MITCHELL: Mr Rudd, good morning.
PM: Good morning Neil.
MITCHELL: There seems today to be massive confusion about the first homebuyers grant. Now will it be dropped, will it be cut, will it be extended?
PM: Well, as in times past, Neil we don't speculate on contents of Budget. But as I said yesterday in Perth at a community gathering, or the day before actually, all good things must come to an end.
This has been an important boost for first homebuyers. I understand the representations made to us by the housing industry about its continuation. We've also got to make judgments about long term financial sustainability of this scheme from the Government's point of view as well.
MITCHELL: That's a pretty big hint though. ‘All good things must come to an end'.
PM: Well don't they?
MITCHELL: Isn't it?
PM: Well we could keep going this way as you'd like, but I think it's been a big help. I've looked at how many people have been helped with this so far. The figures I've got here are about 30, I think it's got a total of 36,000 across the country. Here in Victoria, 8,600. That's quite a lot of people who've been out there supported with this trebling of the first homeowners boost, to enable them to get their first home.
MITCHELL: But what about the arguments it's just put up the market, it's just put up the price?
PM: Well I notice some have said that. But, let's go to the core of where we are with the global economic recession.
When we looked at this decision for government last October, it was very practical. How could you reduce the impact of this recession on Australia?
Two big areas which have an immediate impact on jobs in Australia. One is retail and that's why we've provided unapologetically payments to support pensioners, carers and veterans in order to boost sales in the retail sector, when if you look around the rest of the world, hundreds of thousands of jobs being slashed, and one and a half million Australians - and many people listening to this program this morning - work in retail, first thing.
The second is, an immediate action we took was given the enormous number people also employed in housing and the residential construction sector. And this boost, as the industry's told us and many people have told us, has helped keep our housing construction figures up when the rest of the world has actually been falling in reverse.
I noticed Mr Hockey today has said that this first homeowners boost of the Government's represent a distortion of the market.
Now we have the Liberal Party attacking the first homeowners boost. This is extraordinary. I thought they were supposed to be supporting it, and there are 36,000 Australians, many young Australians out there benefiting from this program.
MITCHELL: But has it inflated the market? I mean it might be creating jobs but is it actually helping the first homebuyer, or are they just paying it over to the building industry or to the vendors?
PM: Neil, the difference in prices around the country and around the city of Melbourne and around Victoria, as you know, each region's different, each locale is different. I can't give you a direct response on price fluctuations in a given area.
What I do know is this. When the Housing Industry Association come into us, and the other construction-related associations come into to say to us that this has been essential to keeping employment up in the construction sector, we take that advice seriously. That's why we've done it, and we think it's been an important part of cushioning Australia from the full impact of the global recession.
MITCHELL: There seems to be a misunderstanding about - you extended it. I'm assuming when you say all good things come to an end, you're talking about extension. You wouldn't do away entirely with the first homebuyers grant.
PM: You're right to point that out. The continuing grant which is $7,000 has been the case in the past and will be the case in the future. What we're talking about is the boost which is to double that if you're buying a home which is already built; to triple it, if you are buying a new home.
And again the intention is to keep up the level of activity in the housing sector and again I draw people's attention, if you looked at our housing construction figures in Australia relative to practically every other developed economy, it's chalk and cheese.
MITCHELL: What about all other subsidies and levies. Are they under review?
PM: In the Budget, we look at everything, Neil. Not knowing where your next question's going to go -
MITCHELL: Neither do I?
PM: - but I have a sense of it. I thought this was going to be a come in spinner question. But, no look. We take a serious expenditure review committee process to everything the Government does, led by Lindsay Tanner, a Melbourne bloke who's the Finance Minister. And he's very serious about this, so we go over everything both in terms of what spend and what we raise.
MITCHELL: The point I am getting at generally is that obviously we'll see some subsidies cut and some levies increased.
PM: All I can say Neil, and consistent with the bloke you used to interview in this studio from time to time in times past, John Winston Howard, we don't speculate on the content of the Budget.
But this is tough. If you stand back and look at what the International Monetary Fund has said to us all, which is that this is the worst global economic recession since the Great Depression in the 1930s, what we're faced with is framing in the most difficult global economic circumstances possible, this Australian Budget.
It's going to be very tough. We have spent a lot of time working our way through this and we've still got some work to do.
MITCHELL: I think before the last election you said no new taxes. Does that promise stand?
PM: What we've always said is that we would not increases taxes as a proportion of gross domestic product. That's been our commitment and -
MITCHELL: In income tax or overall tax?
