HOST: The Prime Minister, fresh from an Easter break, is in our Parliament House studios.
Prime Minister, welcome back to Breakfast.
PM: Good morning Fran.
HOST: Prime Minister, Alzheimer's Australia wants $500 million in this budget for dementia awareness and specialised care. Will you sacrifice your budget surplus to give older Australians the care they need?
PM: We will deliver a budget surplus Fran, because it's necessary for our economy at this time.
As I move round the country, businesses in particular talk to me about how much they'd like to see a rate cut, an interest rate cut. Now of course interest rates are cut by the Reserve Bank independently of government, but what we know is that returning the budget to surplus will help give the Reserve Bank the room it needs to move, should it choose to do so. So, we're going to bring the budget to surplus, it's an economic imperative.
We do have important things to do for the Australian community too, including making sure that our aged care system is sustainable and offers people the quality and the choices that they seek, and that it's going to be sustainable in the future as more and more Australians enter old age. Minister Butler has been working hard on that.
Fran, I'm not going to speculate as to what's going to be in the budget, but I deliberately said during the last election campaign that we would work on aged care during this period of government because we understood that the current system, which has served the nation well, but that the current system was starting to show stresses and strains and was going to show more of that in the future, as more Australians aged.
HOST: Well we're nearly halfway through this period of government and your Minister, as you say, concedes the aged care sector is, quote, ‘an industry in crisis'. That's what he said over the weekend.
Aged care organisations want your Government to respond in the budget. If you don't do it in this budget, you're not going to be able to fulfil that promise are you?
PM: Well Fran, I'm not going to speculate about what's going to be in the budget, and you shouldn't be drawing any conclusions about what's going to be in the budget. You should wait for budget night.
But we have worked through a process here, asking the Productivity Commission to provide advice.
Minister Butler has been out talking to older Australians. He's talked personally in meetings to around 4000. We've received expert advice and submissions from organisations including Alzheimer's Australia, and Fran I'm the first to acknowledge that our aged care system has problems.
It's not offering the choice, the quality that older Australians want. It's not offering them the ability to stay in their own home for as long as they'd like to with packages of community care, a home they've worked hard to pay off and that they rightly want to stay in for as long as possible as older Australians.
I recognise all of these problems in the aged care system, which is why I said during the election campaign we'd work on reform and why we are continuing to go through the process led by Minister Butler.
HOST: We already know that programs will be cut; the Treasurer's told us that, to achieve the surplus, back to the surplus, a $1.5 billion surplus is the promise.
It's a wafer-thin margin. Does it really matter? It makes no difference in economic terms does it, whether the budget is $1.5 billion in the black or $1.5 billion in the red?
PM: I couldn't disagree with you more strongly Fran, couldn't disagree with you more strongly.
Number one, I don't know when we got to a stage where people bandied around figures like billions and decided that they were next to nothing, that's not the approach that I take.
Number two-
HOST: -No but in a $400 billion budget-
PM: -Well Fran, returning the budget to surplus is an economic imperative. An economic imperative because we want to make sure that the Reserve Bank has the room to move should it choose to do so.
If you go round the country and talk to businesses, it's in the interests of Australian businesses to be supporting a budget surplus because Australian businesses, many of them doing it tough, because of the strong Australian dollar, have said to me that they would like to see an interest rate cut. So that's one reason for returning the budget to surplus Fran.
Another reason-
HOST: -Prime Minister, could I interrupt there just to talk about the interest rates, and I'm sorry to interrupt but the Reserve Bank signalled last week it's looking at a rate cut anyway. There's already scope with the low inflation, low unemployment-
PM: -Well Fran that's the wrong assumption. Fran, the Reserve Bank did that against a backdrop of understanding the government's determination to return the budget to surplus.
So you shouldn't be trying to give the impression to people that somehow what the government does doesn't matter.
The Reserve Bank understands what the government's fiscal strategy is. We've been crystal clear about it. Our determination to return the budget to surplus in 2012-13, and we will do so.
