O'BRIEN: The Prime Minister joins me now from Canberra.
Kevin Rudd, when you singled out the mining industry table at the Mid Winter Ball in your speech last night, and said to them, in relation to the current dispute over the resources tax, "We've got a long memory", what exactly did you mean?
PM: Well, I think it's pretty interesting, Kerry. First of all, it's good to be back in 7:30 Report land. It's great to be back with you.
The Ball last night is just a fun and frivolous occasion. Last time I heard it was supposed to be, sort of, off the record. It was just a throwaway line, that's all, and I think anyone observing that would know that. The truth is that-
O'BRIEN: -There are throwaway lines and throwaway lines, of course. If you say you're negotiating in good faith with the mining industry, but you tell me how you'd react if you're locked in a bitter argument with somebody and they say to you 'I've got a long memory, mate', how would you take that?
PM: Well, you know something, Kerry? We're engaged in a very hard fight with various parts of the mining industry. It's all about tax reform, and why are we putting this tax reform forward? Because we believe that within the mining industry we need to move to a system which taxes profits rather than production. It's the best thing to expand the industry long term.
Secondly, the extra revenue we'd get from that we'd use to fund better super for working families, bring down tax for corporates and for small business and to fund the road, rail and ports that so many of our mining communities and communities that support them need.
Now, mining companies, many of them, are obviously unhappy about that because they don't want to pay more tax. Well, there's nothing particularly unique in that, so it's a very hard and hard-fought debate.
O'BRIEN: You have said all this. You've been explaining this for weeks now, which has certainly had no positive impact for you in the polls, but what I'm asking you is whether if somebody said to you, when you're in the middle, locked in a very bitter argument with them and they say to you 'Mate, I've got a long memory', wouldn't they take that as something of a threat, a warning?
PM: Kerry, I just think it's pretty important to put a few light-hearted remarks at a Mid Winter Ball with a bunch of journos in the room into its context. I mean, if you were going to repeat everything else I had to say last night on this program in terms of, you know, various comments about how I or the Government have performed, I mean, are they to be taken in the same sort of serious light? It's just a throwaway line.
O'BRIEN: Well, it was reported this afternoon, it's already been reported in the media, yes, I know it was Chatham House rules, but as I say, it's now been reported. I've spoken to several people and they all took the same reaction from it, that you were sending the mining industry a message.
PM: Kerry, it was just a throwaway line.
This is a tough negotiation with the mining industry. It's very tough and you say that, obviously, we're having no impact in communicating the Government's position on that. Bear in mind we're also up against a forensic campaign being launched by a very profitable industry in this country which doesn't want to see change: the same industry who said that when we changed WorkChoices that the mining industry would fall over - that didn't happen; the same industry that said that when we brought in Native Title legislation that the industry would fall over - and that didn't happen; and 10 years before that, when we brought in the petroleum resource rent tax, that that would kill the offshore industry - and that didn't happen.
These debates are always tough and that's why the Government is going through a tough time. This is a really hard-fought debate.
O'BRIEN: So, do you want to just clear the air now for anybody who's taken your comments wrongly by telling the mining industry that there will be no attempt at payback after the next election if you win it?
PM: You know something, Kerry? I have a very short memory as well, so-
O'BRIEN: -I'm not quite sure what that means but we'll move on. So what exactly-
PM: -It's just a joke, Kerry. It's just a joke.
O'BRIEN: I'll work it out later.
PM: For goodness sake. You have a look at the text of the rest of the things I said at the Mid Winter Ball, the bunch of journos are out there having fun all done up in their glad rags. I mean, it's just a bit of fun, a bit of a joke.
O'BRIEN: So what exactly is the current status of negotiations, because it's become very confusing. Have you now taken personal charge of the negotiations? Are you negotiating company by company? Are you embarked on a strategy where you gradually whittle away opposition from various elements within the industry, leaving the big guys like BHP, Rio and Xstrata exposed?
PM: Kerry, we've gone about this in two, well, in fact, three stages.
Firstly, in terms of consultation prior to 2 May when we released the Henry review and our response to it, the Treasury and the team under Ken Henry had been engaged in about 18 months worth of consultations with industry, including the mining industry, including the prospect of a profits-based tax, including many of the elements of what subsequently emerged in it as well, so let's not pretend that this simply emerged from the blue on 2 May.
