 million. Impairments included: $US514 million against its investment in Lonmin, a $US162 million loss on the sale of a hydroelectric project in Chile to a joint venture with Origin Energy; $US111 million from closure of the Brunswick zinc mine, and $US21 million in merger costs. These were offset by a $US579 million deferred tax credit tied to July commencement of the Mineral Resource Rent Tax in Australia. The board declared an interim dividend of US14¢ per share, up 8 per cent on a year ago.

Xstrata is in the throes of a friendly scrip merger with major shareholder Glencore International and yesterday’s profit drop could see those investors hoping for a higher price. Shareholders are due to vote on the merger on September 7.

Chief executive Mick Davis said if the merger was voted down ”the inherent capacity of Xstrata to generate value as a stand-alone company remains very powerful indeed”.

Mr Davis decried the ”lack of conviction syndrome” which had spooked commodities markets and said the current slowdown was cyclical, not the end of the secular change in demand. Addressing concerns that shale gas would undermine thermal coal demand, Mr Davis said shale production would be largely confined to the US until next decade and coal would remain the cheapest power source for developing economies.

Xstrata shares rose 2 per cent or 18.5 pence to 901.5p in early London trade. Glencore shares also rose 2 per cent or 7.15p to 336p.

Xstrata said the $US970 million in savings would more than offset expected cost inflation of about $US580 million in 2012.

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Transurban risks backlash over CEO pay

TRANSURBAN risks infuriating shareholders again after it was revealed that its former chief executive, Chris Lynch, received a total salary package of $7.36 million for his last year in the job.
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The release of his pay details came as Australia’s largest listed toll road operator took a cautious approach to dividend guidance for this financial year due, partly, to volatile economic conditions.

Executive pay at Transurban was a bone of contention among shareholders for most of Mr Lynch’s four years in the top job. The pay report shows his total package of $7.36 million included $1.76 million in short-term cash bonuses and $3.08 million in share-based benefits.

Although Transurban appeased investors last year by changing the way it rewards management, Mr Lynch’s pay risks raising the ire of investors at Transurban’s annual meeting later this year. His total pay for 2011-12 was 9 per cent higher than the $6.75 million he received the previous year. It amounted to about 8 per cent of Transurban’s total employee expenses.

Transurban yesterday reported a 9 per cent rise in proportionate pre-tax earnings to $784 million for the year to June, which was better than analysts had expected. But the company, which operates CityLink in Melbourne and the Hills M2 and Westlink M7 in Sydney, disappointed investors with its distribution guidance of 31¢ per security for 2012-13.

Shares in Transurban closed down 9¢ at $5.94 following its cautious outlook statement.

Transurban’s new chief executive, Scott Charlton, said the board had decided to take a more cautious approach because it was a ”transition year” for the company and due to volatile economic conditions.

Although not all of the distribution forecast for this financial year will be paid out of free cash flow, Mr Charlton said it should not be taken as a sign that Transurban would return to the days when it adopted the so-called Macquarie model of using borrowings to fund dividends.

Transurban has experienced slight weakness in traffic volumes on some of its motorways, including CityLink, which comprises more than half of its toll revenue.

Mr Charlton, who took over from Mr Lynch last month, said it was difficult to ascertain whether the weakness was due to economic conditions or construction works on some of the roadways.

Transurban also warned that the completion of an upgrade to the M2 could be delayed because of wet weather. It had been due to be completed by the middle of next year.

The company posted a 50 per cent fall in net profit to $58.6 million, which was largely the result of a $138 million write-down in the value of its investment in the Pocahontas roadway in the US.

Transurban spent $US611 million on the Virginia toll road in 2006. The company said it was considering the future of the roadway, which could include selling its interest in the asset. The company will pay a final distribution of 15¢ per security on August 14, which takes the payout for last financial year to 29.5¢. It compares with a total payout of 27¢ in 2010-11.

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Company tax cuts report due

More tax trouble is looming.TENSIONS between miners and Canberra are threatening to flare up again in the coming weeks, as pressure to fund corporate tax cuts puts the industry’s tax breaks under the spotlight.
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After company tax cuts were scrapped in this year’s budget due to political opposition, an expert panel appointed by the Treasurer is due to report as soon as this week on how the government could fund company tax cuts in the future.

