PM: Good morning Neil.
MITCHELL: Ok, bottom line in this. Who pays, who will be worse off, who carries the cost?
PM: Well what we have outlined is a system which is not cost free. That's the first point. Secondly, pensioners, carers and those on those sorts of social security support payments, we have said that we will meet any costs of adjustment to this new scheme as they come in.
We have also said for low incomes earners, that we would do the same. For households beyond that we have said we would provide some support and also provide help, which we have yet to identify in detail but will do so by years' end, on also helping households introduce energy efficiency measures within their own households to help the planet obviously but to help their own household energy bills.
MITCHELL: So who is it? Who in the end will be paying the cost?
PM: Well as I said there will be an adjustment cost for families and the other part of course an adjustment cost for business. There are about 1000 of Australia's largest businesses which will be involved in this scheme, this Carbon Pollution Reduction Scheme, and you will find that many of those businesses and of course the electricity generators, coal fired electricity stations, will have to pay adjustment costs.
We will provide transition payments for a number of them, but this system does not come cost free and I don't intend to misrepresent that.
MITCHELL: I understand that but I cant quite see in the end who pays. Where does the buck stop?
PM: Well if you have got a combination of households and businesses through this, obviously it is a combined effort. This system of Carbon Pollution Reduction covers some 75 per cent of the economy. It comes in from 2010 on, that's our ambition.
And the adjustment cost to the scheme will be born by those thousand businesses. There will be some flow through costs as a result to households and that's why we are providing these adjustment payments on the way through.
MITCHELL: Ok, so every household in a sense is going to have to pay. Even with the compensation, everybody is going to be a little worse off.
PM: No, when we have talked about pensioners and carers and we talked about low income earners, what we have said explicitly in the Green Paper is that we will meet any costs arising from the introduction of this scheme.
But beyond that, we will provide some adjustment support. This will be tough, it will be unpopular, but I believe it is the right and responsible course of action for the long term, which we just cant keep putting off.
MITCHELL: Middle Australia? Well some of the interpretation goes middle Australia will carry the majority of the cost, power bills for example going up $220 immediately.
There wont be full compensation for middle Australia will there?
PM: What we have said for those beyond lowest incomes is that we will provide some support. And secondly what we have said is that we will assist with households investing in energy efficiency appliances and energy assistance within homes.
The precise formula around that Neil, we haven't determined yet and that will be sorted out over the next six months or so.
MITCHELL: What if I am a family over $100,000 or $150,000 will there be help for me?
PM: Well we believe, we are looking now precisely at what form of assistance we provide in terms of, lets say, assistance to help households get the best energy efficiency technologies into their homes.
The precise cut off for that, the precise forms of assistance we will spend the next six months or so working through.
What we want to do is to help families in this adjustment period. A lot of people find it difficult to make the adjustment up front for example by bringing in better appliances on the home front, and we are looking at particular ways of how we help.
But the clarity of that will be in once the White Paper is done end of this year.
MITCHELL: OK but just another element, what about the flow on costs? If you are earning above $100,000 or $150,000 a year, will you get assistance to meet the increased costs?
PM: Well there are two parts of the assistance. One is a measure which helps with the actual adjustment costs themselves and the other part is assistance in bringing in new energy efficiency.
MITCHELL: So I understand that, will the actual adjustment costs, will there be some sort of relief to people above $100,000 or $150,000 on the actual adjustment cost?
PM: Well in terms of middle income earners and those in broader receipt of Family Tax Benefit A, we are of course looking at ways which we can assist them on the actual costs themselves. But on the detail of that and the other forms of assistance in terms of energy saving technology, you'll have that in the White Paper.
That's what we are working through over the next six months and we will be consulting with the community sector and industry on that as well.
MITCHELL: So you are looking for relief for middle income earners but you cant tell us what it is?
PM: Exactly right -
MITCHELL: Ok well what about higher income earners?
PM: And that will come through in the course of the White Paper.
MITCHELL: Well what about the higher income earners? There is not a lot of families earning a joint income $150,000, what about them?
PM: Well at the end of the day you have still got to make sure that your assistance measures are targeted on those who can least afford to meet the adjustment.
That's why we start with pensioners and carers, that is why we move on to those on lower incomes and through middle incomes accordingly.
MITCHELL: So that means higher income earners there is no relief for the additional costs, does it?
PM: What it means is, and we haven't determined as I said the precise definition of the assistance for help when it comes to energy efficiency systems within homes -
MITCHELL: No I am talking about adjustments for the cost, not the energy assistance, I am talking about the cost.