We'll do so because that means that fiscal policy is in the right zone to take the pressure off monetary policy, to give the Reserve Bank room to move should it determine to do so. It will also lock in confidence for the future.
We live in uncertain economic times globally, a great way of sending a signal of confidence about our economy to the world is returning the budget to surplus and we will. It's an economic imperative and that's why we're driven to do it.
HOST: It's an economic imperative, but some are asking at what cost. We don't know exactly the numbers of course until budget night, but at this stage the deficit for the current financial year will be at least $40 billion. One year later, your scheduled surplus.
It's already been pointed out no Australian government has ever attempted such a huge withdrawal of spending in just one year, and that's been described by some as seriously reckless. Could cost thousands of jobs and push the economy into recession. What do you say to those people who are worried about that kind of withdrawal?
PM: Well I'd say don't worry, because we'll be returning the budget to surplus in circumstances where we are forecasting around trend growth. Fran, we've got to be very clear about the state of the Australian economy today, so that any of these issues in people's minds about what's around the corner can be properly dealt with.
The Australian economy today is one where its fundamentals are strong. We've got unemployment at 5.2 per cent. We've got an economy returning to around trend growth. We've got more than $400 billion of investment in the pipeline, in the resources sector alone. We've got a high Australian dollar and that's putting strain on some areas, for example on manufacturing.
Now when you look at all of that, you've got to work out what is in the interests of the Australian economy today. Well with an economy returning to trend growth, with us wanting to make as much room as we can for the Reserve Bank to move, should it choose to do so on interest rates, with us wanting to lock in confidence and send a signal to the world, the right economic zone to be in is with a budget surplus. Now let's remember the return to-
HOST: -Yes, but is it a threat to the return to trend growth if you take out this amount of government spending?
PM: A return to trend growth, Fran, will be in a budget that has a surplus. So these things aren't done independently of each other. Our Treasury doesn't sit around forecasting what it thinks growth is going to be, not understanding what the government's fiscal strategy is. These things are done as a seamless whole.
So with the government determined to bring the budget to surplus in 2012-13, our economic forecasters, the ones who have served the nation well under Labor governments and under Coalition governments, are forecasting a return to basically trend growth.
HOST: Prime Minister, the Treasurer Wayne Swan has already said the budget won't be, quote, ‘a choice between surplus or social policy', and there is already some talk the budget will include start-up funding for the National Disability Insurance Scheme. Is that a commitment you can make today?
PM: Fran, I'm not going to speculate about what's in the budget, you'll have to wait til budget night.
But if I can address what underlies your question, the quote by Wayne Swan and the attitude that we are bringing to this budget, Fran you should expect, as a Labor Government we will deliver a Labor budget.
That means we'll bring our Labor values to the table, the values that always dictate that we run the economy in the interests of working people and always dictate that we do everything we can to help those most in need.
Now, in a budget circumstance where you are returning the budget to surplus, you've got to make choices, and they're not always easy choices.
Some of them, Fran, can be very tough choices, but when we are called on to make choices we do it in a Labor way. We protect frontline services, like nurses and doctors who help people out in public hospitals, and we are always determined to make sure as a nation we're doing better and better for those who need our care and concern the most.
HOST: Will you be able to bring the non-Labor premiers with you, because you sit down with the premiers on Friday at COAG. They've agreed in principle to the idea, the Productivity Commission notion of the National Disability Insurance Scheme, and putting back into that fund the $4 billion the states currently receive in Federal funding for disability.
Will the states be expected to stump up any of their own money extra for the scheme?
PM: Look, what I want to do with the National Disability Insurance Scheme is be honest with everyone, particularly state premiers, about how much work we've got in front of us. This is a huge reform, easily the size of Medicare, and you don't build a new system like that overnight, and you need to build it with full cooperation between Federal and State governments.