Second thing is, since then, the last month or so, we've had a consultation process through a Treasury panel which has been out there bringing forward all the numbers and information from individual companies about the details of the proposed tax reform and its effect on them.
Now thirdly, we are now engaged in a process of negotiation and we are negotiating with individual companies around the country, many of whose circumstances are quite different depending on where they are, what mineral they're mining and what the nature of their production process is.
O'BRIEN: And are you now staying in daily contact with that? Are you in effect now heading the negotiations?
PM: The team of negotiators at the political level is of course myself, the minister responsible for the resources sector, Martin Ferguson, and the Treasurer, Wayne Swan, as you would expect.
O'BRIEN: OK.
PM: And secondly, supported by a team of Treasury officials who do the number crunching. This is how it would normally work. They're complex, hard, commercial negotiations with some companies which don't take the Government's proposals all that well.
O'BRIEN: Blind Freddy can tell that your back's to the wall politically - polls haemorrhaging, an election keeping closer, in a mess over the mining tax. The industry heavy weights can read the polls too, so what's the incentive for them to settle this now when they can see the prospect of a Liberal Government that would actually dump the tax idea?
PM: Well, the first thing I'd say to you, Kerry, is that we need to be pretty mindful of some political history here. You've mentioned polls just now. Governments before have been up and been down. My predecessor went through that on multiple occasions, as did his and as did Bob Hawke before him. You know that as well as I do.
O'BRIEN: Have you ever seen the Labor Party record a poll where its primary vote was running at 33 per cent?
PM: Kerry, if you were to go back through the history of the Party in the last several decades you'll find that we've been up and down at various times.
O'BRIEN: Have you seen one this low? 33 per cent primary? Incredible.
PM: Kerry, I'm just saying governments are up and down depending on the circumstances at the time and the toughness of the fight in which you are engaged. This is a tough fight.
O'BRIEN: But there are people in your own Party who are musing that this didn't have to be quite this tough in quite this way. When you say that the mining industry was engaged from 18 months ago through the process of Henry, it's one thing to be consulted and have an opportunity to present your case to a review process, a committee or a task force, but then once the policy, once the Government puts its policy in place that's a different matter all together.
Why couldn't you have consulted directly with the mining industry about the prospect of this mining tax before you hit them with a finely detailed, crafted policy and then said, here it is, now let's talk about it?
PM: Well, my answer to your question, Kerry, is in two parts.
Firstly, look carefully at the nature of the discussion papers, etcetera, which the Treasury put out prior to 2 May. They actually went straight to the question of a profits-based regime. Ken Henry made multiple speeches on this subject, invited submissions from the industry. The Mining Council of Australia said they wished to move to a profits-based regime themselves. That's prior to 2 May, going back 6 and 12 months. Secondly-
O'BRIEN: -But Ken Henry, sorry, with respect, Ken Henry is a public servant. He's not the Government. He's not actually making the policy. He was doing the review. You're the ones who have put the policy together and you've done that in secret, behind closed doors, and then gone to the mining industry and said here it is.
PM: Kerry, the review which Ken headed was actually conducted by a wide panel and in the consultation process, prior to 2 May, there was extensive discussion across the board in terms of moving to a profits-based tax. That's the first thing.
The second thing is since 2 May, when the policy was released, what we have said consistently is that we believe that the framework we've put forward on 2 May is right, the tax reform to deliver those changes that I referred to before, but on questions of detail, of transition and of implementation, including generous transition arrangements, that we would then engage in detailed consultation and negotiation with the industry, which is what we are doing now.
Now are you seriously suggesting, Kerry, are you seriously suggesting Kerry, that if we had gone through this process with companies before and said, 'hey guys, we'd like to bang this tax on you, I'm just going to consult with you for about three months about that', they would have said, 'That's terrific, thank you for consulting, we'll now pay more tax.'
It was always going to be hard, so I think it's quite frankly just wrong to assume that it was going to be more easily landed as a consequence of having done it some other way.