PM: Where that line comes in. We will draw a line in terms of where the,
MITCHELL: Where?
PM: Well, on that, the precise dividing line we will make clear in the White Paper.
MITCHELL: So above a certain line of income you won't get assistance with the increased costs. Is that the fact?
PM: On costs themselves that is correct. On the question of provision for households, for help with energy efficiency measures, which is another form of if you like cost adjustment, we have yet to determine the characteristics around that but we think that is another way of practically -
MITCHELL: Prime Minister I started by saying, who pays, what you are saying here is, the rich pay.
PM: You will find if you look at the overall design of the system, Neil, it is targeted on 1000 businesses around the country, our biggest businesses which is a small proportion of the millions of businesses in Australia.
MITCHELL: But I am talking about households here and you are saying above a certain level of which we do not yet know, will not get assistance for increased costs. So that means people above a certain level which is determined to be rich, will in fact not get any compensation.
PM: What I was saying Neil is, and why I began talking about business is, it is the flow through costs which come from business. A lot of those electricity generators that flow through in terms of energy prices, but also, other possible flow through costs as well.
So, what we are doing at one level is providing assistance and adjustment support for certain businesses who will be involved in this scheme. That of course affects the flow through cost to consumers from the sorts of things they produce.
Secondly, when it comes to the direct impact on households, as I said, our first target is to help those who can least afford the adjustment and then we will move up the income scale accordingly.
MITCHELL: Ok, but you wont, you don't yet know what the cut off level is.
PM: We will make that absolutely clear in the White Paper, that we believe that it is right fair and balanced to start with those who are least able to cope with the adjustment cost.
MITCHELL: Petrol Prime Minister, exactly how will the excise cut work? When will it come in?
PM: Well the mechanism that we have talked about, as you have seen in the Green Paper Neil is cent for cent. That will come in to accompany the introduction of the emissions trading scheme and therefore, as you know, we have also said in the Green Paper that would be reviewed at the three year point.
MITCHELL: So will there be a trigger point where that happens or will you just, day one say, we are taking a certain amount per litre off the excise?
PM: What we have said, the petrol tax we have brought down cent for cent to match any increase to the price of petrol arising from the introduction of the scheme. On the detail of how that works and precise calibration of the date and the mechanism for doing it, all that will be in the White Paper too.
The principle though is clear, and that is, that it is cent for cent as of the introduction of the scheme.
MITCHELL: But I don't, I can't understand even in principle how that can work. Because the market is so volatile. Do you set a level and say, well above that, that is the impact of carbon trading? I mean, when, or do we pay it at the pump and get it back later. I just don't understand -
PM: No, no, no. The tax adjustment occurs, then as a consequence, it doesn't flow through to the motorist.
MITCHELL: But where does it occur and when?
PM: As I said as of the introduction of the scheme and the second point is, pointing to any future adjustments in the petrol price, what we said again clearly in the White Paper is that there will be periodic adjustments to that (inaudible) arrangement so that the overall principle of cent for cent is preserved and at the three year point, we would also review the entirety of the scheme.
MITCHELL: But I'm sorry I'm still not clear. The day before your system cuts in, petrol is $1.50. The next day how much is it?
PM: As of the introduction of the scheme, any cent increase arising from introduction of the scheme is offset immediately as a consequence of the cent for cent undertaking.
MITCHELL: So you wait for it to go up?
PM: As of the introduction of the scheme it is applied automatically and the principle outlined in the Green Paper is that it would then be adjusted periodically over the course of the next three years to respond to any other changes which occur to the petrol price as a consequence of the introduction of the scheme.
The idea is to produce a system which is as fair and transparent as possible while not slugging motorists at a time of very high oil prices with the cost of the introduction of this scheme. The detail of date and the precise mechanism, you'll have all that in the White Paper, but the principle is clear in the Green Paper.
MITCHELL: But the principle, I'm still, sorry but I still don't understand. The petrol price is so volatile, how do you know whether it's gone up because of market movements or because of your carbon tax and therefore how do we know we're getting compensation for the price increase?
PM: Well, you'll know the carbon price because the carbon price will be set clearly by the market and therefore the translation of that carbon price through to any additional cent per litre in terms of the cost of petrol will be know clearly and publicly and therefore the petrol tax will be adjusted accordingly.
That's what we've said and we will do so with periodic adjustments, not just the first one off, but subsequent to that through until the three year review point.
MITCHELL: Will it apply to diesel as well?
PM: We've said it applies to all products including diesel.