The Prime Minister, Julia Gillard, has signalled that any company tax reduction would have to be ”revenue neutral”, so the panel is expected to float cutting a wide range of corporate tax perks.

And despite miners’ hostility to any tax rises, it is understood the Business Tax Working Group sees cutting hundreds of millions in tax breaks for mining exploration as one way of freeing up revenue.

Accelerated depreciation rules, which benefit miners and airlines in particular, are also likely to come under scrutiny, as the working group asks big business what it is prepared to give up in exchange for lower taxes.

A source close to the working group said the depreciation rules for mining were especially wide-ranging, and cutting the instant write-offs for explorers would be included as one option in its upcoming report.

”If you’re a mining company and you buy mining rights you get an immediate deduction for that,” the source said. ”You’re getting a right to mine, it lasts a long time, should you write that off over a period?”

Instant asset write-offs for miners are worth about $300 million a year, Treasury says. Accelerated depreciation of equipment such as aircraft, trucks and tractors cost more than $1 billion a year in forgone revenue.

Any removal of mining tax breaks would likely face a bitter reception in the industry, which is being hit by falling commodity prices and weak overseas demand.

When an April report from the working group floated cuts to exploration write-offs in the lead-up to the budget, the mining industry took out anti-tax advertisements in national newspapers.

The Business Tax Working Group, led by Board of Taxation chairman Chris Jordan, has until the end of this year to report on whether company tax cuts are justified and, if so, how to pay for them.

But after Ms Gillard said in June that she had ”no doubt” company taxes should be lower than their current rate of 30 per cent, the working group is set to argue the case this month for corporate tax cuts.

Echoing the Henry review of taxation, the group’s report is expected to say Australia’s relatively high company tax rate of 30 per cent is due to be reduced because it could affect the nation’s ability to attract capital.

The challenge, however, is how to pay for lower company taxes.

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Farewell Robert Hughes – critic, raconteur, fisherman, shooter,historian, memoirist

Robert Hughes at the 1997 Sydney launch of his book The Fatal Shore. Robert Hughes with former PM Gough Whitlam at the launch of The Fatal Shore in 1987.
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IN THE American century the art critic Robert Hughes was the first Australian to turn from England and take Manhattan.

Thousands of Australians, including his mates in the Sydney Push, Germaine Greer and Clive James, were carving careers in swinging London’s fag-end years. But Hughes was the only one to complete an Atlantic crossing.

He had erupted as a precocious art critic from the land of the convict taint on the pre-Murdoch Sunday Times when the man from Time happened to flip through a copy of Hughes’ 1969 flop Heaven and Hell in Western Art.

The magazine was America’s window to the world and the men and women who worked on it belonged to a sort of east coast Brahman class. But when the senior editor phoned to offer the Time art critic job, Hughes recalled he was so stoned he thought it was the CIA calling.

”In a measured and dignified way, I told this spook exactly what I thought of the American imperialism whose tool he was, of American policy in Vietnam, of American perfidy. It was quite a little performance. I then, secure in the knowledge of a good day’s work compressed into a couple of minutes, hung up in his ear,” Hughes wrote in a 2006 memoir Things I Didn’t Know.

Nevertheless, he moved to Manhattan in 1970 and wrote for Time for the rest of the century.

Along the way he evolved into a leading intellectual, who not only defended art against postmodernism but also educated and informed millions around the world in immensely popular TV series and books such as The Shock of the New in 1991.

His 1987 hymn to Australia, The Fatal Shore, is his best known work. The book heroically reminded Australians the convict taint that had caused collective amnesia in previous generations could be a badge of honour, and few were surprised when the expat emerged as a leading voice of the republican movement.

Hughes died in New York yesterday from a long illness. He was 74. He had been in bad health since a 1999 car accident in Western Australia left him in a coma. A protracted court case in which he eventually pleaded guilty to dangerous driving causing grievous bodily harm and was fined $2500 further eroded his health.

Prime Minister Julia Gillard said yesterday Australia had lost not only a frank critic and writer, but an esteemed historian who made significant contributions to tracing and telling Australia’s colonial history.

