HOST: Prime Minister, thanks very much for your time.
PM: My pleasure.
HOST: Australia's fortunes are now more closely linked with China's than ever before, as evidenced by the star-studded business delegation you had with you in Beijing, but isn't there a risk that China's great and growing power enables it to dictate terms to Australia?
PM: I'm very confident about the future of the relationship, and I'm very confident about the future of the commercial relationship. China is hungry for the things that Australia can supply. China needs energy to keep fuelling its remarkable economic growth and industrialisation, and we have the ability to supply that energy through a range of products, including, of course, now LNG as well, so I believe this is an arrangement of mutual benefit, and we've both got some ability to work through how the arrangement should work.
HOST: But with a quarter of all Australia's exports now going to China, [AUDIO BREAK] risks that if they stop buying, we're cactus, to use an Australian colloquialism?
PM: Well, nice Australian terminology, but I don't foresee any prospect of that, Jim. China needs energy to fuel its growth. It is rapidly expanding. The rate of growth in its economy is truly remarkable. China has just released its next 5-year plan, its 12th 5-year plan, and under that plan it is aiming to create 45 million new jobs, so with that kind of rapid economic growth China does need the resources that Australia has to sell.
HOST: At the opening of your meeting with Hu Jintao, he spoke glowingly of you wanting a pragmatic, friendly and cooperative relationship. You don't think that sounded a bit like he was suggesting a compliant relationship that wasn't too concerned about the political differences [AUDIO BREAK] the systems and the ideas that Australian and Chinese politicians express?
PM: Not at all. I didn't read it that way.
We have a positive relationship with China. We have a constructive, comprehensive engagement with China. We're also very clear about where there are differences, and where there are differences we put our views.
I've done that on this trip to China. I've done it back in Australia when we've had senior Chinese visitors, so this is a relationship with a lot of mutual benefits in it. We've just referred to the nature of the economic relationship between our two countries, and there's great prospects for growth in that relationship, but we don't agree on everything, we won't agree on everything, and when we don't agree we put our view clearly.
HOST: You did raise specific questions about two Australians behind bars in China, Matthew Ng and Stern Hu. Did the Chinese leaders provide you with assurances that they would follow up on your concerns?
PM: I think it's probably best for all concerned that I don't go into the details of conversations about individual cases. We do raise consular cases of concern, and I did raise the two you refer to directly with Premier Wen.
HOST: Let's talk more generally, then. Did you get the sense from either Hu Jintao or Wen Jiabao why it is that the Chinese leadership is so anxious about the possibility of dissent that it ordered this recent crackdown at a time when its policies have made Chinese citizens wealthier than at any time in the their history?
PM: In my discussions, I did raise Australia's concerns about human rights, about the detention of human rights activists, about the treatment of ethnic minorities, and religious freedom. I believe it is important that we do raise our voice. We, of course, are supporters of human rights. It's in us. It's an Australian value, and so we advocate for it on the world stage, and I raised human rights during my discussions here in China.
We're one voice. Many international voices are raised on this question, and I think ultimately the weight of international opinion does make a difference to China.
HOST: Wherever you've gone in North Asia - in Japan, in South Korea, and in China - you've been asked about Australia as a secure source of LNG. Why would there be any doubt of Australia continuing to be a reliable supplier of liquefied natural gas?
PM: Oh, I don't think there is any doubt. Every discussion I've had in Japan, in South Korea, in China, has been one where people have recognised Australia's history as a reliable supplier of energy and a cost-competitive supplier of energy. I think when we've talked about the future, the perspective being brought to it by those I've spoke to in Japan and South Korea and China have all been a perspective of looking to future growth and seeing really how much growth Australia is able to facilitate and accommodate.
HOST: I do know that the Chinese in particular were very concerned about the initial version of your Government's mining tax. Why wouldn't they be worried about the cost and certainty of future supplies of Australian LNG, given that the Australian industry is warning that your carbon tax could lead to the cancellation of some projects already in the pipeline?
