SPEERS:Kevin Rudd, good morning and thanks for your time. You said this Budget had to be as tough as hell. You said you'd take a meat axe to the public service. The headlines this morning say the budget is, quote, ‘light on inflation'. That it's a ‘nip and tuck budget', ‘softly, softly'. Have you squibbed it?
PM:The challenge we set ourselves in January was to deliver a surplus of 1.5 per cent of GDP. We've delivered a surplus of 1.8 per cent of GDP. And we have done that by ensuring that all of our new spending commitments have been met by savings.
And if you were to speak, for example, to the Commonwealth Public Sector Union this morning about the impact on public servants, I don't think they would agree with the point that you've just made.
SPEERS: Well you said there that you have met your extra spending with saving cuts. But you actually said there would be deep spending cuts. So how does that equate to putting downward pressure on inflation?
PM:Well if we've delivered in this budget, which we have, $7 billion in cuts and on top of that across the forward estimates, something north of $30 billion. That's $30 billion more than our predecessors were ever prepared to do.
It's very difficult to find any savings measure in most recent budgets, so we've turned the corner into this new era of public finance responsibility, it's necessary. That's on the spending side, but also on the tax side.
Tax as a proportion of Gross Domestic Product goes down as well. So we are producing a responsible document, we're getting the balance right between fighting inflation, honouring our pre election commitments to working families and investing in the future.
SPEERS:Why then does this budget say that spending is still going to increase next year?
PM: Well the spending will increase by around about 1 percent. When we took over Government it was increasing by 4.5 per cent real each year, and something north of 6 per cent nominal. This is, had to be turned around, but I have got to say, when you have got to ensure that you honour your pre-election commitments to provide tax cuts to low and middle income earners, it costs money and therefore you have got to ensure that the overall balance is right.
Working families out there are under financial pressure. They need tax cuts. They need assistance with the Childcare Tax Rebate. They need assistance with the Education Tax Refund, they need assistance on the housing affordability front. We have made announcements of policy decisions in each of those areas. It's not a silver bullet. But you know it all costs and we've tried to offset that with cuts in other Government programs, $7 billion worth. $7 billion more than our opponents were ever prepared to do.
And I notice when Mr Turnbull was asked what he would cut further, he said couldn't possibly comment. Pretty interesting.
SPEERS:Well one area where you have cut, the baby bonus. You said just two months ago that, quote, “the baby bonus is absolutely safe”. Did you mislead those earning more than $150,000 a year?
PM:We have always said that we would keep the baby bonus. But we believe that it's appropriate for the baby bonuses structure for the future, together with other welfare payments, that there is appropriate means testing.
The principle of the baby bonus remains and therefore the vast majority of Australians remain obviously entitled to it. But you know, at the end of the day, you have got to arrive at a point where government can afford to deliver welfare payments. And broadly speaking when you start to get to the $150,000 point, we start to form a judgement that north of that, it's probably an area where government can no longer afford to go.
SPEERS:Well if the rich no longer deserve the baby bonus or family tax benefits. Should they also lose the child care rebate and the private health insurance rebate?
PM:Well the Childcare Tax Rebate is a workforce participation measure. You know as well as I do that, speak to business out there they are all screaming for skilled staff. A lot of those of skilled staff are women, younger women, who have left the workforce in order to have kids. They want to come back part time. How do you assist that and accommodate that. That's why we've got a childcare tax rebate system. So it's designed very much as a workforce participation measure.
SPEERS:So they are not to be touched in the years ahead?
PM:Well we think the balance is about right. We can't see a basis for changing that at this stage. But I think when you've got pretty modest levels of workforce participation in this country against other developed economies. You've got to look at creative measures around childcare, and the child care tax rebate is one of them, to make it easier, somewhat easier for women to re-enter the workforce. And going from 30 per cent to 50 per cent is actually a big jump and this is a big measure contained within this budget and we believe it will help women and working families more generally.
SPEERS: On the new baby bonus cut off at $150,000 a year income, we're getting a lot of queries. Does that income test apply in the year before the child is born or the year after the child is born?
PM:My advice is it's the 6 months following the birth of the child and therefore you would make a calculation as to whether you had income in that period of time, of $75,000 which is the $150,000 annually (inaudible)
SPEERS:Combined incomes?
PM: It's a family income.
SPEERS: Ok. What about pensioners? Clearly these are the real battlers. What do they get in this budget?
PM: Well, there are three measures that we'll put forward for pensioners who are finding it really tough with the increases in the cost of petrol, and in the cost of groceries.
One of the three measures we have is of course the pensioners bonus - a one off $500 payment. Secondly, we also have a measure to increase the utilities allowance. This is a very significant measure. Currently the utilities allowance is, I think from memory, about $117. That goes up to $500 in one hit and that is a continuing annual payment for pensioners. Thirdly there is a telephone allowance also for pensioners. Currently I think it is $80. Now it goes up to north of $100 and it's specifically designed to assist with internet connection for pensioners who are now using internet more, through email and the rest, to maintain contact with their families around the world.
SPEERS:The one off bonus payments, though, you said you would put them on a more sustainable footing. Is that work yet to come? I mean they are still listed as one off payments in the budget.
PM:That's, that's true. And one of the reasons why we have put together tax, welfare and retirement income policy, within the overall rubric of the large Ken Henry reform commission on tax, that the Treasurer announced the other day, is to try and get those policy settings right for the long term. This is very complex and very expensive public policy. But you can't fiddle with one bit of it without knowing how it impacts on the rest. So we would like to do that as part of that overall review.
SPEERS:Just one on childcare as well. You promised in the election campaign, 260 new childcare centres. This budget provides funding only for about 38 over the next four years. So how long is it going to take to build 260?
PM: Well there are detailed questions in terms of land use planning for these, they take some time to work their way through. On the detail of each centre and where it goes, I am sure that will be tailored to local, specific needs. But more broadly on childcare - centres is one thing, other supply side measures in terms of helping with the training of childcare workers and early childhood education teachers, there are a lot of measures in this Budget, quite apart from the very massive increase in the Childcare Tax Rebate that we spoke about before.
SPEERS:But what I am getting at is these policies are going to take some years to implement.
PM: When you are dealing with infrastructure questions, if often takes some time to roll out. Because there are detailed physical planning processes to go through. I understand that. I accept that. And we take responsibility for that. We would like it to be quicker, like it to be faster, let's see how we go in the forthcoming Budget in terms of whether any acceleration roll out of those centres can occur.
SPEERS:Just before I let you go, there is a report this morning that you are planning to take the Iranian President Ahmedinejad to the International Court of Justice for inciting genocide and denying the holocaust. Is that right?
PM:The Iranian President's repeated extraordinary statements, which are anti-Semitic, and expressing a determination to eliminate the modern state of Israel from the map are appalling by any standards of current international relations. They are an incitement to international violence.
Now what we have said in the past is that we will take legal advice which the Attorney General is currently doing, in terms of whether there is a (inaudible) way forward here through the appropriate international legal mechanisms and we will study that advice carefully.
SPEERS: No decision made on that then?
PM:No I think the important thing is for the world community right now, to be absolutely united in their condemnation of the regime in Tehran for these sorts of remarks. It is not just, you know, hyperbole, from the bully pulpit of Tehran. It is the roll on effect across the Islamic world to those who listen to Iran for their guidance. I think this is dangerous stuff. The world community should unite against it, and as I said, on the matter you specifically raise, we will take careful and considered advice in terms of whether it is possible on an international legal front.
SPEERS:Ok. Prime Minister, thanks for your time.
PM: Good to be with you.