KING: Prime Minister Kevin Rudd, good morning and welcome to 612 ABC Brisbane.
PM: Good morning Madonna, thanks for having me on the program.
KING: Can you fix home loan affordability?
PM: No we can't fix it. What we can do is do whatever we can within the powers of Government to improve it.
Housing affordability has been a looming crisis for some years in Australia. That's why in opposition last year we convened a Housing Affordability Summit and put forward a whole series of policies that we thought would improve the situation for those trying to enter the housing market in the first place, first home buyers, but also, do what we can to assist people who are struggling to get access to affordable rental accommodation as well. No silver bullets, but we are trying to take measures which recognise that working families are under financial pressure and they need every bit of help that they can get.
KING: Interest rates are expected to go up tomorrow. What will you be telling your Cabinet this morning?
PM: Well, discussions within Cabinet are always confidential. But there is no great secret to the fact that since we took over the Government of Australia we have been facing a very big inflation challenge. It's not a matter of opinion, it's a matter of fact, that when the Government changed Australia was experiencing its highest inflation in 16 years. And on top of that, with 11 interest rate rises now in a row, we inherited a situation in Australia whereby we have the second highest interest rates in the developed world. That's what we face, that's what we inherited, but we now therefore have a challenge to do what we can to tackle the inflation beast. That's why I outlined in January a five point plan to do so.
KING: Would you help your kids to buy their own home or should they do it themselves?
PM: I think every parent, to the extent that they can, would assist their kids to try to get into the housing market. I think that is just a natural human response.
But the big challenge is, if you look at the impact on housing affordability across the country, the new NATSEM data produced as of December last year, that is, as of when the Government changed, indicates that we've got 1.1 million lower income families in Australia now spending more than 30 per cent of their income on housing costs, they face a real challenge.
What we can do for first home buyers is a policy already put out by Wayne Swan the Treasurer, which assists by creating superannuation style accounts for first home savers. First time in the country's history, First Home Saver Accounts, which enable people to save for the deposit for their first home and get preferential taxation treatment on the way through to boost their savings nest egg so they can get into the housing market earlier.
KING: In talking about super, economists say that the $30 odd billion you've promised in tax cuts will be inflationary. A poll in the paper here on Saturday suggested people would prefer to get that money, the tax money, as super. Is that something you would consider?
PM: Look, we made a very clear cut commitment before the election that tax cuts will be delivered to working families and working families need those tax cuts, partly for the reasons that we've just been talking about. They are under financial pressure and dealing with challenges from the petrol pump through to the grocery prices through to the cost of child care through to paying the mortgage
KING: So the tax cuts will remain?
PM: Tax cuts, we're serious about our commitments to the Australian people. We said we'll do it, we are going to do it.
But on the savings front, one of the measures that we have introduced to encourage private savings is the one I just talked about before which, when fully implemented, one of the projections we had last year was that our First Home Saver Account program would result in an additional amount of national savings, private national savings, in the vicinity of about $4 billion. That's one step in the right direction.
KING: Have banks gone too far do you think offering 100 per cent loans, offering people, perhaps, enormous amounts of money in the hope that they can pay it back?
PM: Banks will make their own independent commercial decisions, and I think everyone out there seeking to obtain a home mortgage has to go into it with their eyes wide open and looking at the fine print of what banks are offering.
KING: But is there any argument for the banks not to pass on any interest rate rise we expect tomorrow?
PM: Well, banks make their own decisions on the commercial rates which they set. What the Reserve Bank does, of course, is set the official rate.
KING: Yes, but the Prime Minister's voice carries weight in that debate.
PM: Well what we've said before, and Wayne Swan the Treasurer said before, is that beyond official rate settings, when we've had adjustments by banks outside that framework as we did earlier this year, there was an entirely appropriate response from the Treasurer Wayne Swan, saying that banks experiencing record profitability should be very, very mindful of their corporate and community standing before leaning on people who borrow from those banks any further. And that applied to, as I said, interest rate settings by the commercial banks beyond the official interest rates policy of the Reserve Bank.
