UHLMANN: Prime Minister, good morning.
PM:Good morning Chris.
UHLMANN:Can you think of another government in Australia's history that's inherited a better fiscal position?
PM: I don't think this is the time to sort of recount economic history Chris. The key question is you play with the cards that you're dealt and the cards were dealt -
UHLMANN: Your cards are good cards.
PM: Cards were dealt with from the global economy are very challenging with downwards revisions of growth globally in North America and also in Europe and washing across the East Asian hemisphere as well.
And we've got inflation at home. So when you talk about cards, inheriting government when you've got record high inflation over the last 16 years running north of four per cent, that's a challenge.
And they're set of circumstances we faced. Contractionary pressures in the global economy coming off the back of the financial crisis, and then at home inflationary pressures.
And in those circumstances, a difficult Budget to craft, but we believe we've got the balance right.
UHLMANN: Certainly, but Budgets are about Government finances and we can talk about the global economy in a moment but the “do nothing” position on this budgets was a $14-billion surplus, surely that's the best inherited position of any oncoming Australian Government?
PM: Well remember our predecessors indicated that they would land a budget surplus, something not much better than one per cent of GDP, we said in January of this year that we believed that given the inflation challenge, we needed to aim higher than that at 1.5 per cent of GDP and on Budget night we landed at 1.8 per cent of GDP.
And on top of that, what then comes to the surplus, we haven't just said let's just put all that to one side, we've said instead, let's invest that surplus, both for this financial year and the one coming, into these investment funds for the future.
That is, for the future of infrastructure $20-billion. $10-billion for the future of health and hospital reform. And $11-billion for an education investment fund. We think this is the right way forward for the future as well.
UHLMANN: Now you made much of your cuts in the lead up to this election campaign, but the rate of Government spending will continue to grow next year, won't it? Haven't you left all the heavy lifting on interest rates to the Reserve Bank?
PM: Not at all, remember what we've inherited over the last four years is a government which had expenditure growth running something north of four per cent. We've brought that down to about one per cent and in terms of all our new spending commitments, they've been met by savings.
$7-billion plus worth of savings in this financial year and across the forward estimate, something north of $30-billion.
I pose you the question; where was there a last significant savings measure proposed by the previous Government? There was none, including the time when inflationary pressures were building.
We've actually turned the corner on this, we've said this is a responsible way forward, and at the same time, we've rejected the advice provided by some in the economic commentariat to jump tax cuts for low and middle income earners because we believe they're under financial pressure and they need every dollar they can to help balance the family budget.
UHLMANN:So your Budget will slow the growth in the economy?
PM:Well you've seen what's happened in terms of both the Bank's and the Government's projection in the Budget papers in terms of upcoming growth.
Obviously that's in fact affected by global factors, and obviously that's been the consequence also of recent interest rate tightenings, remember we've had now 12 in a row.
But, our responsibility is to get the balance right. Firstly, not to fuel the flames of inflation, hence why we've honoured our commitment to meet new spending promises by offsetting savings, and at the same time, ensuring that we keep a rein on overall expenditure growth into the future. We think we've got the balance right.
UHLMANN: And as a consequence, unemployment will rise?
PM: Well if there is going to be, you've seen what the Budget papers have to say on that question. There will be a modest increase on that score as projected through the Budget papers, but we believe that our responsibility for overall balance in the economy is to make sure that you're doing what you can through Budget policy to put downward pressure on inflation and downward pressure on rates.
And at the same time, providing what you can through the tax system, through the child care tax rebate system and other payment systems to working families under financial pressure, to help them balance the family budget now.
UHLMANN:So rising unemployment is a good outcome?
PM:Well look, in a global economy where you've got contractions in growth in the United States and in Europe and including a revised growth projections also for East Asia, obviously there's going to be some knock-on effect.
Therefore I'd say also to those who believe that the smart thing to do is simply to axe things like the tax cuts, frankly, I think they need to have a more balanced view of where things will unfold into the future as well.
We believe we've got the balance right given we've got these conflicting economic trends that we're dealing with at the moment, contractionary forces operating globally off the back of the financial crisis and inflationary pressures at home.
UHLMANN: This is just one Budget, Prime Minister, we haven't seen the full effect of your election promises in this Budget have we?
We haven't seen anywhere near enough money to fix the hospital system or to reform federal-state relations. So the big bills for you Government are on the never, never?
PM: Well I suppose that's where I'd disagree with you Chris because I think what we have done is lay out very plainly where our future investment priorities lie.
This is a huge departure point from the previous Government. Firstly on infrastructure, a $20-billion Building Australia Fund to deal with road, rail, ports and broadband.
Secondly, an $11-billion Education Investment Fund to deal with TAFEs and universities.
And thirdly health and hospital reform, the one you just touched on; $10-billion.
Now, these funds exists over and above the normal operations of the Commonwealth Budget.
These are specifically designed to enter into individual national performance, or partnership payments, with the states to improve outcomes in these critical areas.
So what we're saying is rather than play the blame game in the past of saying hospitals? State problem. TAFEs? State problem. Roads? State problem. We're saying we want a partner with the states and the private sector in getting these things right and putting $40-billion down for the future on this, I would say is a decisive step in the right direction.
UHLMANN: Well, Prime Minister, just on the true cost of your promises, can you guarantee that no parent or State Government will have to pay an extra cent to support your promise to put computers in every school?
PM: What we've said with the computers in schools program Chris, is that there's a $900-million commitment.
$100-million is to be outlaid very soon, and I was talking to the Deputy Prime Minister about this yesterday. And we've also said in most recent meetings with the states through COAG, that if there are any other roll on and anticipated costs associated with this program from the states and territories that we'd work together about how we can best meet those.
But you know, advancing Australia into the digital revolution is expensive. Our predecessors said, ‘not our problem, let someone else fix it', we say we've got to have our kids in the right place.
UHLMANN: But Prime Minister you said, you said you would pay for computers in every school. Can you guarantee that you will pay for every cent of the cost of putting those computers in schools that there will be no lamington drives, that no State Government will have to kick in to support your election promise?
PM: Chris, we will honour as we have done in this Budget our commitments to the Australia people prior to the election. And that commitment was for computers to be made available to Year Nine, 10, 11, and 12 students over a fixed period of time.
Now, what State Governments do assist and partner with us in that program, given that many of them had begun in part programs of a similar nature, is of course being resolved at a matter of detail in each state through the Deputy Prime Minister and Minister for Education.
Now what individual schools do for fundraising, well Chris, that's a matter for them, but can I say, our commitment is rock solid and its a billion dollars worth of additional investment in making digital classrooms of the future more of a reality that had ever occurred under our predecessors.
UHLMANN: But just quickly, you are clearly expecting it to cost more than you've promised?
PM: Well you know something, when you're rolling out a digital revolution which involves first of all whether you've got the broadband connections right, you've got the broadband capacity right and that you've got the right platforms for each individual school in each classroom, it's going to be complex, hard and difficult.
But the Government's resolve to get this done remains unaltered. I'm determined to make sure that every kid in the future in this country has access to the tools of the information economy of the future. Otherwise they get left behind, otherwise Australia get's left behind.
UHLMANN: Prime Minister, thank you.
PM: Thanks Chris.