O'BRIEN: But why didn't you handle the tax pretty much in the way the Hawke Government did successfully in '84 with its resource rent tax on the petroleum industry - signal your intent on having the tax, release the parameters as the Government, based in your instance on Henry's findings, for genuine negotiation, then announce your policy?
What you did instead was to sit on the Henry report for months while you determined the policy, then you sprang it on the industry and the public, enshrined it in the Budget and then invited them in for consultation about the transition costs. That's not a policy negotiation, is it?
PM: Well, Kerry, you slid over, at the very end of your question, the whole point of transitional arrangements. What do transitional arrangements mean? It goes to the existing state of projects which mining companies are operating. They're vastly different and when we have said consistently they're in the marketplace for generous transitional arrangements, we mean that. So, in terms of, if you like, flexibility about those transitional arrangements, we've always been upfront about that since 2 May.
What you seem to be assuming is that if you were to say all that beforehand that mining companies would be out there dancing in the street and saying, 'Yep, we really want to pay more tax, we'll just have a discussion with you on the design features'. Let's get real about this. They wouldn't want to do that and what we as a reforming government have been on about is to use this tax reform, one, to actually boost the long-term growth of the industry by making it an efficient profits-based tax, as opposed to a blunt instrument called a production tax which throttles so many early companies in the early stages of their development, and beyond that to use the revenue which comes from that tax reform to fund better super for working families, 7.5 million of them; better tax breaks for small businesses, 2.4 million of them; a 2 per cent cut in the corporate rate for the 770,000 Australian businesses who are incorporated; and beyond that investing in road, rail and port in the regions of Australia as well.
That's why it's a tough debate, because whenever I ask the question of the mining industry, 'Hey guys, where am I actually going to find this extra money from to invest in the road, rail and ports right around regional Queensland, regional WA, various parts of Queensland where I was even today?'. the question comes 'We need to get this investment to support our local mining industries, who's going to pay for it?' Well that's the question I'm now putting back to the industry. That's why we're proposing a regional infrastructure fund, in part, to do it.
O'BRIEN: There's been a lot of criticism of the way you have centralised power within the Government, that since the global financial crisis Cabinet has become not much more than a rubber stamp, the big issues decided by the so called gang of four - yourself, Julia Gillard, Wayne Swan and Lindsay Tanner. For instance, on the resources tax your Resources Minister, Martin Ferguson, a skilled negotiator who knew all ins and outs of the industry, was very much on the periphery as this policy was put together. Have you now re-embraced a wider Cabinet consultation process?
PM: Well, you know something, Kerry, I just think the proposition is wrong. Let's just go to what the Government has been doing in recent times and over the last year or two. Nicola Roxon, the Health Minister, fantastic minister, National Health and Hospitals Network, a major health reform.
Go to what Julia has been doing in terms of the national curriculum. She's been doing that and bringing it ultimately to the Cabinet for conclusion.
Look at various other reforms by other ministers, Penny Wong and the renewable energy target. Look at the other reforms which we've brought in through various other ministers. Tony Burke, the new reform in national drought policy which is currently being trialled in Western Australia. Chris Bowen, in terms of what's now been done with uniform national credit laws. This is all done by individual ministers and this is done-
O'BRIEN: -And when you, and did Penny Wong bring a submission to Cabinet to alter the timing and schedule and walk away in the next two years from the emissions trading scheme or was that decided by you, Julia Gillard, Lindsay Tanner and Wayne Swan?
PM: On the question of the internal deliberations of the Cabinet, these are always done through Cabinet or the Cabinet committee structures, including on the matter that you just referred to.
O'BRIEN: Was that decided within that committee group of four?
PM: I won't go to the internal Cabinet decision making processes and individual decisions. You know that as well as I do. Cabinet committees are-
O'BRIEN: -I'm not asking you to reveal secrets about what you talked about. I'm asking you to tell me whether that decision was taken by yourself and three other ministers and then presented to the Cabinet as a fait accompli. How much discussion was there in cabinet?
PM: On the budget question you've just referred to, to go back to your point before about the budget consequences of the emissions trading scheme, of course Penny was consulted on that. I consulted her as did other ministers on many, many occasions.
