HOST: Prime Minister Julia Gillard is in our Sydney studio. Welcome to the program.
PM: Good morning Fran.
HOST: Prime Minister what will the price of carbon be in 2020, because in the documents you released yesterday, and there were many of them, Treasury's default escalator estimates $48 a tonne by 2020. Is Tony Abbott right when he says this carbon price is just going to keep going up and up and up?
PM: The carbon price does go up Fran, of course by then the scheme will be internationally linked, we will be in an emissions trading scheme and so the Australian price will be the international price. That's a good thing, because it means that Australian businesses are able to abate carbon pollution at the least possible cost.
That's good for Australian jobs, good for Australian businesses. Fran, the carbon price does go up and so does the household assistance and there will be a second round of tax cuts, so we will ensure that we keep moving the household assistance and the tax scheme so that the degree of assistance that we've promised to Australian families flows through.
HOST: That's going to be key to your selling of this package because householders generally, voters generally, are concerned about two things. Will this cost them and how much and will it do any good, will it help the environment?
Now you say nine out of ten households will be compensated, but why so much compensation? Is it unreasonable to ask all of us to pay something to reduce emissions, isn't that how you change behaviour?
PM: Well, the behaviour we're principally aiming to change is the behaviour of the big polluters, the around 500 big businesses that will pay the price for putting carbon pollution in the atmosphere. At the moment of course they do that for free, from 1 July next year they'll pay a price, $23 a tonne and that will go up over time. And what the means is that they will think of ways to innovate and change so that they do what their business does, generating less carbon pollution. That's what gets us a clean energy future as well as catalysing investment in renewables which we are doing through an around $13 billion dollar package to make sure this nation gets the benefit of solar and wind and geothermal and tide - all the wonderful new sources of renewable energy.
As for consumers, of course individuals can do their bit, they can make choices to buy products that have got less carbon pollution associated with their production. I wanted to make sure that households in low and middle income ranges were in a situation where they had from us tax cuts and family payment increases which help them with the cost of living, which is why we've designed a package so nine out of ten households do get some assistance and around six million households have basically come out square and I've determined to associate that with a tax reform.
We're lifting the tax free threshold from $6,000 to around $18,000. That will mean a million Australians are no longer in the tax system, having to do a tax return at the end of the year. It will also better reward people for making a choice to go to work, particularly to move from welfare to work, or for second income earners, to go back into the workforce. So I'm aiming here, Fran, for a clean energy future and for a high work force participation Australia.
HOST: I'll try and come back to the tax packages, tax income - the thresholds, because the Coalition has some problems with that. But just to stay with the compensation for householders, of course, inevitably, there are some losers and it appears that some middle income earners will slip through your compensation cracks. The Opposition gives the example of a policeman and a nurse each earning $70,000 a year with one child who will be $230 a year worse off after compensation.
PM: Fran, there's no way of sugar coating any of this and I'm not going to try to. Yes, there are some people who will not receive tax cuts or family payment increases that bring them out square, that is they will pay a price themselves. That price -
HOST: -And they're not all rich people.
PM: Well, that price will be very modest. We are talking about a change in cost of living in the Consumer Price Index of 0.7 per cent, 0.7 per cent. And I had to make choices about who needed assistance the most, I've determined that lower income Australians, more than four million lower income households, pensioners and the like, should come out with a 20 per cent buffer. Their budgets are very tight and consequentially they don't have much money to move around so we've protected them by giving them 20 per cent more than the expected impact of the carbon price on them and then, as I've said, around six million households will come out effectively square.
HOST: Okay, the other criticism of this whole plan is that it is a money-go-round and considering the levels of assistance to heavy polluting industries, emissions intensive trade exposed industries will receive almost 95 per cent of their permits free of charge. How exactly, can you explain to everyone listening, how that will drive a change in behaviour in industry?
PM: Well we know this will drive a change in behaviour and that's why we can say to people that in 2020 there will be 160 million tonnes less of carbon pollution, that's the equivalent of taking 45 million cars off the road, that is a very big number.
HOST: Does it matter that 100 million of those tonnes will be from abatement offshore, overseas?