KING: So you would expect banks not to raise interest rates above any increase that the Reserve Bank announces tomorrow ?
PM: Well the official interest rates regime of the Reserve Bank will be set. They are independent. In fact we have enhanced their independence since we formed government at the end of last year. That is one thing. And that takes into account the overall monetary policy settings for the country. We at the government level of course are responsible for what we can do through the budget, to take as much pressure off the Reserve Bank's inflation challenge as possible. But when it comes to the individual decisions of the commercial banks, they make those and if they move outside of official interest rate settings, then mindful of the general circumstances of financial markets at the time, then I am sure the government will not be restrained from making appropriate comment.
KING: How worried do you get about this interest rates? Is this something that actually keeps you awake at night?
PM: Well it is a core, core challenge. The first responsibility of Government, beyond national security is to provide for macroeconomic stability. And therefore if you are like us and you have been elected for just three months, the facts say, the data says, the statistics tell us that as of when we assumed government, that we inherited the highest inflation the country has seen in 16 years and the second highest interest rates in the developed world, this is a real challenges. I am not pretending that it is anything other than that.
That's why in January, barely after six weeks in office, in Perth I announced our five point plan for tackling inflation which goes to setting a responsible budget surplus target for the year 2008 - 2009, at 1.5 per cent of GDP and secondly dealing with the question of private savings and what we do on the supply side of the economy as well, which is skills and infrastructure and workforce participation.
KING: At the beginning of this program I said everyone is only a number of pay packets away from homelessness and we are doing a special report this morning on the state of homeless in Brisbane, prompted largely by your call that your MPs go and visit a homeless shelter, do you know how many of them have done that?
PM: No I don't have a full report back from the caucus yet but we will be discussing this very soon when the caucus reconvenes in Canberra. What we have done in response to that of course is launch the government's first white paper, and that is on homelessness, to get to absolute tin-tax with the causes of the fact that in Australia today we have got more than 100,000 people who are homeless according to the census data, and what we can practically do to bring that number down.
KING: You are 612 ABC Brisbane listening to the Prime Minister Kevin Rudd, today is his first 100 days in office. Prime Minister, talks have been held between your government and Indonesia about a possible transfer treaty for Schapelle Corby and members of the Bali Nine. Can we expect them home by Christmas?
PM: Oh look in terms of those matters, first and foremost a number of them lie before the courts and the judicial process in Indonesia at present and therefore I think it would be completely unwise to comment on the state of those cases prior to them being finally and fully determined by the Indonesian courts. Secondly, I am sure my colleague the Justice Minister or the Minister for Home Affairs I should say and the Attorney General, I am sure are in contact with their Indonesian counterparts about the best settings for the future.
KING: But has this moved forward considerably in the last couple of months as reports suggest this morning?
PM: Well discussions have been underway for a long time, and I think these go back to the days of the previous government as well. Minister Debus has raised the matter of prisoner transfer treaty with Indonesia, with the Indonesian Attorney General and their Foreign Minister, discussions are continuing. But it is not appropriate to comment until these things have been resolved one way or the other. And as I said, in relation to some of those individual cases that you mentioned, they are still before the courts in Indonesia.
KING: We are talking about repossessions and the like, I read on the weekend where you have cancelled the project worth $10 million I think to help make rain in the South East. Given the pretty dire circumstances South East Queensland is in, don't we need to try everything?
PM: The key challenge when it comes to effective long term water policy is first of all, acting effectively on climate change where our predecessors did not act. They buried their head in the sand. Secondly when it comes to appropriate water infrastructure for the future for the National Government, also take a leading infrastructure role rather than simply blaming the states. So what have we done about that?
One of our proposals in Government is to establish a $1 billion urban water infrastructure fund and it is there precisely to assist State Governments and water authorities to invest in new projects for example, desalination projects to assist long term water security.
In the past the National Government under Mr Howard did not see itself as having any role in this area. I believe things have got sufficiently serious that you've got to be in this planning, assisting, helping; not just carving from the side.
