GRUBEL:
It's your Government's 11th National Budget and the 9th surplus. Tax cuts for everybody. Are you pleased with the way it's been received by the public and media?
PRIME MINISTER:
Yes I am because all Budgets are important and you like them to be well received. It's a very comprehensive Budget. It not only reforms the tax system and provides large tax cuts to everybody, it also has a dramatic new plan for superannuation which has been widely welcomed. And it also contains targeted spending in important areas like defence. I mean we're committed to maintaining the three percent real growth in defence spending each year beyond 2010 and amongst other things we'll be able to acquire four C-17 heavy lift aircraft and that's very important for a country with regional responsibilities such as Australia. And there's almost a billion dollars of extra spending on medical research. I'm proud of the fact that Australia has always punched above her weight in this area and there's a lot of additional spending on roads, which in a sense, in a country like Australia is a concomitant of the high price of petrol. I mean people associate the two and I think it's a very important association.
GRUBEL:
Okay, but nevertheless some economists seem to be divided over the impact of the $37 billion of tax cuts and whether that will have implications for interest rates. Can you reassure Australians that monetary policy and fiscal policy are pulling in the same direction?
PRIME MINISTER:
I certainly can. Economists often disagree. The most important person in this of course is the Governor of the Reserve Bank. He has said on a number of occasions that the country could afford tax cuts provided we had a good surplus and there wasn't a sharp variation from year to year in the size of the surplus. Well those two conditions have certainly been met and it's the inflationary pressure in the economy which most exercises the minds of central banks and there's nothing in this Budget that's going to push up inflation.
GRUBEL:
Sure. What would you say then to the financial markets because they seem to be pricing in with bond yields another 25 basis point rise later in the year? Are they getting it wrong?
PRIME MINISTER:
Well I neither invest in, or exchange rhetoric with the financial markets.
GRUBEL:
Just on the Reserve Bank, you haven't had any indications from them about the impact of the Budget?
PRIME MINISTER:
I don't to talk directly to them about that. It's not appropriate that you bargain these things. They have a role in monetary policy, the Government has a role in monetary policy and of course controls fiscal policy. And we think this Budget is anti-inflationary, we think this Budget is responsible. We've paid off our debt, we have an enviably large surplus and we've provided tax cuts and targeted spending in important areas.
GRUBEL:
Just on the Reserve Bank, just for the moment though, Ian Macfarlane retires later this year. Do you think he's done a good job?
PRIME MINISTER:
I think Ian Macfarlane has done a first class job. Ian Macfarlane has been a very good Reserve Bank governor. He held his nerve during the Asian economic downturn and a lot of people were flapping around about using interest rates to deal with certain things and he is, in my view, one of the finest Reserve Bank governors this country's had.
GRUBEL:
Would Glenn Stevens make a good replacement?
PRIME MINISTER:
I'm not going to speculate about his successor, heavens no.
GRUBEL:
Just on your trip, just moving to your trip. I'll come back to defence and the Budget in a few moments. You're meeting with George W Bush in the White House and with the Prime Minister of Ireland and Canada, what will be the focus of this trip? What are the issues you will be raising?
PRIME MINISTER:
Well in America, not only with the President but with all his other senior officials, I'll be talking about the bilateral relationships, I'll be talking about some particular aspects of it. But the broader international situation, especially Iran. The inter-relationship between Australia, China and the United States. Australia has a very close relationship of course with the United States, as close as we have with any country. We have a good relationship with China and one that has brought great dividends for Australia. But obviously, it's a different relationship and we bring a slightly different perspective because we are here in the Asia Pacific area and America brings a different perspective again. And I think part of the value of these exchanges is to, as it were, blend our perspectives on China, and that is very important.
GRUBEL:
Is it likely that you will be discussing the uranium exports to India, given the US-India nuclear pact that was signed a few months ago and has George Bush asked Australia to consider selling uranium to India?