The key question though, and I go back to your broad point, about what ministers are doing in this Cabinet of the Australian Government, if you lined up our Cabinet members, our Cabinet Ministers, one by one, and compared them with their opposite numbers, this is an exceptionally strong Cabinet team and if you go down the list of what I've just gone through and I didn't even get to Jenny Macklin on paid parental leave, a stunning reform through the Australian Parliament today so that for the first time from 1 January next year you're going to have a paid parental leave scheme for 148,000 parents across the country, $570 a week-
O'BRIEN: -And missing a lot of space in the media because it's taken up with all these negative issues, some of which even your own colleagues believe you've brought on yourself.
PM: Well, Kerry, tonight I notice that you haven't asked a question about paid parental leave, 148,000 parents out there about to have their lives changed. You're asking me about communications tactics, you're asking me about political management.
I'm seeking to talk to you about policy. There's a policy which affects 148,000 people, a large slice of whom will be watching your program tonight, and it means being able to spend more time with a little bub when it comes home, a bit more support financially when that time comes in your life and this is something the country's been waiting for for years and years, and to go right back on the core question you asked, Jenny Macklin has had responsibility for this, discharged it, concluded it, brought it to Cabinet and decided. I could give you a list of a 100, a 100 of these things which have been done in the last two years and I think it's pretty easy to become, you know, fixated on one thing or another, but this list of reforms is impressive, those ministers are impressive ministers, as are their colleagues, and they've taken charge of these things themselves in a proper process of Cabinet government.
O'BRIEN: OK, and to some degree I imagine the media will be fixated over the next 24 hours with what the Auditor-General said to a Parliamentary committee today, that your advertising, government advertising guidelines had been softened and this was in the context of the campaign that is running now on the mining industry, and I'm told that this is an issue that's resonating in Labor electorates, in marginal electorates, that the people are taking a view, that you have departed from your own pledge on this, that you set new ground rules for government advertising to prevent abuse and that you've now changed those ground rules which the Auditor-General says have been softened?
PM: Well, Kerry, I made two commitments prior to the last election on this. One was I said the quantity and the volume of government advertising under the Howard Government was obscene.
Let me just go to some facts. In the first year that this Government was elected, we spent, I think, about one third of what the Howard Government had spent on government advertising in the previous year. In the second year of this government we spent about one half of what the Howard Government spent on advertising the previous year, and in 2007 I think they spent about a quarter of a billion dollars on Government advertising. In the last 12 months, I'm advised, we've spent probably $50 or $60 million on advertising.
When it comes to introducing the goods and services tax, the Howard Government tax spent $450 million on that, I'm advised. On this particular campaign concerning a very deep question of tax reform, we are spending $37 million. Let's put this into some quantitative context.
The second part of your question is this, the guidelines. We said before the election that we would involve the Auditor-General in an approvals process. On 1 July, 2008 we brought in that because we thought it was the right way to go. At that stage I'd already received a letter from the Auditor-General to me personally, not long after becoming Prime Minister, saying that he thought this was not the right way to go and it should instead be an independent committee.
We said we'd review this after two years. We did so in 2010 by an independent committee. It then established or recommended an independent communications committee. That's been functioning since the beginning of this year.
That is what we have done and I think it's important to put it into its context, so on the commitments I've made, I believe they're consistent with what I've said to you and to others prior to the election.
O'BRIEN: And very briefly, coming back to those polls. If the trend in those polls is not reversed in coming weeks, or at least arrested, will you consider putting your Party ahead of your own personal ambitions and resign?
PM: Can I just say to you, Kerry, this business of reform is a tough business. It's a hard business. It's never some sort of even and smooth trajectory. I expect that we're going to continue to take a whacking in the polls for some little time to come yet
O'BRIEN: But you've got an election looming, you've got an election coming.
PM: Yeah, well we have an election due by whatever it is, March or April next year and we only have 3-year terms. You've got to use the time effectively. You can't just dodge hard questions like tax reform. You've got to engage in it and that's what the business of being an effective government of the country is like together with the other stuff that we have done-
O'BRIEN: -OK, I won't ask you to go through the list again, but we're out of time.
PM: -keeping the economy strong, unemployment at 5.2 per cent. That's as important as the other matters we're engaged in right now in the debate.
O'BRIEN: Kevin Rudd, thanks for talking with us.
PM: I appreciate it.