Subjects: petrol; Ryan by-election; federal budget; Telstra; pensions; National Party; economy; Shell/Woodside takeover; foot and mouth disease.
E&OE....................................
BATH:
Good morning, gentlemen. Thanks very much for joining us.
PRIME MINISTER:
Pleasure.
BATH:
Thanks for joining us, Mr Howard. Why did it take you so long to realise that you'd got it wrong on petrol?
PRIME MINISTER:
Well, I guess I'm like everybody else. I'm human and I make some mistakes. But it was quite obvious that the public wanted a significant gesture from us on the price of petrol - not that it can bring it down dramatically - the only thing that can bring it down dramatically will be a fall in the world price. I think everybody knows that.
So we are going to reorder some of our priorities and we're not only cutting it by one and a half cents a litre but, importantly, we're abolishing the automatic tax rises that happen every six months under a regime that was put in place 18 years ago. That's a very good, long term reform.
BATH:
For some time though, Prime Minister, you were saying it would be economically irresponsible to do that, so why is it possible?
PRIME MINISTER:
Well, what I was saying was that, having put $1.6 billion roads, it was going to be very difficult to go further. And the reason that we've been able to go a bit further is that we are going to reorder priorities in the budget. It will be a tight budget, it'll be a sensible budget; fortunately, we're in a very strong fiscal position.
The government doesn't owe much money, we've repaid $50 billion of the $85 billion debt we inherited from the former government, so we're in a position to have a tight but a sensible budget and that's what we intend to do.
MILNE:
Prime Minister, you've scrapped indexation, as you said. Will you guarantee that any government which you lead won't increase the rate of excise on petrol?
PRIME MINISTER:
We wouldn't want to, Glenn. We wouldn't want to. But, I think more importantly .
MILNE:
That's not a guarantee, though, is it?
PRIME MINISTER:
Well, I mean, look, I don't know years into the future, but what I can guarantee is that we're going to abolish the automatic indexation of excise. And even if some future government wanted to do so, it'd have to go through the Senate, but I wouldn't be wanting . proposing to increase it, no.
But, what I'd like to know is, does the Labor Party support the reduction of one and a half cents? And will it stick to that policy if it wins the election at the end of the year?
MILNE:
So, you're calling on Kim Beazley to match your guarantee?
PRIME MINISTER:
Yes, I'm calling on Mr Beazley to say today a future Labor government will not only keep the reduction of one and a half cents, but it will not reintroduce automatic indexation, because it was a Labor government that gave us automatic indexation. I mean, we've got rid of it and we're not going to bring it back. So, I want to know whether Mr Beazley's prepared to make the same commitment.
MILNE:
Could you understand that voters in their current cynical mood would put your guarantee in the same basket as your never, ever promise on the GST?
PRIME MINISTER:
Well, in the case of never, ever, I had an election - remember? I mean, I didn't change my policy after an election and before the next one, I changed the policy - put the change in front of the people and said do you approve of this change. I think that's a vastly different thing from going to an election on one policy and doing the opposite thing when you get in.
MILNE:
Well, the Federal Government's done its bit on excise, would you like to see the states also match your actions?
PRIME MINISTER:
Well, I certainly would. I mean, we've had an enormous number of lectures from state governments over the last few months on petrol pricing. We pay the states $1.7 billion of fuel-related revenue every year, the Queensland Government can give a rebate to its motorists of eight cents a litre, why can't the New South Wales Government? Why can't the Victorian Government? Why can't the Western Australian Government give a similar rebate?
See, the states are getting this money, we're collecting it on their behalf, we're giving it to them. We've done our bit, why don't they do their bit?
MILNE:
Well, if they did that, how much would the price of petrol come down further, do you think?
PRIME MINISTER:
Well, it would depend on what happened in each individual state, but it is eight cents a litre cheaper in Queensland than it is in New South Wales.
MILNE:
So, that could be the situation across the country?
PRIME MINISTER:
Well, there is no reason, as I see it, why the states can't reorder their priorities. If it's good enough for me to reorder my priorities, why isn't it good enough for Steve Bracks and Bob Carr and Geoff Gallop to follow Queensland and reorder their priorities?
