E&OE
O'BRIEN: I am joined now by the Prime Minister in Parliament House. John Howard, we'll get to the issue of those leaked documents in a few moments but first, the issue of the levy. When you have got a strong surplus, why was a special levy necessary to pay for a year of East Timor peacekeeping and the build up of troops?
PRIME MINISTER: Well, Kerry, the surplus would have disappeared into a small deficit if we hadn't decided to introduce this special 12 month levy which will cover the financial year 1st of July next year to the 30th of June 2001. We had a cash surplus of $3.1 billion projected for that year. We had to spend another $1.8 billion in the negotiations with the Democrats to get the tax package through. When you take other necessary expenditure since the May Budget and variations of economic forecasts into account we faced the situation where we could have covered all of those things with the $3.1 billion without going into deficit. But the $1 billion on Timor which couldn't have been anticipated in the May Budget was really the king hit which would have tipped us into a deficit of about $500 million. And we weren't prepared to accept that and that's why it's necessary. Now, I don't like it, I am sorry about it but we had an alternative.You have three options - you go into deficit, you have this special levy or you cut further into spending. Now, frankly, there's a, you know, there's a point you reach with spending cuts where if you cut any further you are taking away essential services. Now, we have been very tough on Government spending,. It's a lower percentage of overall product now than it has been since the 1960s and I am not prepared to go further in many of the very, very sensitive areas because I don't think it's the right balance. I think you have got to have a balance between these things and I think we have got a pretty good balance and I think the Australian community, while they may not like this, they will see it as a fair and decent way of coping with an unexpected problem. And I repeat, it's only for people earning over $50,000 and it's only for 12 months. It comes off after that 12 month period.
O'BRIEN: And now today you have also announced a boosting in your armed force numbers. You have got a major Defence paper coming early next year, is there a prospect that we'll see a further boost again in defence numbers next year as well?
PRIME MINISTER: Well, Kerry, I don't want to pre-empt the White Paper but the lifting of the two additional battalions to full strength is of a piece with our East Timor commitment plus another 500 into the Air Force. I don't want to rule anything in or out but I have said before that this country has to make a greater provision for defence and that means that we have to give a greater priority to defence spending. The difficulty we faced and what really caused the levy was that the next financial year was a particularly hard year. We have got no problem absorbing East Timor this year and no problem in the years subsequent to next year but because the GST is starting next year there were particular front end costs on the Budget associated with that and that's why we had to have this levy. The surpluses in the years flowing after the financial year 2000/2001 look pretty healthy even if you make allowance for a continuation of the East Timor like costs.
O'BRIEN: Okay. Prime Minister, these leaked Defence intelligence documents, were you aware early this year of that intelligence that the Indonesian Military were, according to that intelligence, were deliberately arming pro-Indonesian militia, effectively sub-contracting them, to use the terminology, to disrupt the independence vote?
PRIME MINISTER: Well, Kerry, I was aware and I made it very plain publicly that the Indonesian Military was behaving very badly. I just checked before I came on this programme, I, for example, at a news conference on the 17th or 18th of April this year I said that there was unmistakable evidence that the Indonesian Army at the very least was not doing anything to stop the violence and that was what.
O'BRIEN: The.
PRIME MINISTER: Well, hang on, can I answer your question. And that's what provoked my visit to see Dr Habibie in Bali. But can I just say one thing about all of this, can I just say to those people who are now being critical, what did they expect us to have done other than what we did? Are they seriously saying that even if we had believed every single word in every single document that we were going to go and invade Indonesia?
O'BRIEN: No-one is suggesting invasion, Prime Minister, but the implication is that when Australia's chief priority around this time, January, February, March, when Australia's chief priority as expressed by your Foreign Minister was to promote reconciliation between warring Timorese you had Defence advice that the Indonesian military were using the militia as active tools to ferment violence and disrupt any reconciliation process. How could you have hoped to achieve reconciliation in that climate?
PRIME MINISTER: Well, Kerry, we received a great range of advice and the take out clearly was that at the very least, and it was obviously potentially much worse, the Indonesian Armed Forces were not doing their job. That's at the very, very least. But I take you back to the fundamental question that we had no capacity to bring about a change of attitude on the part of the Indonesian Army or the Indonesian authorities other than by intense diplomatic pressure. We made 120 separate representations to the Indonesian authorities from the beginning of the year until about the time of the ballot. Australia ahead of any other nation on earth put pressure on the Indonesian Government to accept a peacekeeping operation. If it hadn't been for Australia's efforts the peace enforcement operation assembled more rapidly than any peace enforcement operation in the last 20 years by the United Nations would not have gone in as soon as it did into East Timor. Now, of course, the Indonesian Army failed in its duty at the very, very least and potentially much worse but there's no way on earth, Kerry, that the Indonesian Government was going to allow peace enforcers to go into East Timor until after the ballot. That was made plain to me when I saw Dr Habibie in Bali in April. It was made plain to me again when I spoke to Dr Habibie around the time of the ballot.
