HOST: Good morning Prime Minister and welcome to AM.
PM: Thanks Sabra.HOST: The budget update has few or no friends this morning. The Financial Review says it's tax trickery, News Limited papers say that middle Australia has become the fall guy. Have they?PM: This is the right economic statement for the Australian economy. Sabra, we would not be sitting in the United States or in the UK or in many other major developed nations around the world and talking about bringing a budget to surplus.This mid-year economic statement is part of our long-term strategy to keep the Australian economy strong, to deliver a budget surplus as our economy grows, our economy will continue to grow, we'll create jobs, unemployment will be low, inflation will be low, and all of that gives the Reserve Bank room to move on interest rates if it chooses to do so.And, you know, a family paying a $300,000 mortgage off is paying $4,500 less a year than before this Government took office.HOST: The changes to the baby bonus have raised some eyebrows. Mr Swan argued yesterday that often families don't need to pay for those extra costs when it comes to the second and subsequent child.Mr Abbott was asked about this on Channel Seven this morning, let's listen to that.ANDREW O'KEEFE GRAB: When you've already bought the cot and the pram and the, you know, the first lot of clothes and all that, everyone knows the first child is the golden child Tony don't they?ABBOTT GRAB: Well Andrew in our family every child is a golden child, but often Andrew, one child is still in the cot when the second one comes along, one child is still in the pram when the second one comes along.So you actually need to get an extra cot or a double sized pram. I think if the Government was a bit more experienced in this area, they wouldn't come out with glib lines like that.HOST: Does the Opposition Leader have a point here, does the leadership group of Labor understand the pressures of families with children?PM: Well I think Mr Abbott can explain what he meant by that line. On families and pressures with children, the Government is certainly working with Australian families and we understand many families are struggling to make ends meet, and for example they face costs when the kids are going back to school, which is why we provided the School Kids Bonus.And let's be clear about the way we're working with Australian families and working with them on cost of living pressures. For a family with two children, the School Kids Bonus is worth $15,000 across the life of the kids at school, all of the years that they're at school.Mr Hockey has very clearly said that Mr Abbott, if he was Prime Minister, would take that away, and yet at the same time, we've got Mr Abbott on TV this morning complaining about a change to the baby bonus which means a $2,000 difference once for a family.This doesn't add up Sabra.HOST: So you're saying that families get enough payments and help from the Government already, you shouldn't notice this.PM: I'm saying it's in the interests of Australian families for us to have a budget that brings a budget surplus in; we've got a growing economy so this is the right economic strategy for jobs and for growth.It's the right economic strategy too to make the maximum possible room for the Reserve Bank to move on interest rates if it chooses to do so and lower interest rates have been, in the interests of Australian families who are paying off a home.
At the same time, we will continue to work with people on their cost of living pressures, for example, the cost of getting the kids back to school.We have made a structural save on the baby bonus, that's absolutely true, and that's part of a long-term strategy to get our budget in the state that it needs to be and of course we will be working to fund things that people value.As I move around the country, people do talk to me about the quality of their child's school, they do talk to me about a better deal for people with disabilities, and we'll want to be making the room over time for those things in the budget.HOST: Okay, but should export prices continue to fall, and there's a strong risk that they might, that is going to affect the Government's tax take too. Is there anything that you are prepared to do to save the surplus?PM: Look Sabra I'm not going to deal with hypotheticals, I'm going to deal with the facts and the facts are-HOST: Well but the hypotheticals here - some forecasters are also saying if Treasury and the Government are being way too optimistic on those predictions.PM: Well on Treasury predictions, the same people have done the economic predictions now as did them under the Howard Government, as did them under earlier Governments. These are the expert Treasury and these are their predictions, which are broadly in line with predictions from other sources in the Australian economy.HOST: With every MYEFO since 2010, they've had to revise down.PM: Well we get the experts at Treasury, the same people who assisted Prime Minister Howard, to do their best expert projections and that is what is in MYEFO.
On your broader question, we're not dealing with hypotheticals here, we're dealing with facts. We delivered the Mid-Year Economic and Fiscal Outlook yesterday and it has a surplus in it despite us having a revenue write-down of more than $20 billion.Now that shows that we are prepared to do some hard things in order to have a budget in surplus. We're a Government that's made more than $130 billion worth of savings, we've got tax to GDP at a lesser rate than the former Howard Government, so less tax.We are making those decisions because they're right for the economy and to support jobs.HOST: Half the savings announced yesterday are from changes in the way that corporate tax is paid. Did the Government consult its business tax working group on this change, because it seems like they've been taken by surprise.PM: Look we made this change because it simply strikes us as fair that when working people pay their tax weekly or fortnightly, perhaps monthly, depending on how they get paid, that companies should also pay their tax as they go along.HOST: But you've got this consultation group, did you actually consult them?
PM: Well we've got a process here now too; this is a change that's going to take effect-HOST: It sounds like you haven't.PM: Well this is a change that's going to take effect from 1 July 2014. The purpose for the business tax working group was to see whether within the tax envelope that businesses pay, there were ways of re-gearing it to lower the company tax rate by forgoing other concessions.Sabra, this move on company tax is not an increase in company tax; it's about the time of payment of company tax.