I mean, we've had, you know, premier after premier taking cheap populist shots at us. Why don't they put their money, their taxpayers' money which we collect on their behalf where their mouths have been?
BATH:
Prime Minister, in the state of Queensland, we have the Ryan by-election coming up. Of course, that's going to be a federal by-election? Do you think your move on petrol prices is going to make a difference?
PRIME MINISTER:
Look, I don't know. Look, what you've got to understand about the petrol prices thing is that it wasn't meant to be some cheap political fix.
BATH:
You've certainly been accused of that?
PRIME MINISTER:
Well, I mean, I get accused of a lot of things. It actually goes with the territory. But, we did it because we accepted the public felt that a gesture from us was needed. And that's why we did it.
BATH:
So, in Ryan, what would be an acceptable swing against ...
PRIME MINISTER:
Oh look, I'm not getting into the question of political commentaries. I'm a participant on the political playing field, I'm not a commentator. That is for other people to talk about.
Look, it's tough because the climate is not good for a by-election. It's very tough. And we're up against it.
MILNE:
Do you think you could lose?
PRIME MINISTER:
It's very tough, Glenn. You can get big swings in by-elections but we've got a good local candidate. We're taking it seriously, we're not taking it for granted. We're door-knocking, we're doing all the orthodox grass-roots things because we treat it very seriously and we don't take the public for granted.
MILNE:
What would a defeat or a big swing against you mean for you leadership do you think?
PRIME MINISTER:
Well, that's a matter for the commentators.
MILNE:
Well, it's a matter for the Party, I think.
PRIME MINISTER:
No, it's a matter for the commentators.
MILNE:
But you wouldn't reassess whether you think it's a good idea to continue on to a general election if you were defeated in Ryan?
PRIME MINISTER:
Well, Glenn, you're asking me to hypothesise about a lot of improbables. And I'm just focussing on talking to the people of Ryan and focussing on ... you know, trying to balance listening to the public's concerns with the maintenance of very strong economic policy.
MILNE:
One of the issues that was raised in the party room last week, I believe, by one MP was that the government needs a vision for the next term. Have you got a vision for the next term?
PRIME MINISTER:
Well, I've got a number of things I want to say about my third term agenda, but this isn't quite the right time to do it. We're in the middle of a by-election. We're in the process of responding to concerns from small business and the public in relation to the Business Activity Statement, trusts and petrol. And that's not the time to be talking about the third term agenda.
But I certainly have in mind a very strong third term agenda. And people will be hearing a lot more about it as time goes by.
MILNE:
Well, of course we know that you've got limited budget options, spending options now because of the decision on petrol excise? Does that mean big income tax cuts are off the agenda for the next election?
PRIME MINISTER:
Well, I don't want to get into that, Glenn. I mean, that question assumes that certain things were on the agenda. I mean, we will maintain a budget surplus.
But, we will also recognise that we have done a tremendous job in reducing debt. And our budget position is really very strong. And the petrol excise thing was of course a tax cut.
MILNE:
Well, what do you think the surplus is now if you say it's very strong?
PRIME MINISTER:
Well, it's strong enough. I mean, I'm not going to start speculating precisely about what next year's budget surplus is going to be. It's too early to do that. But I know from the figures in the media economic and financial overview that we are still solidly in the black and we intend to remain in the black.
But equally, there's no point in running up unnecessarily large surpluses. It is the people's money and they want it used in an intelligent fashion, particularly when we've retired so much debt already.
MILNE:
Peter Costello seemed to send you a very public message on Friday when he said he expected your support in keeping the budget in the black and keeping spending tight. Is there any tension with the Treasurer over the issue of the impact on the revenue of all these backflips?
PRIME MINISTER:
Oh no. He's right. We do need to keep the budget in the black. And that's something that I have said to my colleagues in the cabinet and said to my colleagues in the party room. And we are one in making sure that the budget is kept in the black just as we're one in bringing in taxation reform and all the other things that we've worked on together.
BATH:
So, Prime Minister, why do you think Mr Costello felt it necessary to give you such a public message?
PRIME MINISTER:
Oh well, that's the interpretation some people have put on it. I didn't see it that way because what he said was what I had said to the Cabinet and members of the party room.