MITCHELL: Okay. Now it's reported the trucking industry is only guaranteed one year of relief is that correct?
PM: That's correct.
MITCHELL: Well, that's a bit dangerous isn't it? I mean, if the price of fuel goes up for the trucks it flows through to all of us for everything?
PM: What we've said is parallel to what we've said in the case of motorists that there will be a review at the 12 month point.
Because this is a, I fully concede Neil, a complex system, but at the end of the day we've got to move to a lower carbon economy over time.
We ought to make sure that we've got the system working as effectively as possible, and therefore, for long haul vehicles on our open roads we've been in deep consultation with the trucking industry about how this should work. We want to make sure that it's working effectively at the 12 month point then we would review it.
But we've been very mindful in providing that adjustment for the first 12 months of what you point to, which is any impact or flow through impact on the cost of goods for people, particularly in regional Australia.
[Break]
MITCHELL: Prime Minister I understand you can't above a certain level, but for the middle income earners the estimates on the average family are done in Melbourne today, an immediate $220 rise in their power bills. Can they be confident they will be compensated for every dollar of that?
PM: I haven't seen that particular report, but can I say that the precise number that flow through to energy bills and of course what you and I have just been talking about Neil which is petrol prices, will come once the actual carbon price is set. What you've got probably got in the Green Paper are figures which flow through on the assumption of $20 a ton. But we haven't actually got to that point yet.
MITCHELL: Well I guess the principle is, is there a principle here that says no middle income family will be worse off?
PM: Remember in the earlier part of our discussion today, I said that for people on income support payments - that's pensioners and carers and others - we will meet any additional costs. For low income earners we will meet any additional costs and for middle income earners that we will assist. The precise level of assistance in terms of financial assistance in addition to what we also help with by way of helping households adjust with new energy efficiency technologies, that will be made clear in the White Paper.
MITCHELL: What is the impact on the CPI likely to be?
PM: Well according to the Green Paper, somewhere between 0.9 and 1 or 1.1 (per cent). Therefore, this is a significant element in our thinking because working families, households across the country are under financial pressure. And that's why we have been very keen to make sure these adjustment payments are as fair as possible to help those who are going to be most, or least able to cope.
MITCHELL: There is a massive impact there, isn't it, because the CPI obviously flows through in so many costs, charges and taxes. That will be a massive impact on people.
PM: Well 0.9 per cent. So that's, if it's translated into a basket of goods of $100, that's 90 cents out of $100.
MITCHELL: Yeah but every bill I pay, every tax and fine in Victoria and mostly around the country is linked to the CPI?
PM: Well I'm the first to agree with you Neil that this has a cost impact. I've said that from the beginning. This system will never be cost free. But you've got to move to a lower carbon economy in order to deal with longer term the economic cost to Australia and to jobs of not acting on climate change. And these are some of the challenges you face.
What you've got to do is be balanced and reasonable about it, and provide adjustment payments on the way through. Which is what you and I have been talking about for pensioners, carers and lower income earners in particular.
MITCHELL: Prime Minister, as I understand it, business has to consult by the end of September, yet they don't get the economic modelling until October. How can industry consult if they don't know what it is?
PM: Well we're going to have a longer process of initial and subsequent consultation with business. Once the exposure draft, for example, goes out and the actual White Paper, there's what we call third round consultation with business as well.
What we've got to do is take this step by step. What we said with the Green Paper is, and we're asking industry's response to this, is the actual design of the system. It's complex, it's hard, it's difficult to explain - I accept that. And that's what we're seeking industry response to.
Given that we are talking about the direct impact on 1000 of Australia's largest businesses, and remember we've got about two million businesses out there around the country, these 1000 businesses we'll be working with them pretty directly on the way in which the system we designed. But we will have a further round of consultation with them too.
MITCHELL: But you're also talking about an impact on every Australian here, aren't you, financially?
PM: Well the flow through to the whole economy affects all of us. I mean, I've always said from the beginning Neil that I'm not going to stand up and say to people that this is a cost free change.
It's wrong to say that, it's just simply untrue. But if you're going to make a change for the long term, which is necessary if we find ourselves in this country already as the driest and hottest country, continent in the world, and therefore likely to be hit hardest and earliest by climate change.
We've got a responsibility not just to those who come after us, our kids and grandkids, but also to the here and now of the Australian economy to begin this process of adjustment.
MITCHELL: How much money will you bring in, in the trading scheme, in the permits?
PM: Well, that of course will be determined by the carbon price.