PM: No, total tax as a proportion of gross domestic product, because what are you concerned about in the economy? Not allowing taxes to consume too much of economic activity. And we think that's a reasonable discipline to apply on average over the cycle. And we have done that.
MITCHELL: But that doesn't rule out new taxes though, does it?
PM: What we've, well there's always going to be possible changes at any time to the taxation mix, but the aggregate discipline remains which is how do you actually keep the lid on the overall, shall we say, creep of taxation over time?
You see our challenge also is in dealing with the global recession, and also on how we provide necessary economic stimulus now to support jobs today, and build the infrastructure we need tomorrow, like the school building program, is that we have to engage therefore in a temporary deficit and temporary borrowing.
That's what governments are doing right around the world, and therefore, it's equally important that you have an exit strategy from temporary deficits and temporary borrowing which means that the way to do that is to ensure that once the economy returns to normal growth, that taxation is able to recover and you are able to use that then to restore the Budget to surplus, and you're able then to use that to pay the temporary borrowings.
That's the way in which -
MITCHELL: So how do you do that? Do you have it ready to go, do you have it in place?
PM: Well we have a clearly stated fiscal sustainability strategy reflected in the last statement we made on the financial outlook.
And that goes to return to trend growth which is when the economy recovers from this current economic recession which is why global economic coordinated action has been so necessary through the G20 and others.
Secondly, allowing taxation to recover. And thirdly, also keeping a cap - and we say this quite plainly - on two per cent on future spending growth as well.
Put those things together, you have the necessary elements of a return to Budget surpluses and to repaying down on temporary borrowings.
MITCHELL: Are you willing to extend the deficit beyond $200 billion?
PM: We have said that we need to ensure that we can pay first of all for the impact which the recession has brought about, through the collapse in taxation revenues.
That means, for example what we're doing already, more than two-thirds of temporary deficit, temporary borrowing are arising from a pure collapse in taxation revenues. That's company tax, that's income tax and all the rest.
Happens to governments around the world. And I'll come straight back to your question in a minute.
The alternative is to say there's been this massive collapse, so far $115 billion collapse in taxation revenues. We've been upfront about that. That's what happened. And with these new growth figures which have come out from around the world, there'll be a greater reduction in taxation revenues as well looking forward.
You've got two alternatives under those circumstances. Either you completely slash and burn everything government does and throw tens of thousands of extra people onto the unemployment queues and cut funding for hospitals and schools, or you engage in temporary borrowing.
Mr Turnbull has said the collapses in taxation revenue, he would borrow as well. And that represents more than two-thirds of what we're doing at the moment.
The other bit is what you do by way of, let's call it discretionary economic stimulus. The investments we're making in the school modernisation program, social housing and the rest. And of course we engage in temporary deficit and temporary borrowing for that.
We believe that it is important always to calibrate the amount that we need for our future expenditures and therefore our temporary deficit and temporary borrowings based on, most primarily, what happens with future changes in the tax base.
MITCHELL: So will you go beyond $200 billion?
PM: We don't see the need for that at this stage. But we are very concerned about what happens in the future about further collapses in taxation revenue.
That is the key variable here. As I said, it represents two-thirds of our problem up until now. If taxes collapse further, we have a continuing problem and the alternatives are as I've just described.
MITCHELL: So there's a mixture there, you borrow more if necessary and you increase taxation?
PM: Well, there is, on the question of taxation which we discussed before, our discipline is don't allow taxes to get out of control because you don't want to strangle an economic recovery.
That's important, that's why we stick to this principle of not increasing taxes as a proportion of the economy. But as I said within that, then of course there's always possible to have changes in the taxation mix.
But I say again Neil, we're still working our way through this. The Budget's still some ways off. It's hard, it's difficult and it's very hard to frame a Budget in the circumstances which we're presented with, the worst global economic recession since the Great Depression.
MITCHELL: Well is it time for those who are still well off to pay more? To pick up more of the load?
PM: Well, I think, this is not a comment in relation to the upcoming Budget, but as a general principle, we've just got to be very mindful for example of how do we pay for pensions. You and I have discussed this many times on your program before.
I don't think anyone listening to your program would believe that our pensioners are being overpaid at present.
Therefore, if you're going to have fundamental pension reform, and make sure it is possible for people on the pension to deal with the costs of living, then we're going to have to have long term reform, and we've committed to do that.
But you know? You've got to therefore undertake other measures to offset that. And that is why the Finance Minister, the Treasurer, and myself have been going through line by line elements within the Budget to see what we can do to make the necessary savings by what you send, by what you spend, and also what other measures may be necessary to support pension reform.