O'BRIEN: [Inaudible] Dr Habibie told you but the fact is.
PRIME MINISTER: But that is also my..
O'BRIEN: Isn't it true that it was only by that concerted international effort, not just Australia's effort and nobody is taking away from Australia's effort, but isn't it true that it was only by that concerted international pressure on Indonesia that Indonesia eventually folded and allowed the peacekeepers in. And I guess the question is, will we ever know if that concerted international effort had been encouraged earlier in the process when you were getting this advice from your own military, we will never know whether the Indonesians would have folded early and lives would have been saved.
PRIME MINISTER: Kerry, you have left out one very important element in the chain of events and that was the ballot. It was the catalyst represented by the overwhelming vote for independence followed by bloodshed and a clear desire by the militia to frustrate the ballot outcome that finally galvanised the world. Now, my critics, the Government's critics on this.Mr Brereton and others are basically saying we shouldn't have had the ballot. Now, that's what they are basically saying. Now,.
O'BRIEN: Aren't they saying that the effort should have been made earlier to get peacekeepers in?
PRIME MINISTER: Well, every effort was made but short of invasion how else could you have got people there. I mean, you come back.
O'BRIEN: But isn't the point.
PRIME MINISTER: No, could I just finish? I listened to a very long question so please allow me to answer.
O'BRIEN: There have been some reasonable answers to.
PRIME MINISTER: No, no, but I am actually being asked to respond. The catalyst for action, the thing that really galvanised the world in the end, Kerry, was the combination of two things. An 80 per cent vote for independence followed by unmitigated bloodshed and a clear desire by the militia to frustrate. Now, it is my firm view that that was the thing that finally made it possible for the world to be fully galvanised to act. There was no enthusiasm on the part of the Americans for heavy military involvement before. There was no enthusiasm on the part of anybody. Nobody in their remotest senses would have suggested that we should have contemplated military action against the will of the Government of the republic of Indonesia.
O'BRIEN: But isn't it also..
PRIME MINISTER: ..a combination of events that finally tipped the scales in favour and it was Australia out of everybody else that brought this about.
O'BRIEN: But isn't it also true that when you were still arguing and recommending to the Americans and others that reconciliation should be the primary focus that in that same period you were putting peacekeeping initiatives as a second rung issue, that reconciliation was your prime focus?
PRIME MINISTER: Well, Kerry, what I was recognising was the reality and that is that there was no way the Indonesians were going to accept foreign troops on their soil before the ballot. No way. That was made plain. That was the view of Kofi Annan. It was the understanding of any person who really understood this situation. We are seeing a massive and partisan attempt to rewrite history and it won't wash.
O'BRIEN: Just very briefly, in one of the later intelligence documents in September after the ballot, they stated that General Wiranto quote has destabilised Indonesia, General Wiranto the head of the Armed Forces still, has destabilised Indonesia by reintroducing violent confrontation and repression as a means of doing business. That the resurgence of Wiranto will engender the widespread opposition likely to be met with violence, destabilising consequences over the next five years. Does that advice concern you, the implications of it?
PRIME MINISTER: Well, if it turned, obviously if it were true and it turned out to be true it would. I tend to take a more optimistic view, Kerry. I think the Presidency of Wahid and the Vice-Presidency of Megawatti offer real hope for Indonesia. I think they are embarked on a new path. I don't want to get carried away with that notion but I think we are seeing a huge change. I mean, they have gone a long way in 12 months. 211 million people, third largest democracy on earth if it sticks. Now, you know, I'd like to believe that that is possible. Anything can occur in a nation that has gone through the, sort of, volatility and turmoil that country has gone through. But there are some very optimistic signs and I see in President Wahid very much part of that.
O'BRIEN: And are you satisfied that Australia is giving enough support, urging strongly enough for a genuine energetic international effort to prosecute war crimes where justified?
PRIME MINISTER: I think we are getting the balance right in relation to that. And I think if you allow the proper processes to run and we will do all we can to facilitate the proper processes I believe that that will lead where there is guilt to the prosecution of that guilt and the punishment of those who are responsible for war crimes.
O'BRIEN: Even if it goes right to the top, General Wiranto?
PRIME MINISTER: Well, look, Kerry, I don't want to say yes or no to that because, I mean, others can fling names around. I have to be rather more careful.
O'BRIEN: John Howard, thank you for talking with us.
PRIME MINISTER: Pleasure. [ends]