But the principle that we have set is that any cent, any single cent, which is earned from the selling of permits, basically, pollution permits, is then reinvested in the adjustment payments which go to households on the one hand, and also for businesses to help them with adjustment during this period of moving to a lower carbon economy.
MITCHELL: Prime Minister, in the current economic environment, you would agree that, I assume, that the world economic environment is very nervous, very volatile, perhaps even depressing?
PM: It's a very difficult time and I know the argument, which says that this therefore the wrong time to be debating this. Of course, our intended ambition for implementation is 2010, which is a couple of years away.
We believe, however, that there are huge costs which continue to grow for Australia if we just push this off and off and off. So also, that's why we tried to bring in a responsible and balanced scheme in terms of adjustment arrangements for the industries who will be part of the scheme.
MITCHELL: But the Untied States is teetering on the edge of recession, isn't it?
PM: The testimony from the head of the US Federal Reserve overnight points certainly to lower levels of growth in the United States. It is a very difficult time in the global economy. Global financial markets have been in a state of flux since August of last year through the sub prime crisis. Also on top of that we've had the problems flowing from Middle East oil.
That's why we've tried to come up with a balanced scheme which does the right thing for Australia for the long term because if we keep putting this off, and we need to have a global scheme with other countries participating, if we keep putting this off, then I think the cost that will come to Australia will be huge.
The one projection, just for your listeners, is that if we don't act on this and get a decent outcome both nationally and internationally, we're looking at 20 per cent more droughted areas in the country by 2030. You're looking at a 63 per cent reduction in our agricultural exports.
All of that means jobs and wealth for Australia down the gurgle unless we do something about it.
MITCHELL: I know we're almost out of time, but what is your priority then? Is it this legislation, is it climate change, or is it economic reform? Is it the state of the economy? Is it reforming the financial markets?
PM: The first responsibility we have is for responsible economic management. That makes it therefore fundamentally important that we are engaged with the global monetary authorities, as we have been since we came into Government last November, on the stability of the financial system.
Secondly, a responsible Budget which is what we brought down in May, with a $22 billion surplus because of the uncertain times which lie ahead.
But thirdly, embarking upon this reform to bring in a lower carbon economy over time, gradually, with adjustment payments. And people from the Greens and the left will also say this is not enough, and people from the right will say it is going too far. We think we've got to get started; this is a responsible way forward.
MITCHELL: Could this cost you Government if you get it wrong?
PM: Oh look, I don't take anything for granted, Neil. These are tough decisions, it's tough times. The easy political thing to do is short term politics, put it in the too hard basket and bury it at the bottom of the garden.
I don't intend to do that, because I think this is the right course of action. We'll have further debate in the next six months: consultation with business and households to try and get the final settings of this right.
But I think for the long term, what's the challenge? As Prime Minister, I've got to face the scientific facts, the economic facts, and adopt a balanced and responsible course of action on the way through. Not just hope and pretend it will all just go away.
MITCHELL: Just finally, Prime Minister, you're meeting the Pope today, later today - do you believe that people who raise these cases of sexual abuse are ‘dwelling crankily on old wounds'?
PM: I haven't seen, you're quoting someone's remarks there, are you?
MITCHELL: Yes, I'm quoting the Bishop in charge of World Youth Day, and a case of a family approaching, wanting to get an apology on behalf of one child who has committed suicide after being abused by police and another who is a hopeless alcoholic. Bishop Fisher made the comments, ‘dwelling crankily on old wounds'?
PM: Well, I haven't seen those particular remarks. What I do know from individual cases that I have read about over recent years is that these cases of abuse cause enormous damage to families, enormous damage to the individuals over time. And it's appropriate that Church authorities handle each of these matters individually and sensitively.
As you know, when Pope Benedict was in the United States recently, he issued an apology to all victims of abuse in Catholic schools and institutions and elsewhere. And let's see what the Holy Father has to say when he is in Australia as well.
MITCHELL: You'd hope he'd do the same?
PM: Well, it's a matter for the Church. But I noted carefully what he said in the Untied States. And going back to the family of the circumstances you just described, these are horrendous. They're just awful. They're horrible facts. And what I do note also is that the Church over time has been moving in response to each of these matters as they've come into the public domain, and you would say sometimes better than others, but it is very important for the Church to respond appropriately to each individual case.
Ultimately it is a matter for the Church, and I've noted carefully what Pope Benedict has had to say on this sensitive and difficult matter recently in the United States.
MITCHELL: I appreciate your time. Thank you very much.
PM: Thanks Neil.