MITCHELL: I gather the principle is, if pensioners get more, the well off have to pay for it.
PM: Well pensioners get more or we can make savings elsewhere, okay, when in terms of other programs which may not be essential, or longer term you have to look at what can be afforded by way of additional support from those who are better off.
MITCHELL: What is better off? $100,000, $200,000?
PM: Well we've, as you know, how long is a piece of string? But as you saw from our Budget last time, we introduced some changes in relation to $150,000 threshold. Which in terms of various welfare related reforms which we thought began to be a reasonable, not inviolate, not permanent, not you know, cast in stone, but way of delineating.
And if you're looking at a pensioner who's you know, not out there earning $150,000 a year, there's a question about fairness in Australia as to how you balance it out.
MITCHELL: So if I'm earning over $150,000, I could be a target?
PM: Well, nice segue from what I said to your last question Neil. But I've got to say, we think that Australia is all about fairness. People who are at the upper end over time perhaps could be in a position to provide greater support. Perhaps. And I again make no specific comment in relation to the upcoming Budget.
But if you are going to engage in a fundamental pension reform, then the rule of thumb we've used in the past is between every $10 a week you increase the pension, that's about $1 to 2 billion a year by way of extra funds which have to be found in the Budget. It doesn't grow on trees, you either achieve it through savings or you achieve it by other means.
MITCHELL: You have made the point that you want to be honest with the Australian people. So in this climate, before I move onto other matters, deal with a couple of things very quickly. But there is pension reform promised, that you're not backing -
PM: Remember I said before, in the Budget we would commence pension reform. And we are upfront about that. I'm also being equally upfront that it costs a truckload of money to do it.
And I note also that the attacks from the Liberals on our allocations to pensioners, carers and veterans, one-off payments recently, I don't think demonstrate that they are any way in touch with how difficult it is for pensioners to make ends meet.
MITCHELL: Just another quick one on the economy. In that spirit of honesty, will unemployment go beyond 10 per cent?
PM: Our internal figures, which you saw produced last time we put out our economic forecast, projected seven. You've seen the figures contained most recently in the International Monetary Fund which are higher than that. Look, as we've said very bluntly in recent weeks, unemployment is going to go higher. I wish I had a perfect crystal ball on this Neil. I don't. But our projections are as contained in the last forecast, the IMF has slightly up on that, I think from memory 7.8, hence underpinning the need for economic stimulus.
Can I make one point about where we are relative to the rest of the world? International Monetary Fund put out these appalling figures for the global economy for 2009, all advanced economies to shrink by 3.8 per cent in 2009. This is a massive figure.
The projection for Australia is a contraction of 1.4. We are doing almost three times better than the rest of the advanced economies. And a core reason for that is the economic stimulus strategy we're engaged in is out out there pumping demand into the economy.
We're trying to do it in what the economists would describe a counter-cyclical way, working against the cycle of the economy. Where the private sector is in retreat, Government steps in temporarily and then once the economy recovers, let me tell you I'd much rather be out of there.
MITCHELL: We'll take a break, come back with other issues for the Prime Minister.
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MITCHELL: The Prime Minister is with us, we'll take a quick call, Richard go ahead please.
RICHARD: Good morning.
PM: Hello Richard.
RICHARD: Just before I ask you a question. When are the kids going to get their computers that you promised? But you know, if you want stimulate the economy Mr Rudd, you've got to do something about these local councils. You try and get a planning department planning permit and you can't get it, it takes-
MITCHELL: Is that to build a house or something? Alright. Two questions there, the computers and local councils which is I suspect a state issue.
PM: Two rounds of the Computers in Schools have already gone out and the Deputy Prime Minister Julia Gillard is working through the schools of the country systematically. Each area that I've been to in last week in Western Australia and South Australia, I've gone to communities where literally thousands of communities, computers have been distributed to those local schools.
In terms of your school sir, can I suggest that through the program you let us know what the school is and we'll get back to you in terms of when your school will actually come within the program but we're doing it round by round by round across the country and it's the right thing to do.
Second part of the question was? Local authorities?
MITCHELL: Was local authorities. That's a state one.
PM: Look, local authorities operate in Victoria and elsewhere under State Government law and of course under their local ordinances but you talk about stimulus. Yesterday - key fact - in Perth I launched the first project under the community, local community infrastructure program; $2.4 million there for improvement of a park reserve adjacent to the Swan River. These are now rolling out to the tune of $800 million right across Australia wide. Local authorities are very good at rolling out quick, immediate, short term stimulus projects which build local community infrastructure for tomorrow and provide jobs today.