I do note that there is a political party with a policy to increase company tax and that's Mr Abbott's Liberals.HOST: It's not more tax, but it certainly increases the red tape and the compliance, and for some businesses their intake isn't smooth over the year, they have seasonal lumps and dips. It certainly will be harder for them to calculate and factor in this. It makes it more difficult for business.PM: Well on the mechanics of how it's going to work, of course we'll be open to feedback from businesses, let's be clear here Sabra, businesses account for their GST, for example, on a monthly basis. Businesses keep their accounts forensically, indeed if you talk to some of our biggest businesses, particularly those in the consumer retail sector, they're basically able to give you 24 hour data, that's how forensically they track what's happening in their business. And the businesses that are coming on stream first for this change are the biggest businesses in Australia - 350 of them.
So it's not a tax increase, it's a change in time of tax accounting and it mirrors what working people are required to do and working people too can face changed circumstances during the year.HOST: Are you prepared to talk, you said you're ready to talk to them, will you move, is there any-PM: No, this is the policy. If people have got ideas on the best mechanics of the accounting, then obviously we would be open to those but this policy will be implemented.HOST: Can you explain how cutting half a billion dollars in research funding sits with your desire to boost Australia's productivity? Professor Fred Hilmer, the chairman of the Group of Eight universities, says it will obliterate 1,500 jobs and that it will damage Australia's reputation overseas.PM: Well I don't agree with Professor Hilmer, he's a good man and I respect what he's done and respect what he's done for the university that he's most associated with and I've been with him to his university, but I don't think he's called this one right.We've increased research funding by more than 40 per cent. We set a target of, in this program reaching a goal of $300 million a year, what we've done is we've deferred that goal from reaching it now to reaching it in 2016.Every year in our budget, research funding will continue to go up. Every year in our budget, university funding will continue to go up and as universities continue to experience those increases, they can of course continue to pay all the staff and do the things they want to do.We've increased the number of student places by 150,000 through changing the way in which university funding works, so this has been a big commitment to universities. We are seeking to put this program on a more sustainable footing for the long term.HOST: The independents have signalled that they'll consider each measure on its merits when it comes before Parliament. Is the surplus gone if they don't pass this stuff through?PM: I think first and foremost we need some clarity from the Opposition here about their position. I have noted that the Opposition's been full of its usual negative huff and puff and I'm sure we will see Mr Abbott and Mr Hockey out negative to the last breath.But our experience in the past has been, even though they've been negative until they were blue in the face, then they've come into the Parliament and they've backed in the Government's legislation. We'll wait to see what the Opposition says about supporting these changes.HOST: Since last time we spoke, you labelled Tony Abbott a misogynist. Were you surprised by the public reaction to that and now in hindsight do you regret saying that?PM: I stand by every word of that speech and I meant every word of it. Yes, I have been a bit taken aback by the dimension of the public reaction here and around the world and the way it's gone through social media to so many places around the world.People were certainly raising it with me overseas and many, many Australians have raised it with me here back at home. But I stand by every word of that speech, I meant it.HOST: Those women who are close to Tony Abbott say that they vehemently disagree.PM: Well I've put my views and I stand by every word that I put in the Parliament, and I pointed to some very clear statements by Mr Abbott which I think indicate his attitudes to Australians and to Australian women in particular.HOST: When you appointed Peter Slipper, the Speaker, a year ago, many of your colleagues predicted that it would end in tears and it has. Do you regret that decision and also, many people say it now clouds your judgement, your ability.PM: Well I made it very clear on the day on which gave the speech you've just asked me about that I viewed the text messages that Mr Slipper had sent as grossly sexist and vile, so that conduct cannot be excused and should not be excused.Of course, I was not aware of that when Mr Slipper became Speaker at the end of last year.HOST: Certainly there were questions about his performance prior to this, long prior to this.PM: You can't work on the basis of rumour in Parliament House, rumours churn around here very frequently. What I worked on the basis of is that Mr Slipper had served as Deputy Speaker. I think he'd been perceived by many to do a good job as Deputy Speaker.I actually think, Sabra, for the time he was Speaker, in his management of question time, for example, many people thought he did a good job at that, indeed many in the media talked about how he did a good job in managing what can often be an unruly and difficult part of the day.But the circumstances are as they were revealed and those text messages were grossly offensive and Mr Slipper took the decision to resign and that was the right decision.HOST: Maxine McKew's publishing a book in the next week - are you poised for another round of destabilisation based on its contents and do you wonder why, as a Labor woman, she's doing this to you?JULIA GILLARD: Well Maxine McKew is, you know, she obviously has written a book. Before she was in Parliament she was of course a journalist and so she's taken those skills into writing a book.
I'm not aware of its contents other than what, you know, has been publicly reported to date, so I'm not going to speculate about a book I haven't seen.HOST: Okay, Prime Minister thanks for your time this morning.PM: Thanks Sabra.