”Few people … can have been so completely cosmopolitan, and completely Australian as Robert Hughes. His was, in every sense, a great Australian voice.”

Another Australian occupant of the world stage, satirist Barry Humphries, said Hughes was an old friend and a great and fearless critic. ”He gave a wonderful and witty speech at my last birthday party in New York and I’m deeply saddened that alcoholism, or whatever name it sometimes goes by, should have claimed yet another distinguished victim,” he said.

His niece Lucy Turnbull said Hughes combined irreverence and larrikin charm and humour with an incredible gift for language: ”He was a real man’s man … he was a very keen fisherman and shooter as well as being an erudite and very learned communicator and so knowledgeable in the arts.”

Hughes came from an establishment, but Catholic, family. His grandfather was Sydney’s first lord mayor, his father was a highly decorated First World War pilot who trained Australian flyers in the Second World War and died when Hughes was 12. His brother Tom, was John Gorton’s attorney-general but, dumped by Billy McMahon, retired to a glittering career at the Sydney bar. He also had a brother Geoffrey and sister Constance.

He was educated at Sydney’s Riverview and, if the Jesuits did not keep their man, they inculcated a grasp of religious iconography that impressed the man from Time. Hughes failed to finish an architecture degree at the University of Sydney, drew cartoons and wrote art criticism for the Packer family’s current affairs magazine The Observer and then set sail for London in 1964.

In 1967 he married Danne Emerson. The marriage produced a son. Academic Catherine Lumby recalls the pain Hughes went through when they divorced. ”Life was pretty freewheeling for some in those days but Bob wasn’t one of them,” Lumby said. ”He … was clearly hurt by what was occurring.”

His son, Danton, committed suicide in in 2002.

Hughes married twice more. The second marriage, to American artist Doris Downes, was in 2001. She had flown to be with him after the 1999 Broome crash.

Barry Humphries knew Hughes in expat London and as young bohemians around Sydney in the mid 1950s. The satirist once joked he modelled Les Patterson on him, partly because in 50 years in New York he never lost his Australian accent.

Nor did Hughes lose his sense of place: He remained an Australian citizen.

Correction: The original version of this story incorrectly said Hughes’s sister Connie was a nun.

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Art critic and author was destined for success

ROBERT Hughes was always larger than life. His personality was so forceful that he dominated every gathering in which he took part, from a conference to a casual lunch. He was witty, irascible, opinionated and impatient with fools. Although everyone was his audience, he had a gift for friendship that put people at their ease.
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Hughes was one of a generation of great expatriate intellectuals, who had many characteristics in common. Like Barry Humphries, Hughes had the knack of shooting down opponents with one well-turned barb. Like Clive James, he had a lifelong love affair with the English language, no less obvious in a small magazine article than in a large book. Like Germaine Greer, he had a temper and an ego that occasionally alienated his fans.

He was always destined for success, but he shot to worldwide prominence with the television series The Shock of the New (1980). It was the ideal successor to the original art mega-series, Kenneth Clark’s Civilisation (1969). Hughes picked up the story where Clark had left off, displaying his gift for the well-turned one-liner.

Although most people probably got to know Hughes through his appearances on TV, he will be remembered for his writing. His early Art of Australia (1966) was a sparkling read, although of dubious value as art history. After spending 10 years as art critic for Time magazine in New York, the book The Shock of the New (1980) was more sure-footed and became a worldwide hit.

His masterpiece is undoubtedly The Fatal Shore (1987), a monumental examination of the early years of Australian settlement. For Hughes this project was a way of paying his dues to Australia. It surprised him that it became an international bestseller, making the small world of colonial history into a topic of global interest.

The Fatal Shore made Hughes one of Australia’s favourite sons. He sacrificed that high esteem after being catastrophically injured in a car accident south of Broome, in 1999. While sympathies were running high, he spoke and acted in a brazen, arrogant manner and was widely criticised. He returned to the United States denouncing Australia and swearing never to return.

But return he did, and all was forgiven and forgotten. The only problem was the state of his health, which had been permanently shaken by the injuries received in the car crash.

For a man like Hughes it was hard to grow old, let alone grow old as an invalid.