When we had the Cabinet meeting that endorsed the change in relation to petrol excise, I said to my colleagues this means we're going to have a very tough ERC. And some things that we would otherwise . might have contemplated doing we won't now be able to do. I actually said that to my cabinet colleagues so what ... you know ... Peter and I are both of the same view on this.
BATH:
Was the decision about petrol unanimous then?
PRIME MINISTER:
Every Cabinet decision is unanimous.
MILNE:
Ultimately.
PRIME MINISTER:
That's right.
MILNE:
Telstra, Prime Minister ...
PRIME MINISTER:
Yeah.
MILNE:
You say the budget's in the black, you say it's in a pretty solid position. But of course, Labor says you have the future sale price of Telstra built in to those forward estimates and the thing hasn't been sold. And indeed we see reports that service levels might fall because Telstra's cutting spending on phone service and so forth.
I mean, how can you build in that figure to the forward estimates?
PRIME MINISTER:
Well, can I make a couple of comments about that. Firstly the future strength of the Budget does not stand or fall on the sale of Telstra. That's the first thing . point that should be made there's a lot of misunderstanding about this. People think the whole thing is dependent on it, that's not true actually. I mean, we're in a very strong fiscal position irrespective of what might happen in relation to the sale of Telstra.
And the things have been put in the Budget in the normal way, because the Department of Finance says that the conditions that are attached to the sale of Telstra - and they're very important conditions - on the assumption that those conditions are met. And it's reasonable to include the future sale proceeds and the debt public interest savings in the Budget.
But our position on Telstra is that we've first got to be satisfied we've got service levels right and that is a precondition to any further action. That's been our policy now for a couple of years.
MILNE:
Well, if the Budget's in such good shape why persist with things like the pension claw back. And we see today reports that as a result of the GST we're going to have similar action in relation to rent allowances and pharmaceuticals, but doesn't that doesn't that give the impression that the Government is flint-hearted? Do you think there might be problems?
PRIME MINISTER:
No, no . because Glenn there is no clawback. And what happened with those things is that they were paid in advance and we're not taking them back, we're just avoiding paying them twice. I don't think to avoid .
MILNE:
But for the sake of two dollars a week for a pensioner, doesn't that .
PRIME MINISTER:
Yeah, but, I mean, you can say that, but hang on, I mean, hang on that would be . for the sake of two dollars a week, you make it sound as though we're taking it away, we're not.
We paid it in advance and we're not paying it again to avoid a double payment. Now, that's not taking something back. I mean if I give you ten dollars .
MILNE:
So, so .
PRIME MINISTER:
. gave you ten dollars last week .
MILNE:
But is it worth the anger?
PRIME MINISTER:
Well, when you say, yes, but I mean, there's a lot of money and a lot of other people, say, well if I can get . they can get paid for it what about me? I mean, where . you know, you can't, I mean, let's be fair. We paid that in advance so that . and people had an upfront advance payment. All we're doing is ensuring that it's not paid twice and I don't think that's a claw back.
BATH:
Prime Minister can I ask you about the National Party. We've seen a lot of public squabbling. We've seen a lot of disunity in the National Party. You must be very disappointed about it.
PRIME MINISTER:
Well, the National Party is a separate party from the Liberal Party and it's obviously . was concerned about the outcome of the election in Queensland and the Queensland branch has always been quite a big branch in the National Party and .
BATH:
But the Nationals are .
PRIME MINISTER:
. it's going through a . through a difficult phase. But federally my National Party colleagues are a very strongly committed as part of the Coalition team. John Anderson and I work together very closely and whilst there are things happening on the ground in some of the National Party branches, overall as part of they're a very strong part of the team.
MILNE:
Prime Minister can we talk about the economy more generally. For the first time in a long time we're seeing headlines that say a potential recession is about to come upon us, what's your view of the strength of the economy?
PRIME MINISTER:
Well, it's still fundamentally very sound - low inflation, low interest rates, budgeting surplus, strong retail sales, structural reform, taxation, industrial relations.
However, the December quarter looks as those it was softer than earlier quarters and I would expect the growth figures to come out during the week .