PRIME MINISTER:
Well he hasn't no. And I would not expect that he would. He would understand that's entirely a matter for Australia. I will only discuss it to the extent that I will be seeking further information about the arrangement between America and India. We are not currently disposed to change our policy in relation to selling uranium to countries that aren't parties to the Nuclear Non Proliferation Treaty, but we want more information about the deal between America and India. And of course we remain, as one of the major exporters of uranium, we remain interested in sales of uranium subject to proper safeguards.
GRUBEL:
There's a report in The Australian today suggesting that there's been talks with Australian officials in India. Does that suggest that there's some progress being made in this regard?
PRIME MINISTER:
Well they're the talks that I said I would arrange when I was in India. And what the officials have done is gone there at my request to talk to the Indians about their arrangement with the Americans and then the same group will go on to Washington to talk to the Americans about that arrangement. But it doesn't, of itself, indicate or flag a change of policy. Our policy is that we don't sell to anybody who's not a party to the Nuclear Non Proliferation Treaty and we don't currently have an intention of changing that.
GRUBEL:
Okay, fine. Just back on the Budget and the economy, I just noticed the jobs figures out this morning show a sort of a slight fall in the number of jobs and a slight increase in the jobless rate. Does that ease some of the pressures on inflation that the Reserve Bank, that have been out there?
PRIME MINISTER:
I don't think it's one thing or the other. It's just the normal monthly variation. The fundamental position is that unemployment is at a 30 year low and the labour market remains very strong. We've generated 1.7 million additional jobs over the last 10 years and this is a workers' market like never before. The opportunities for people to get high paying, good jobs is better in Australia now than any time during the 32 years that I have been in politics.
GRUBEL:
Okay, as you mentioned earlier, there is more money, rolling money for defence in the long term in the Budget. Does this give planners the ability to sort of look at the bigger acquisitions that Australia's looking at, for example the Joint Strike Fighters and to secure some of the contracts that we're looking at for the ships, the amphibious ships etcetera?
PRIME MINISTER:
It certainly does. I mean it's a signal that this country will continue to increase its commitment to defence and I've said before and I'll repeat it, that we have to get used to the idea of spending increasing amounts on defence. We live in an unstable region, we'll have regional responsibilities of the Solomon Islands type for years into the future and we need to have a military and defence profile that is appropriate, as well as having the capacity to join coalition operations in other parts of the world. Now that is going to be the lot defence-wise for Australia years into the future and the value of the decision we took to announce the ongoing commitment is that we are providing some forward certainty to defence and we're also telling the world that we're going to increase our commitment to defence.
GRUBEL:
Is this important, just getting the message out to some of our neighbours, that this money's coming, but it's a gradual build up?
PRIME MINISTER:
I think it's important that Australians understand the ongoing need to increased defence capacity, the context of it, which is very much the regional, plus the capacity to operate in partnership with our coalition friends, as exemplified in Afghanistan and Iraq, but it's also to indicate to our region that this country is serious about its responsibilities.
GRUBEL:
Sure. And just finally Prime Minister, I notice in Dublin you're meeting Tony O'Reilly. With media reforms high on the agenda here in Australia, is this a sign that perhaps his Independent group is looking at increasing its stake in the Australian media? Is there anything we can read into that?
PRIME MINISTER:
I always see Tony O'Reilly when he's in Australia, or if I happen to be in Ireland, and we'll talk about two things. We'll talk about rugby and we'll talk about media policy, but it doesn't mean anything in particular in the context of media policy.
GRUBEL:
Do you expect any legislation on these media reforms by the end of this year?
PRIME MINISTER:
It's possible. It depends on the outcome of the discussions Senator Coonan is conducting on her proposals. It's important to reform media laws, but it's not the most important thing in front of the Government. We're interested in what people have to say and what their reactions are, but it's not the most important thing. The living standards of the Australian people are the most important things on our plate.
GRUBEL:
It doesn't leave much time for next year though to get the legislation through given the electoral cycle.
PRIME MINISTER:
Well let's just wait and see how it unfolds. As I say, it's not something that's right at the top of our list of concerns.
[ends]