A man’s man and a ladies’ man, he was always the centre of attention. His views were forthright, and expressed with astonishing eloquence. He wrote with intelligence and integrity, and brought a literary flair to the much-maligned discipline of art criticism.

He will be remembered, quite simply, as one of Australia’s finest writers.

John McDonald is a long-serving art critic for Fairfax.

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Riding on Deek’s experience

It’s the odd-couple relationship which started from one of Canberra’s most devastating disasters and now Robert de Castella is ready to help Caroline Buchanan take Olympic Games gold.Almost a decade after bushfires ripped through Canberra’s south, destroying more than 500 homes and killing four people, Buchanan and de Castella have formed an athlete-mentor relationship they hope will yield Olympic glory.The pair hardly seem to have much in common – de Castella is a marathon legend with an expertise in endurance while Buchanan is a daredevil BMX star with a thirst for adrenaline. But both had to rebound after the fires tore through their lives and a meeting organised by Buchanan’s dad sparked a long-term relationship.It’s de Castella’s advice that is helping Buchanan deal with the hype and expectation of being a medal favourite in London.Buchanan will begin her Games campaign tomorrow morning when the seeding runs of the women’s BMX competition start at the Olympic precinct.She’s ranked No.2 in the world and is the time trial world champion, but the chance to win gold has been the source of her motivation for the past four years.‘‘[De Castella] just told me to be the professional I am and that I’m the ‘complete yellow pages book’,’’ Buchanan said. ‘‘He said anything that happens on the course I can handle it, and that’s great advice.‘‘I’m going to use that going into these races … it’s not about his bike knowledge, it’s about giving the support and I appreciate it.’’De Castella has been Buchanan’s official mentor since they teamed up through an Australian Sport Hall of Fame scholarship program initiative.But their relationship runs much deeper than mentor and student.The bushfires brought them together and they’ve remained close since. And even when she was nine years old, de Castella could recognise Buchanan’s talent.But it’s not the technicalities of flying over jumps they share.Instead, it’s the way to handle the pressure of performing on one of the biggest stages in world sport.De Castella was a marathon world champion in 1983 but could only manage fifth in his Olympic campaign the following year because he put too much pressure on himself and trained too much.Buchanan’s other high profile mentor – surfing great Layne Beachley – is also in London.‘‘I’m still getting used to talking about riding and not running,’’ de Castella laughed. ‘‘When we first met she just had that quiet confidence and determination to do well, but attitude is just one piece of the puzzle. It’s just such a big deal to come to your first Olympics and have that expectation of winning … it’s really challenging and difficult to deal with it.‘‘I don’t know much about the event at all, but I know what you need to do to manage all the pressure. I do have a bike and I have come off a few times, so I know the dangers, but it’s more about dealing with everything around what happens in the race.’’Buchanan was too young to compete when the sport was added to the Olympic schedule four years ago.Since then she’s had a burning desire to reach her goal of racing for Australia in London.The 21-year-old has worn the Olympic rings on a chain around her neck to remind her of what she was working towards. So is she feeling the pressure with her dream on the verge of becoming a reality?‘‘Not really, and I like pressure,’’ Buchanan said. ‘‘Diamonds are made under pressure and I definitely enjoy it. ‘‘I think most of the pressure is going to be on the local girl, so I’m just going to enjoy it.‘‘Winning the time trial [world championship] was good for me, I know over the four international races we’ve had this year, I’ve been the fastest by the clock on every single trap. ‘‘So I’m just focusing on consistency and that’s one of the big keys coming into an Olympics.’’
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Stable dumps suspect jockey

RACING giant Darley Australia has distanced itself from Mark Zahra after the top jockey was named as being under investigation for race fixing.
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Darley Australia’s managing director, Henry Plumptre, said yesterday that Zahra (below) would not ride a Darley runner until the police probe into his handling of a horse at Cranbourne last year was completed.

”Mark is not currently riding at the moment, but I think we’d leave it until the investigation is finished,” Plumptre said.

”This industry stands or falls through the integrity of our sport, and if there is an issue all I can say is that we’d be extremely disappointed.”

Zahra was reported as saying yesterday: ”They told me I’m not needed, at least until this thing’s over. The really disappointing thing is that I haven’t been charged with anything. I’m implicated in something, I guess, but I haven’t been charged.”