So, I will be saying to my colleagues at COAG, as I've said to them one to one, that this is a great reform for our nation, it's going to take work, it's going to take work in partnership, it's going to take some time to do, but we should aim to get it done for the Australian people because there are too many people now, Fran, who have got a disability, who are in a zone where they cannot get all of the services they need.
This really does depend so much on how you got your disability. You will be in a very different position if you were born with a disability as opposed to getting it in a transport accident. Now that's not fair, that two Australians with equal needs should get such unequal treatment, and that's what we're determined to fix.
HOST: Prime Minister, can I ask you about the HSU report, sorry the FWA - Fair Work Australia - report into the HSU, but more generally the ACTU and the Labor Party have now disaffiliated the Health Services Union.
The HSU has suspended its President, Michael Williamson, yet the person at the centre of the allegations, Craig Thomson, enjoys your full support. Surely the only logical explanation is that they're either all too harsh, or you're too lenient.
PM: I'm taking the same approach as Prime Minister Howard took in comparable circumstances Fran, which is that proper processes should be worked through.
I would remind you Fran, and you probably remember it, you would have been broadcasting then as well, that during the Howard Government there were members who were subject of referral to the DPP, indeed one of those Members of Parliament is currently a Parliamentary Secretary on Tony Abbott's front bench.
Prime Minister Howard then said proper processes should be worked through. Tony Abbott supported him in that. I'm saying what was good enough then should apply now. Proper processes should be worked through.
HOST: But was the ALP then improper - the ACTU rather, improper to disaffiliate the HSU?
PM: It's dealing with different things Fran, and you know that. The ACTU is making a decision about one of its affiliates, you are referring to an individual in the Federal Parliament, and proper processes should work through for that individual.
HOST: With the Fair Work Australia report of no use to the Commonwealth DPP, in terms of proper processes what happens now?
PM: Well this is a question for Fair Work Australia and a question for the DPP. Fair Work Australia is rightly independent of government, I'm not going to, Fran, try and step into the shoes of the industrial umpire, that wouldn't be right. The industrial umpire has to do its work independently of government.
HOST: But even if the industrial umpire seems to be incompetent? How is it possible for Fair Work Australia to have taken three years to deliver a report to the DPP that is of no use? I mean, really is independence to the point of incompetence, is that standard for a Government?
PM: Fair Work Australia is independent, and you should direct those questions to Fair Work Australia.
On the setting up of the system, I do believe in an independent industrial umpire. I don't believe that politicians should be able to dictate things like the result of a minimum wage case, whether or not penalty rates get stripped out of an award.
HOST: Of course.
PM: Now, politicians on the other side of Parliament might hanker for those powers because of course that's what they've done in the past - got penalty rates ripped off people through Work Choices. The approach we have is one of having an independent industrial umpire.
HOST: Yes, but if that industrial umpire, to all accounts, appears to not be able to manage some duties, and that seems to be what we've had, witnessed here, three-year investigation into a union. Is it time to review the powers and capacity of that industrial umpire? You are the government of the day.
PM: Fair Work Australia is independent, and Fran I'm not going to be drawn on commentary about the way it does its work.
More generally, and separately to the matter that you have been raising with me, when we set up the Fair Work system, when I, as the then Minister, put the Fair Work legislation to the Parliament and got it through, despite very trenchant opposition from the Liberal and National Parties, when we succeeded in getting that legislation through, we said at the time that there would be a review at this period, two years in, and that review is in train.
HOST: Just finally Prime Minister, on the issue of asylum seekers, there's a boatload of Chinese people currently in and around Darwin on their way to New Zealand to seek asylum, and they're going to be able to leave Australia as I understand it to make that boast journey.
Why, given that Australia asks so many other countries to stop people leaving their shores on boats headed for Australia?
PM: My understanding of that matter is that we're not in a position where we could detain these people. They have not asked for asylum in Australia and they are on a seaworthy vessel. So we are not in a position where we could detain them against their will.
HOST: Prime Minister, thank you very much for joining us on Breakfast.
PM: Thank you.