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Leading the news this morning:

The US president has outlined his vision for the Middle East, which includes a two-state solution for the(口误，应去掉)Israel and the Palestinians based on 1967 borders. The announcement was given a less-than-enthusiastic reception by the Israelis with Benjamin Netanyahu saying it could compromise Israel(口误，应为Israel’s) security.

The former head of the International Monetary Fund Dominique Strauss-Kahn has been granted $1 million bail by a New York court. The court also ordered he be held under home detention with 24-hour electronic monitoring. Strauss-Kahn will have to spend another night in jail before he’s released.

Western Australia has punched a gaping hole in Wayne Swan’s budget. It’s increased its iron-ore royalties by $2 billion. The Federal Government has promised to reimburse miners for state royalties under its mining tax. Resources Minister Martin

Ferguson is threatening to retaliate by reducing Western Australia’s GST revenue or withdrawing its infrastructure funding. Bali Nine drug smuggler Scott Rush says he still suffers (from) nightmares about being executed. In a letter to The Age newspaper, Rush says he’s found new purpose since winning his appeal against the death sentence. He says a dreadful burden has been lifted and his determination to reform has been strengthened.

And a massive fire has destroyed a petrochemical factory in Melbourne’s south-east. About 100 firefighters aided by helicopters battled the blaze in Dandenong in the city’s south overnight. Residents in several surrounding suburbs were told to stay indoors as thick plumes of smoke blanketed the area.