Darley is owned by United Arab Emirates Prime Minister and Dubai ruler Sheikh Mohammed, who has racing bases in six countries. Zahra has been one of the leading riders for the global stable’s Melbourne base, collecting more than 100 wins on Peter Snowden-trained runners during the past few seasons.

Zahra rode Baikal in a race at Cranbourne in April last year. He is being investigated for allegedly riding against beaten favourite Retaliate to give Danny Nikolic’s heavily backed mount, Smoking Aces, an improved chance of winning. Smoking Aces won the race.

Zahra was named in The Age yesterday and on Monday night’s Four Corners program on the ABC as being under investigation, along with Nikolic, for alleged race fixing.

Racing Victoria is waiting to be briefed by police on the investigation before considering any action against the riders.

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Six-day rule costs Swan two games

COLLINGWOOD’S hard-line decision to suspend Dane Swan for two matches was based on a season-long ban on drinking alcohol six days before a game. Swan’s indiscretion also violated a recent vow by the players to avoid alcohol completely until season’s end.
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Swan was suspended after the Magpies found evidence that he had been drinking on Sunday night. Swan did not deny drinking, as has been speculated, but did deny that he had consumed a significant amount, the proverbial ”skin full”.

Collingwood’s director of football, Geoff Walsh, said it was merely the fact Swan had broken a team rule that cost him. ”Fundamentally a strict club policy was not adhered to, and we felt that couldn’t be ignored,” he told the club’s show on Fox Footy last night.

”There’s nothing more to the suspension beyond the drinking and beyond the breach. It’s a clear mandate from the playing group and supported by the entire football department that six days before a game you shouldn’t be out and about, let alone drinking.”

Walsh said the rules applied to every player. ”Like everyone, he’s subjected to and … agreed to certain rules and certain protocols. And when they’re breached, there are consequences.

”Dane’s disappointed, there’s no doubt about that. Disappointed that he’s let himself down, let his teammates down and let the football club down. There’s no doubt he’s remorseful and disappointed but entirely understanding that his actions have led to the consequences that are on the table.”

Walsh said the suspension sent a message. ”I don’t think we’re cutting off our nose at all. What we are [doing] … is reaffirming and endorsing that we have rules and regulations that everyone, whether they’re your best [in the] playing group or they’re No. 500 on your list, we all operate and live by the same standards because we’ve all signed off on them.”

Swan is likely to play in the Magpies’ VFL team in the second week of the ban.

Collingwood considered there was evidence that Swan had been drinking when he turned up at the club for training and meetings on Monday. There is speculation he was queried about his physical condition by a teammate on Monday morning.

In the past few weeks, a concerned Collingwood skipper Nick Maxwell and vice-captain Scott Pendlebury called a meeting at which players pledged to abstain from alcohol until the end of the season.

Even before the pledge, Swan would have broken the prohibition on drinking by 24 hours. But the players’ vow to eschew alcohol meant he had broken what the club called its ”protocols” on two counts.

The decision to suspend him was made at a meeting involving coach

Nathan Buckley, Walsh, the leadership group and several other senior players. It is perhaps the clearest sign of the expected tougher line on behaviour by Buckley.

As a result of the suspension, Swan will miss Collingwood’s critical games against Sydney and North Melbourne, as the Magpies, who play only top-eight sides in their last four games, seek to secure a top-four spot.

The two-match penalty, immediately the subject of debate given the potentially damaging effect it might have on Collingwood’s flag prospects, is consistent with the suspension meted out to midfielder Sharrod Wellingham, who was outed for the season’s first two matches after he missed a rehabilitation session and admitted he had been drinking the night before.

Collingwood’s official statement said: ”The decision was made after the club became aware that Swan had been drinking alcohol six days before next Saturday’s match against the Sydney Swans, a clear breach of club protocol. The suspension followed discussions between a number of parties, including the leadership group.”

Collingwood is 14-4 and in third spot, but has Hawthorn chasing hard and fifth-placed West Coast still seeking the double chance afforded by a top-four finish.