MILNE:
Negative, though, do you think?
PRIME MINISTER:
No I'd be . I mean, they'll be lower than previous ones. I don't know about whether something will be negative or not, I just don't know. I can't tell at this stage but it does look as though they'll be lower than what they have been.
MILNE:
But you think still positive?
PRIME MINISTER:
Well, I just don't know Glenn. I .
MILNE:
On dangerous territory for the .
PRIME MINISTER:
Well, people start talking the recession, I mean, recessions are two quarters of negative economic growth .
MILNE:
Well, that will put us half way there, wouldn't it?
PRIME MINISTER:
Well . well, yeah, some people would say that but I don't . it'll be low but can I make one point about this. I hear the Opposition saying that this is due to the GST. Well, in fact the tax reform package injected an additional four to five billion dollars into the economy this year. If we hadn't have had that fiscal stimulus from tax reform then maybe some of the things that they now talk about are being .
MILNE:
But the other .
PRIME MINISTER:
. would have been more open.
MILNE:
. that the GST dampened consumer confidence .
PRIME MINISTER:
Well, we . how can it have dampened it when you're putting extra money in people's pockets? I mean, it's a complete contradiction. I mean, I keep hearing the Opposition say it's the GST. Without tax reform, we may have had a more contractionary situation, because we wouldn't have been injecting as much money via the big personal tax cuts.
MILNE:
Well, this is certainly .
PRIME MINISTER:
Into the economy.
MILNE:
This is certainly not the environment for, well, certainly not an environment for an increase in interest rates, but is it the environment for a cut in interest rates?
PRIME MINISTER:
Well, that's a matter for the Reserve Bank. And I simply note that the commentaries - which I won't join - are certainly suggesting that the interest rate environment now is a lot more benign than it was.
BATH:
Do you think that will change, though, Prime Minister, given the cut to petrol excise? Last year you were saying any cut would put upward pressure on interest rates?
PRIME MINISTER:
What I said is if you went into budget deficit, you would have upward pressure on interest rates.
Given the slowing of the economy, the fiscal stimulus from the cut in petrol excise is quite welcome, according to one approach. I mean, people could well take the view that what you need . have needed over the last few months and over the next twelve or eighteen months is a mild fiscal stimulus.
And certainly the tax reform, via the personal tax cuts and the cut in petrol excise, together, provide a very significant fiscal stimulus. And that is a good thing that will even out the impact of any contraction in what has been a very fast rate of economic growth. I mean, we're talking here about coming off a very high level of growth.
We're not talking about, sort of, having bumped along at the bottom for five years, we've been roaring ahead at the top for five years and if there's some slow down, well, that is to be expected. The important thing is to make sure it's not a big slow down.
MILNE:
One decision that people are looking at in terms of the strength of the economy is the Shell attempt to take over Woodside. Just quickly - has the decision been made and will Shell be allowed to take over Woodside?
PRIME MINISTER:
Well, no decision's been taken. There are procedures to be followed by the Treasury, you get your recommendations from the Foreign Investment Review Board and I'm sure the right decision will be taken.
MILNE:
And the right decision would be?
PRIME MINISTER:
Well, that's a matter for the Treasurer, acting in accordance with the law.
MILNE:
And finally, Prime Minister, foot and mouth disease, the tragedy in Britain, we've all been watching closely - are we safe here?
PRIME MINISTER:
Well, we will bend every effort and strain every sinew to make sure we are. We haven't had foot and mouth disease in Australia for a hundred and thirty years.
And I want to say to the Quarantine Service, if you want more resources from the government to keep this out of Australia, you'll get them. I want to say that, to all of the Australian people, that our quarantine restrictions are the toughest in the world and they will continue to be the toughest in the world.
We will not, under any circumstances, compromise the strength and the quality of our quarantine services. There are nine hundred thousand people come into this country from Britain each year, that's an enormous number - and we have to, you know, coming and going - and we have to make sure that, you know, there is no earthly possibility of anything getting in because it would be quite catastrophic for this country.
MILNE:
Prime Minister, we thank you.
BATH:
Thank you very much for joining us, gentlemen, we'll leave it there.