HOST: The Prime Minister Julia Gillard joined me from the Lodge a short time ago. Prime Minister, thank you for your time tonight.
PM: Thank you very much, Leigh.
HOST: None of the state premiers have said they'll sign up to your education reforms. We've also seen a new gap in the budget revenue forecasts emerge this week.
Does that mean that your education spending plans are already dead in the water?
PM: On the budget, on the spending, we have already announced savings to back in the spending for Australian schools. They haven't been popular but in my view they've been the right thing to do.
And I will sit at the Council of Australian Governments meeting tomorrow and make it very clear to premiers and chief ministers that this is a critical moment to make a difference for Australian education; for children today, and for the generations of children to come.
To make sure that every Australian child gets the opportunity to reach their full potential in a properly resourced school.
So I am determined, Leigh, that we get this done. I will make that clear to premiers and chief ministers tomorrow.
And then if we leave the COAG meeting with any premiers or chief ministers having not agreed, then in the ten weeks to come I will be out there, not only talking to premiers and chief ministers about the importance of our children and properly funding their education, but talking to parents, schools, communities about it too.
HOST: You say that you've already announced savings. Let's unpack that a little bit.
The Commonwealth share of funding for education plan is $9.4 billion. So far to pay for it you have nearly $3 billion in university cuts plus almost $1 billion in superannuation savings.
So that leaves a gap of about $5 billion. Where will that $5 billion come from?
PM: Leigh, you're dealing with two time scales. The figure that you're referring to of just over $9 billion, which is a lot of money, is a figure over six years.
The savings on the forward estimates are obviously the savings over a four-year period.
The kind of savings that we have selected, for example in superannuation, have helped to make the superannuation system fairer and more sustainable, and those savings continue to grow over time.
HOST: But when you're looking at four years or six years, your Government has made some serious miscalculations in what you're going to earn over the next period.
The mining tax is delivering billions less than forecast. We know that the carbon emissions revenue is likely to be substantially less than budgeted.
Aren't your spending promises fanciful given that you're not going to be making as much money as you hoped?
PM: Let's do appropriate comparisons. When we work out what we are prepared to spend of course we go through a process of properly assessing that, and we've made proper savings to back in the spending on Australian schools over our forward estimates.
And as I've just indicated, beyond the budget period some of these savings continue to grow.
On the revenue side, the amount of tax money that the government gets, the Minerals Resource Rent Tax is deliberately designed as a profits-based tax.
So when commodity prices come off, and they came off more sharply than expected, then that does affect the amount of revenue collected.
On carbon pricing, we said that we wanted a full emissions trading scheme from 1 July 2015. That's what we have legislated for.
We've said we wanted that to be internationally linked so that we got the benefits of the international price.
That's the least cost way for business to cut the amount of carbon pollution that they're generating.
Now there has been some volatility in Europe, just like there's been volatility in all markets in Europe in the wake of global financial crisis.
HOST: But you have a whole lot of policies that are going to hit a funding crunch around 2015.
You've got a dental scheme, you've got your education plan, you've got the disability insurance scheme, the cost of detaining and housing asylum seekers, a fleet of new submarines.
Isn't there a serious credibility problem here in that you're making the spending promises but the revenue forecasts you've made have been overinflated?
PM: Leigh, we make revenue projections working with the professionals in Treasury.
We are in an unusual circumstance in our economy at the moment: post the global financial crisis, the amount of tax money per unit of GDP coming to the government at its lowest rate since the recovery from the recession of the early 1990s. Certainly much lower than the professionals at Treasury who work with government predicted.
We've also got commodity prices coming off and some changes in the terms of trade.
So let's be real about the things that make budget forecasting the thing that you work with professionals to do.
And yes, there are factors that change forecasts. Of course there are. There always have been under previous governments and there always will be in the future.
HOST: But Prime Minister I am-
PM: What we've said Leigh, is that we will back in new structural saves with new structural spends. That is what we should be held to account for.
We are going to make sure that as we put on the budget new obligations to do the right thing by our kids and with people with disabilities, that we are backing that in with new savings as well.
There will be some hard choices there and I've said to the nation we'll have to make them. But that is the right thing to do to put those high priority areas; our kids, our future, people with disabilities first.
HOST: But structural changes and cutting spending can only go so far. You do rely on revenue and I'm just making a simple point you've said we're going to spend and we're going to have all these new initiatives based on forecasts that you're going to earn a certain amount of revenue and it's proven that you're not going to make that much money.
PM: Leigh, I'm working with the most up-to-date forecasts that the professionals at Treasury can give me.
Then in the budget we will update those forecasts again. That's what governments do.
But we know that if you are going to introduce a new spend, you've got to back it in with a new save. We have already accepted that discipline and we are working to it.
HOST: In terms of wanting to rely on up-to-date forecasts, we've seen what's happened with the carbon price in Europe in recent times.
Just a simple question, in this coming budget will there be a revised price for carbon in 2015- 16 and a revised revenue forecast as a result?
PM: As the Treasurer and I made clear yesterday, the budget forecasts in carbon and in all other areas will be updated in the usual way: at budget time.
HOST: Australia's relying on modeling that the European price for carbon will be $29 a tonne in 2015. It is currently around $3 a tonne.
Do we seriously think that in two years that carbon price could have recovered to ten times what it is today?
PM: Leigh, as I just said, we will be updating budget predictions and forecasts at budget in the usual way assisted by our professionals in Treasury and Finance.
So you will see those numbers on budget night.
HOST: Would you consider tweaking the current carbon price legislation?
PM: The legislation is there. The system has been outlined for all to see. We worked in a very consultative way with business to get this done.
We've got the legislation in place Leigh, and of course the system is rolling out against that legislation.
HOST: But the legislation does lock in a price that's actually a lot higher than what our competitors in Europe are paying. Would you consider tweaking that to bring in closer to what European companies are paying for their carbon emissions?
PM: Leigh, the legislation is done and you know how hard that was to get through the Australian Parliament.
You know that this has been bipartisan politics since - it was in 2007, let's put a price on carbon, have an emissions trading scheme.
You know Prime Minister Howard supported that and yet, because of the entrenched negativity of the Opposition, getting legislation through the Parliament was incredibly difficult.
We succeeded. We are cutting carbon pollution.
None of the silly claims about carbon pricing destroying the economy, wiping Whyalla off the map, $100 roasts, any of the foolish things said by the Opposition have proved to come true.
The legislation is there and we are working against that legislation, a fixed price now going to an emissions trading scheme on 1 July 2015.
HOST: Prime Minister Gillard, thank you for joining us tonight.
PM: Thank you.