As matters stand, the Pies would have to travel to Adelaide in the first week of the finals, with a trip to Sydney another possibility. All this is to be determined over the last month, beginning with Saturday night’s blockbuster at ANZ Stadium in Sydney, where Collingwood has won the past six times it has played there, but will have to do it this time without its 2011 Brownlow medallist and three-time Copeland Trophy winner.

Swan’s absence may be keenly felt. He has had an outstanding two months since he missed two games with a hamstring injury in rounds nine and 10. In the eight games since, he has averaged 39 disposals and been dominant in at least three games, soaring to the top three in Brownlow Medal betting.

The three-time All-Australian has avoided club suspensions or sanctions for several years, despite a reputation for enjoying himself. His most serious blemish was as a youngster, from an incident in 2003, which led to a conviction for affray. Swan was ordered to perform community service and pay $100,000 to a victim in a Federation Square brawl with a security guard. The incident almost cost him his career.

The Pies did manage, arguably, their best win of the season without Swan, when they defeated the Crows in Adelaide in round nine.

His suspension adds to a bad week for the AFL. It came 24 hours after the Western Bulldogs stood aside young midfielder Tom Liberatore for the remainder of the season after he was found by police drunk and with an ecstasy tablet in his pocket in the King Street nightclub district in the early hours of Monday.

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Swan, Buckley men on different paths

TO SAY that Dane Swan was bound to run foul of Nathan Buckley once the new coach was appointed would be an exaggeration. But it is clear that Collingwood’s past two Brownlow medallists diverge in their approaches to football.
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Unlike his coach, Swan has never been one of those players who does absolutely everything – peeling the proverbial skin off his chicken – in his preparation for games. He is a serious competitor, but relative to, say, the meticulous Scott Pendlebury, the tattooed midfielder is more old school. He has never hidden his fondness for a good time and a full social life.

Swan gives the nonchalant impression that he plays football for enjoyment and mateship, and that there are aspects of the modern game – the meetings and monastic lifestyle that it demands – that he finds odious.

Hence, no one in the Collingwood loop was terribly surprised when Swan withdrew from the leadership group before the start of the season. He’s not one for telling teammates how to behave, or for organising and running meetings. He trains – hard – and he plays.

The decision to suspend Swan for two matches is a tough one, given he hasn’t done anything to anyone. To our knowledge, he didn’t put a barman in a headlock, punch or abuse a bystander. He’s had a drink six days before the next match. In days of yore, that session would be compulsory. In his version of events – which may or may not differ from the club’s, the Pies having sought ”external” verification as well as ”internal” – he didn’t drink much.

The decision to suspend Swan is consistent with Buckley’s long-standing hard line on player behaviour. At a similar stage of 2006, Collingwood skipper Buckley was disappointed when his predecessor, Mick Malthouse opted not to suspend Chris Tarrant and Ben Johnson for their role in a drunken brawl in the wee hours.

Malthouse took a more tolerant view of player misdemeanours than his skipper, who also believed that the players should have more say in enforcing standards, along the lines of Sydney and Geelong.

Buckley’s belief in player empowerment means that the leadership group, headed by Nick Maxwell, had a significant say in the decision to suspend Swan. As football chief Geoff Walsh said last night, this is a case of players abiding by their own standards, which they ”signed off on”.

That said, there is no question that players want to do the bidding of their new coach and would frame the penalty accordingly, just as their pledge of abstinence from alcohol for the last part of the season would be made with Buckley’s uncompromising standards in mind.

The tricky part for a club is always: a) what to do when the offending player is a star, and b) when the upcoming games are crucial.

There is always an argument that the rest of the team ought not be penalised for the actions of an individual. Malthouse took that stance for much of his coaching career, trading Tarrant rather than suspending him, in 2006. When Collingwood went harder and suspended Alan Didak and Heath Shaw for their drunken car crash and fictitious explanation in 2008, the club really had no choice because the pair had lied.

Here, the benchmark for punitive action was established before round one, when Sharrod Wellingham was rubbed out for two matches for drinking and missing a rehabilitation session. Walsh noted the ”consistency” of the Swan penalty.

That’s the problem with curfews and prohibitions. They can bite you at the least-opportune times.

Swan’s loss could well prove the Swans’ gain.

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