PM: A tonne of carbon pollution out of our atmosphere is a tonne of carbon pollution out of our atmosphere.
HOST: But it's not a behaviour change in the Australian society is it?
PM: Well there will be changes in the way that we do business. Big polluters will change the way they do things, we will drive more investment in clean energy for the future that will change things in our own country, changing things in terms of the amount of carbon pollution.
Yes, there is international linking in the scheme and so there should be because I want to see less carbon pollution in our atmosphere, I want to achieve that result at the least possible cost and international linking is pivotal to achieving that result at the least possible cost.
Anybody who is telling you that there shouldn't be international linking is effectively saying Australian businesses should pay a bigger price and Australian workers should be at bigger risks than, in my view, they should be. We're talking about a system here where we're protecting Australian jobs, where we are working with businesses and where we are getting the lowest cost abatement, including through international linking and through the very design of the scheme, which is the most efficient way of cutting carbon pollution.
HOST: Okay, let's run through a couple of things if we can. The steel industry says it's pleased with the $300 million assistance it will receive on top of its 95 per cent free permits. In effect steel companies like BlueScope and OneSteel will be pretty much fully shielded from the impact of the carbon tax, like households, for the first few years. Why did you do that? Was it the Australian dollar and does that mean if the dollar drops so might the steel compensation package?
PM: The steel industry's doing it very tough in Australia at the moment and that is partly as a result of the very high Australian dollar. I mean we live in a time of enormous economic possibility, great resources boom, record terms of trade. The consequence of that though is a sustained high Australian dollar and that does put pressure on some industries particularly manufacturing and it's put pressure on steel. So we wanted to work with the steel industry and with manufacturing and other industries to make sure as we price carbon we're working with those industries and doing our best to protect Australian jobs.
HOST: And Prime Minister does this package mean that no new coal fired power stations will ever be built again in Australia?
PM: Certainly this package changes all of the incentives for energy for the future, so what we'll see is the development of renewables rather than dirty coal fired power stations.
HOST: So no more new coal fired power stations?
PM: My expectation is we will see from this package more renewable energy, we will also see more gas used, rather than coal-fired power stations that are very big emitters.
HOST: OK, in a moment we'll be joined by Brad Page from the Energy Supply Association for electricity generators. He's concerned that generators are going to have to pay upfront for their pollution permits under this scheme, sometimes up to three years in advance which is, he says, could lead to a lot more expensive and volatile power prices. Do you acknowledge this is a problem because it is a change from Kevin Rudd's CPRS package, the way that worked.
PM: We have changed the way that we're working with electricity. Particularly what we've done is put in place a system to retire some of the highest carbon pollution creating parts of our electricity generation sectors so we will go to market and tender to retire some of the energy generation that creates the most pollution, but we will do that in a way that works over time, is measured over time, so that we are swinging in new renewable energy and of course there is enough electricity and there are no problems about energy security.
What we've also done in this package is effectively pulled forward the assistance that goes to the electricity sector.
HOST: Just finally, the 160 million tonnes out of the atmosphere by 2020, I think, is that your aim?
PM: That's right.
HOST: That's the plan. What about in the short term, what about in two years time, in three years time? Because I think people want to know, be able to see this is going to make a difference. What are the figures of how many tonnes of carbon, how much less carbon will be emitted say in three years time?
PM: Well my answer to that Fran is of course it's going to take people some time to change processes and to change the way that they work, but effectively the starter's gun has gone off.
For businesses now, for around 500 big polluters, the first shot has been fired, they've heard the starter's gun, they know on 1 July next year they start paying, so right from today they will be saying to themselves ‘What changes can we make that reduce our carbon pollution?'. And we've got to get on with sending that price signal to people otherwise here we are, sitting in Australia, talking to each other and per head of population we generate more carbon pollution than anyone else in the developed world.
That means our economy has got a big journey of transition, it's not going to be achieved over night, but it's never going to be achieved unless we start and that's why we've got to get on with pricing carbon from 1 July next year.
HOST: Prime Minister thank you very much for joining us.
PM: Thank you.