KING: Some would argue this was a project that was going to do that?
PM: Well I'll defer to the experts on that one. Can I say that we believe that core planning for the future must go to the elements of critical water infrastructure, making proper provisioning for the future for things like desalination plants, where local, state and other water authorities deem those to be appropriate as they have in various states around Australia.
And secondly, on basic things like lets call it, the effectiveness of water pipes around the country. Many urban water pipe systems have been laid down a century ago leak like hell resulting in certain cities of up to 30 per cent loss and leakage.
That's why we established a $250 million fund to partner with local authorities and State Governments where appropriate to deal with that. In other words, to reduce the wastage of water which currently occurs.
KING: One hundred days in the chair, is this the hardest thing you've ever done?
PM: Well it's certainly the most challenging thing I've done Madonna, but it's very satisfying that you can think and plan and hope that you might be able to make some changes for the nation's long term good. But actually being elected to do something about it, well that's something else.
The mission statement is pretty plain for us, and that's how do you build a modern Australia to deal with the challenges of the future, to secure a future for not just the nation, but for working families as well. And there big challenges but we're we've got the sleeves rolled up
KING: What's been the toughest day?
PM: To be blunt, when I got the phone call to say that in our near neighbour to the north, East Timor, there had been attempts to decapitate the entire democratically elected leadership of that small democracy.
That involved some difficult decisions and we turned it around within 24 hours by having troops on the ground and further police on the ground within the day. And I think that was an appropriate response.
KING: People listening now know you, you were part of our inside Canberra segment each Wednesday for years. How's your life changed?
PM: I think there are less hours in the day Madonna. It used to be 24 I'm not sure anymore.
KING: How many hours of sleep a night do you actually get?
PM: The answer to that question is not enough.
KING: But roughly 4-5? 7-8?
PM: Well it varies, depends what on. I've got to get up early and think about a interview with Madonna King.
KING: What about last night? How much did you sleep last night?
PM: I'm usually in bed by midnight. But I've been up recently. Look if you talk to all your listeners, I find with most people across the country is that people are working harder and longer to make ends meet. Talk to families about how they manage to hang it together for weekends these days.
It's not just looking after the kids but doing some part time work on weekends as well.
KING: You talk to those people and they say too that it would be so easy for a politician to be out of touch and they see there politicians as getting out of limousines and going to nice dinners. Can you see that it would be easy to get out of touch being a politician?
PM: Yep I can, very easily. It's one of the reasons why last Saturday not two days ago but nine days ago, I was back in Brisbane doing my mobile office up in Oxford Street, Bulimba talking to constituents who have been waiting to see me for some time.
And that's one of the reasons why yesterday, up at Narangba Valley State High School, we had a Community Cabinet, the first in Queensland since the election of the new Government. There you had us with six, seven, eight hundred people from the local community, in a community hall, and unlike our predecessors, putting the whole cabinet up front and opening yourselves to questioning about anything from anybody.
Challenging experience but I think it's really important for any Government to remain in touch and that is to throw yourself open to community at every opportunity.
KING: You say you came up Saturday week ago. The last Prime Minister we had lost his seat along with the Prime Ministership. How often do you intend to come up and actually look after that electorate business?
PM: As often as I can. I think people in my local community will understand I've got a few other things on my plate at the moment. But, I'll be back in Brissie as often as I can, and when I get a chance, there talking to people.
In fact after Community Cabinet last night a few of the colleagues wanted to go out and have a bite to eat, in fact it Anthony Albanese's birthday, so I said the best place to go was my electorate. So off we went and I introduced them to various challenges of my community.
KING: One last question before you go. Anything you wanting to confess this morning, Have you ever inhaled? A previous marriage we don't know about?
PM: I'm sorry on those two, no and no. If you were to impose the moral test further I'd probably fail.
KING: Kevin Rudd, appreciate your time. Thank you.
PM: Thanks a lot, Madonna.