MITCHELL: Okay thank you for calling Richard. The AM program today interviewed an asylum seeker who has actually got approval as a refugee, an Iraqi man in Indonesia. I'll just play you very briefly what he said but he's effectively, he's saying that your policies have encouraged him to try and sneak into Australia.
ASYLUM SEEKER: Kevin Rudd. He changed everything about refugee. If I go to Australia now - definite, definite, maybe accepted but when John Howard (inaudible) Australia he said come back to Indonesia.
MITCHELL: Okay well obviously the perception there is among some of them at least that your policies are softer and therefore they get a better deal.
PM: The UNHCR, the United Nations High Commissioner for Refugees recently in Indonesia actually, described our policies as tough and hardline. The bottom line is that with this global push in illegal immigrants coming out of global insecurity, people are going to have a range of different perceptions all the time.
I ran into a bloke the other day who hopped on a boat in 2001 in the midst of Mr Howard's Prime Ministership and, as I was advised, was informed that once he got to Australia under Mr Howard there'd be two free houses and three free tractors, there you go. I mean look it's a rumour mill out there. What's the key thing?
MICTHELL: But haven't you added to the rumour mill with the different policies?
PM: Can I say that the key question here is having the best, most hardline deployment of our defence, maritime, aerial surveillance assets in the air-sea gap in Australia, doing their job. And these vessels have been interdicted and taken to Christmas Island. That's the key thing.
All our folk on the beat up there and I'm proud of each and every one of them, they're doing a very professional job in Australia. Look at how cast the archipelago is, look at the civil war in Sri Lanka and when you've got civil wars in Sri Lanka, a rolling war in Afghanistan and cross, instability across the Middle East and this vile trade of people smuggling still rolling on out there, you're going to continue to have all these push factors affecting every country in the world. Our job is to maintain strong border protection in the air-sea gap.
MICTHELL: Well have you seen the, an Australian Federal Police Report saying the same as this man is saying, saying that the policies will lead to a new influx?
PM: I'm unaware of any such report. But-
MICTHELL: Not because you would have seen it if it existed, presumably?
PM: Neil, there are literally a large number of federal police, intelligence officers and those involved in the broader national security policy establishment who at any given time will have a range of views on what should or shouldn't be done. I accept-
MITCHELL: Did you ask to see it after it was reported that it existed?
PM: Neil, the advice that I receive on these sort of questions comes from the National Security Adviser of the Commonwealth of Australia, Mr Duncan Lewis. And when I speak with Duncan about these matters we seek to calibrate our responses to the emerging threat. There is no silver bullet here when global -
MICTHELL: If this report existed, exists and we don't know that it does, Did you ask if it exists because it's been reported that it exists?
PM: Our responsibility also Neil is to say this; on any report relevant to intelligence matters we do not comment publically.
MITCHELL: But you said you hadn't seen it? Did you ask if it exists?
PM: The responsibility that I have through the, the arrangements I have for national security are through the National Security Adviser. As I said, in any given day, there will be an avalanche of reporting from around the world. We have an extensive police intelligence network and on these sort of questions we also depend on those reports being distilled and provided by the National Security Adviser -
MICTHELL: Yes but I'm not asking you what's in or if it exists. But it was front page of a newspaper, this report exists saying that your policies, you've been told, the federal police believe your policies will lead to an influx of asylum seekers. Did you not at any stage say, does that report exist?
PM: As I said to you before Neil, I am unaware that it exists. If there are concerns about elements of our policy we'll work our way through that in response to advice as I said through the channels that we've established. Any individual officer across our police and intelligence agencies will have a different view at different times about what should be done. That's just normal, that's them doing their job.
MICTHELL: The James Hardie people are saying they mightn't have enough in their fund to pay compensation because of the global financial crisis. What can be done about that?
PM: I was appalled at seeing that report last night, absolutely appalled. Now your program has been very good on this question, others have been in Sydney as well. We intend to now, work very closely on this question. I will not tolerate any of those workers who have been affected by this appalling disease and have been treated so badly by this company to run short.
MITCHELL: When is the election due?
PM: Last time I remember we were elected at the end of 2007, plus three, we haven't changed the Electoral Act since then.
MITCHELL: What are the chances of going full term?
PM: I believe that it's important for governments to serve out their mandate and we were elected for three years. But I would say this about Mr Turnbull and the Liberals, it's very important that they don't block everything in the Senate as a matter of course.
MITCHELL: Thank you for your time.
PM: Thanks Neil.