Subject:
East Timor, interest rates
E&OE...
GILBERT:
Prime Minister, thanks for your time today from Dili. First of all, happy birthday. Was there any cake on offer for you up there in Dili?
PRIME MINISTER:
I've been hard at work Kieran, thank you and I'm about to have lunch with the Australian contingent, the Australian military contingent, but I've had meetings all this morning so it's been business as usual, but thank you for your thoughts.
GILBERT:
You've just come out of talks with the East Timorese President among others. Can you tell us what came out of those talks?
PRIME MINISTER:
Well we spent most of the time talking about the political situation in East Timor. There were separate elections held, there were presidential elections and that resulted in the election of Jose Ramos Horta as President and then there were parliamentary elections which left no one party with a clear majority and since then there have been discussions between the President about the formation of a new government. He is hopeful that those discussions can be concluded in the next few days and that a new government can be formed next week. We all agreed that that would be very desirable because it now has been some time since the election but that is a matter for the East Timorese government and the people of that country. We are very interested in and very supportive of a bright future for East Timor and we don't want the challenges that the new government faces to be underestimated, but the first thing is to get that new government and I know that the President is working very, very hard to bring that about.
GILBERT:
Mr Howard, what's your message to him as to Australia's presence? Have you given him any sort of timeline, any commitment as to how long we will be there?
PRIME MINISTER:
I haven't given him a timeline. What I've said to him is that Australia is a good friend of East Timor's, a very special friend. We want to see a prosperous East Timor. It's an underdeveloped country, it's got a small population, it has high unemployment and it's got huge challenges but unlike many other underdeveloped countries it has oil and gas resources and if it uses them intelligently the revenue from those resources can build quite a good future for the country. We will stay there as long as we are wanted and our presence has the sanction of the United Nations. Although we are not setting any dates we equally are saying to the people of East Timor that our commitment is not indefinite. It can't be open ended and the aim must be to so strengthen the political infrastructure of that country that it can stand on its own two feet and it can avoid the breakdown that occurred last year that necessitated a return of Australian forces to keep the peace.
GILBERT:
Mr Howard, onto a domestic matter, there's a lot of nervousness back here in Australia off the back of those inflation figures yesterday. In the past you've taken credit for low interest rates, will you take the blame if interest rates do go up in August?
PRIME MINISTER:
Well I'm not going to speculate about what happens to interest rates. I am happy to talk about the things that influence interest rates. I'm happy to talk about the fact that state Labor governments going into deficit has had the effect of putting upward pressure on interest rates. This is a very important issue. The Federal Government has paid off all of its debts, we don't have any net debt now and as a result the Federal Government is not out there borrowing money and therefore competing with private borrowers and putting upward pressure on interest rates, but state governments are.
GILBERT:
Is that the major cause of the upward pressure on rates do you think?
PRIME MINISTER:
I'm sorry?
GILBERT:
Is that State Government debt and their deficits, is that the major cause for the upward pressure on rates?
PRIME MINISTER:
I am not saying it is the only cause, what I am saying is that it is a cause and state debt will be $70 billion over the next five years, it will increase rather by $70 billion over the next five years as a result of state budgets this year. Can I say that again; it will rise by $70 billion over the next five years as a result of state budgets this year, now these are Labor Government's deficits, they are not Liberal government deficits because all the state governments are Labor. Now by contrast, the Federal Liberal Government has paid off $96 billion of debt. I am not saying this is the only upward pressure on interest rates, but it is an upward pressure and I don't think the Labor party, which is opportunistically running a line in relation to the Federal Government's management of the economy, can escape the reality that at a state level while we are reducing pressure on interest rates, state Labor Governments are increasing pressure on interest rates by going into deficit. I mean it's another example of the double game. They have a line federally, but they behave differently at a state level. Now these are some of the things that cause upward pressures on interest rates, there are other things, and obviously they are issues that will, all of them, that will need to be taken into account. But I want to make the point now, and nothing can contradict this, that the deficits that State Labor...
GILBERT:
Apologies there, we lost the Prime Minister, his line cut out from Dili.