CURTIS: Prime Minister, welcome to AM.
PM: Good morning Lyndal.
CURTIS: Does the Treasury modelling show that far from having a big impact on the economy, Australia could afford to cut emissions harder without doing significant damage?
PM: Well the Treasury modelling examined four particular scenarios for the future with different rates of a carbon price. And that is important for our evaluation in terms of what model or what approach that we hit upon for the future and that will be determined when the Government produces its White Paper later in the year.
CURTIS: But they all show a relatively small impact on economic growth, don't they?
PM: That's correct. I mean if you look at the modelling, its overall impact in terms of the debate is as follows. The first is that under the four scenarios which are examined, we have growth in the economy continuing, growth in each case only reducing slightly and furthermore that with the introduction of a Carbon Pollution Reduction Scheme, the overall economic logic is the earlier you begin to act the more economically advantageous it is because you are not in the business of having to act sharply, dramatically and drastically in the future.
CURTIS: There will be a bigger impact on some selected industries like aluminium, coal and coal fired power stations. Do those industries as we know them now have a use-by date?
PM: Of course not. Our attitude is this. When you introduce a system, a Carbon Pollution Reduction Scheme, the objective of which is to bring about a more carbon friendly world, more carbon friendly Australia in the context of a more carbon constrained world and a more carbon constrained Australia, obviously there are going to be adjustment mechanisms which are necessary, we understand that.
That's why in the Government's Green Paper we outlined how we would do that with what is called energy-intensive trade-exposed industries such as those you just listed, but also other strongly affected industries such as the electricity generation sector including coal fired generation.
What we have proposed in the Green Paper is a series of adjustments for those industry sectors and they are still the subject of discussion and negotiation between the Government through the Climate Change Minister and others and the industry.
CURTIS: Is there a chance you will have to increase the amount of money you spend on adjustment and help for those who will be hardest hit by the emissions trading scheme such as lower income earners and displaced workers because they will also be dealing with the effects of the financial crisis?
PM: Well let's take it in order. Firstly for households and the impact on them, the Green Paper outlined how we would deal with low and middle income households in ensuring that they don't cop a hit in terms of their energy prices which is not compensated for through the family payments or the transfer payments system. That's the first principle.
The second is when you come to other industry sectors like we were just discussing before, of course we are into deep and detailed negotiations with those industry sectors about the form of adjustment which will be necessary in their cases. And we will do that entirely mindful of the submissions they have made, at the same time mindful of the fact that we have got to move to a lower carbon Australia and a lower carbon world.
And we will get this balance right. What the modelling demonstrates is that we can achieve this while still generating growth in the economy, with growth only being brought back very slightly as a consequence of the introduction of a Carbon Pollution Reduction Scheme, but most importantly the finding that the earlier that you act in transitioning to this type of economy the more economically efficient it is as well.
You don't want to get to a stage in 10, 15, 20 years time where suddenly you have got to make a massive transformation. Because the other international reality we face is the emergence of the debate in other parts of the world about environmentally punitive tariffs against countries and economies which refuse to act on climate change.
CURTIS: Given those debates are going on and given economies are also dealing with the Global Financial Crisis, what are the chances of getting international agreement on climate change that everyone can sign up to?
PM: Well I have been discussing this with Penny Wong, the Minister responsible for our international negotiations as well, and she of course has just returned from meetings in Poland which are beginning to prepare for the Poznan meeting in December which is the big stepping point to the Copenhagen meeting a year later.
I think it is fair to say in my discussions with Penny that these international negotiations are going to be tough, very tough indeed. But there is one big outstanding factor here and that is the attitude which will be taken by the incoming administration of the United States.
Because whether the Republicans win or whether the Democrats win, both candidates are committed to making significant cuts in American carbon pollution and as a result that will affect significantly the international climate of negotiations. But I am not going to mislead your listeners by saying this is going to be some walk in the park, it's not.
CURTIS: You talked about last night the building consensus for global action to address the economic slowdown and that part of that should be further coordinated interest rate cuts. Should Australia be part of that and can we afford another big interest rate cut at a time as the Reserve Bank deputy Governor says we are still dealing with an inflation problem?
PM: In the case of the Australian Reserve Bank, as I have said many times before, both as the leader of the Opposition and now as Prime Minister, the Reserve Bank is independent in making any decisions on Australian monetary policy settings. What the Reserve Bank may or may not do in consultation with its international partner banks, other central banks around the world, is a matter for it.
What I did say last night was that there is an emerging global consensus that concerted macro economic action, that is by the relevant agencies responsible for monetary policy, that's interest rate settings around the world and through Budget action or fiscal action is in the long term and in the immediate term necessary because we believe in Australia that the impact of this global financial crisis has been felt not just in financial markets, not just in growth, not just in credit markets, not just in stock markets but it now poses a real threat to jobs and growth in the real economy in Australia and around the world.
And to assist that, governments need to act not just unilaterally, governments need to act as far as possible together in order to provide coordinated global stimulus to growth because we are all in this together.
CURTIS: The polls in the United States point to a win by Barack Obama in the Presidential election and polls in other parts of the world seem to favour Senator Obama. Could a victory by him give the world a shot of confidence that it badly needs right now?
PM: Well the decision by the voters of America is to be done privately and independently by them in their great American democracy. So I comment even less on polls in overseas countries than I do on polls within the Australian democracy.
Australia will be well served by the victory of either candidate because both of these individuals, Senator McCain and Senator Obama, are first class candidates, they are positively disposed towards Australia and I believe are committed to coordinated international action, as in fact has President Bush been in his decision to convene the G20 meeting of heads of government in Washington soon.
CURTIS: Prime Minister, thank you very much for your time.
PM: Good to be on the program.