PM: Well, Jim, the truth is I've been here in China for two days. I've met with Premier Wen. I've met with President Hu. I've attended an international business forum for chief executive officers, I've attended a trade dinner. I attended a lunch today with senior representatives of state-owned enterprises, huge businesses that have major investments in Australia, and in all of those discussions no-one raised with me carbon pricing in Australia.
HOST: So, were you able to assure the leaders of Japan, South Korea and China that changes in the Australian tax regime would not further increase the cost of Australian LNG, and for that matter Australian coal and steel?
PM: None of the leaders you referred to raised the question with me. Prime Minister Kan did not raise it. President Lee in South Korea did not raise it. Premier Wen and President Hu in China did not raise it.
So, I know, of course, that we are having a fast and furious domestic debate on the question of carbon pricing. I'm very determined that we will have a clean energy economy in the future, and that's why I am ensuring that we will price carbon from 1 July next year. It's the right thing to do by our future prosperity, it's the right thing to do by the environment, but none of the leaders I met with on this trip raised carbon pricing with me.
HOST: The benefits of new LNG contracts are in the longer term. In the shorter term, though, won't they simply mean more competition for labour and investment resources in Australia at the very time when inflation's already spiking?
PM: Well, the inflation figures have come out in the period I've been away, but Jim, a proper analysis of those figures would show that they are containing some one-off factors, which flow from the flooding and natural disasters in Queensland.
We've been explaining to people for some time now that we expected a one-off inflationary spike. That's what happened in the wake of Cyclone Larry, when we saw a huge spike in banana prices, and that fed into CPI. Now, following the Queensland floods and cyclone, we are living through a similar period, where the affects of those natural disasters on fruit and food prices generally show up in the consumer price index.
You are right to point to an issue for our economy, which is what I call the patchwork economy, where we're seeing huge growth in some industries and some parts of the country. I want to make sure that we've got balanced growth across the country, and that Australians throughout our nation have the benefits of opportunity.
That does mean that we've got to be investing in skills. It does mean we need to be sensitive to regional economic needs. It also means that during this period of economic growth, we've got to be doing everything we can to increase workforce participation and to enable Australians, some of whom have been outside the labour force for a period of time and faced a lot of disadvantage, to find a way back into the labour force whilst our economy is in this growth phase and people are hungry for workers to fill jobs.
HOST: You discussed defence and security with Hu Jintao. Did you express any concern about the relative lack of transparency surrounding China's rapidly increasing defence budget and the risk that that poses for misunderstanding, for suspicion, accidents and for conflict, too?
PM: The discussion we had on defence cooperation was one of noting that defence cooperation between our two countries has been increasing. We now have a system of annual meetings and exchanges between the chief of our Defence Force, Angus Houston, and his counterpart here in China.
There have been some limited, admittedly, but some examples of joint exercises, including a live fire exercise, and we have seen Chinese ships in Australian ports, and that may well occur in the future.
So, we are seeing increased defence cooperation. It's a step at a time. We noted that today in my discussions with President Hu, and said we were open to further cooperation. I think that this does assist in building an understanding between our two militaries about the way they work, the procedures they go through, the protocols they work to, and that is important.
HOST: My final question, Prime Minister - you're off to the wedding of the year. How does it feel as an unwedded republican to be attended a Royal wedding, and by the by, can you give us a hint what you might be wearing?
PM: No hints on the clothes, other than to say I will be wearing some Australian designers. Jim, if we were going to send a woman from Australia around the world to model Australian fashion I don't think I would be the first pick out of the 11 million-odd women who live in Australia, but I will be wearing some Australian fashion.
I will be there at the Royal wedding, representing Australia. I'm approaching it with a sense of excitement. I think that sense of excitement is being increasingly shared in many places in the world.
I'm here this evening China. I'm in a nation that doesn't have any natural connection to the Royal family, but I can tell you there's a sense of excitement here in China about the Royal wedding, too.
HOST: Prime Minister, thank you very much indeed.
PM: Thanks, Jim.