CASSIDY: Now to Canberra and the Prime Minister Kevin Rudd, who has had a couple of days to try and absorb Professor Ross Garnauts 600 page draft report on climate change. He joins me now, Prime Minister good morning and welcome.
PM: Good morning Barrie and thanks for having me on the program.
CASSIDY: A diabolical political problem, the toughest any Government has faced in a lifetime, that's enough to overwhelm anybody, do you feel in any sense overwhelmed by this?
PM: No Barrie we took this decision when we were in opposition, we said first of all we were going to ratify Kyoto, the Howard Government refused.
Secondly we said that we would introduce an Emissions Trading Scheme to bring down carbon pollution. The Howard Government having originally opposed that, then supported it and now the Liberal's oppose it. So goodness knows where their position is today.
So the decision we took was last year, we realised then as we realise now this will be a very tough decision. But we need it for the long term, bringing down carbon pollution is necessary if we are going to provide a sustainable long term economic growth path for Australia as well as protecting our environment and the planet. It will be hard, it will be tough, but the Government's up for it.
CASSIDY: And you say it will be tough. What's the toughest decision you have taken so far as Prime Minister?
PM: I think you can't just sort of pick and choose on those sorts of questions. I think the whole raft of challenges we face in Government are complex and difficult, but this one, Barrie, is one which I think challenges us all as a nation, because it goes beyond our generation into the next and into the one after.
The easiest thing to do is stick your head in the sand and say "Not my problem", but I frankly don't think most Australians can do that, if they looked in the faces of their children and grandchildren, they think it is their problem and they expect Government to take responsible, calm, measured approaches to deal with it, that's what we are seeking to do.
We need to do it for the economy, there's an economic cost to Australia and a jobs cost if we fail to act because of the impact on tourism, the impact on agriculture and the impact on the total economy therefore. But we need to do it for the environment, so that people who come after us have some place where they can live, and live as we have lived.
CASSIDY: I think It's understood that you will need to take tough decisions and that's why I asked you to nominate one tough decision you have taken so far?
PM: Well look can I just say the preparation of the Budget, the reason I answered the way I did before is because we are confronted on a daily and weekly basis with a range of difficult choices.
CASSIDY: But in retrospect what was the tough decision in the Budget?
PM: Well can I say if you are elected as an incoming Government with a whole range of expectations to turn around in six months what our predecessors left unaddressed in 12 years, it is very, very difficult. Therefore, taking the knife to a whole series of Government programs in order to produce a $22 billion surplus at a time when there was considerable pressure on inflation, having inherited inflation at 16-year highs, that was tough.
Myself, Lindsay Tanner, Wayne Swan and other Ministers including Julia Gillard sat down, week in week out for months, working our way through programs to cut so that we could honour pre-election commitments, that hasn't been popular, we understand that. If you want to know what's tough, that's tough. What's easy is what the Liberal Party say which is "Let's blow a hole in that surplus by going on a spending spree.” Well that's irresponsible in the fight against inflation.
CASSIDY: I think some would argue means testing certain benefits to people beyond $150,000 is not particularly tough.
PM: There's a whole range of programs in the Budget arrangement Barrie, which all have consequences in terms of the community. We understand that and we receive a lot of complaints from a lot of things that have been done. But to actually bring down tax as a proportion of GDP, to bring down expenditure as a proportion of GDP to the lowest level its been since 1989, all driven by one imperative, which is how do you put downward pressure on inflation to put downward pressure on interest rates. Because if you let interest rates get away, what happens is, it affects the real economy and growth, and that affects jobs.
That's a complex message to sell, but its the right message to sell and cutting in order to bring about a $22 billion surplus, while at the same time honouring your pre-election commitments for tax cuts and the rest, that was a hard process, a difficult process. But we got through it and the Ministers performed fantastically in that process.
CASSIDY: You only need to listen to talkback radio for 5 minutes and you sense the public is desperate to have a better understanding of the climate change issue. So lets try and help, in plain simple terms what is an emissions trading scheme.
PM: Well let me answer it in three ways, one you say what's the public aware of. I think I agree with you the public understands that there is a need to act. And for Australia there is a need to act for a range of economic and environmental reasons, the cost of inaction now is far greater than the cost of action.
On the specifics of a carbon trading reduction scheme or a carbon emissions reductions scheme or an emissions trading scheme it's this: first of all, we as Australia, need to put a cap on the total amount of carbon pollution we put out into the atmosphere. Otherwise, frankly, if everyone around the world keeps does that, just letting it rip, then the planet gets hotter and hotter, and hotter. If we fail to act on that, then we have a real problem.
The second question then is once you have imposed that cap, which we would do through this trading scheme, is how do you then manage the economy within it? What you do then is that you provide each individual business unit with a permit and the green paper will go to the question of how that might occur, but you allocate permits across the economy which together add up to the total carbon cap for the economy. Then rather than the Government coming in and saying, "You can do this, you can do that", you allow a market too operate, a carbon market whereby people who are emitting carbon can trade with each other, but still the overall carbon market or carbon cap is kept in place.
That's the responsible way to ensure you don't go beyond an environmentally unsustainable point in terms of carbon pollution, but secondly providing flexibility for businesses within the economy to trade within that overall cap.
CASSIDY: (inaudible) That essentially applies to industry. What is it that you are asking of ordinary Australians?
PM: Well obviously once you bring in a carbon pollution trading system like this, that it affects through the entire economy most particularly through the cost of carbon-based energy, and, of course, including petrol. That flows through to the entire economy, and therefore flows through to households, so therefore there is a consequence.
One of the matters which will be canvassing in the green paper is how do we provide adjustment support for households during that process, and similarly, how do we provide adjustment support for businesses during the process. These are complex and difficult questions, but these will be outlined at least in the broad once we get to the green paper point.
CASSIDY: Sure, but in simple terms, what are you asking of people out in the suburbs - your asking them to pay for more Power and more for petrol?
PM: As I said if your going effectively a cap on carbon, and therefore have a new price for carbon, that flows through to the price of energy for households, that's true. Mr Howard said that, I say that, I think even Dr Nelson has said that.
The key question then is how to support households, particularly lower income households, in their adjustment to that new system and that's where the devil lies in the detail. That's where there'll be a whole lot of debate and that's why we're going to go through this is in a calm measured responsible way once we put out our green paper on this later in July, and work our way through to the public debate through on it through to the end of the year.
CASSIDY: And if its $2 a week or something on the power bill and maybe 4 cents on petrol, given the mood of the country on this issue, they'll accept that wont they?
PM: Well we don't know at this stage what the carbon price would be. Therefore, I think any adjustment at a time when households across Australia are under real financial pressure with rising mortgages, rising rents, the impact on petrol and the impact on food, I think any adjustment cost will be difficult.
That's why we have to be mindful of how we provide adjustment and support for households during that process, particularly those at the lower end of the income spectrum.
CASSIDY: Now, there is another diabolical aspect I suppose to all of this - inflation. Inflation is public enemy No.1, and your responses to climate change surely must, by definition be inflationary?
PM: Well our response to that Barrie from day one of the Government coming into office, has been to outline a hard line fight against inflation. In January my first speech on the economy barely a month after becoming Prime Minister I outlined our five-point strategy against inflation, led by our approach to how we would bring about a responsible Budget and boost public savings. Therefore that's the framework within which we approach economic policy. When it comes to the carbon pollution management system that we are talking about in this debate we are very mindful of that as well.
The Governor of the Reserve Bank was asked about this only a few months ago and he indicated then that he did not see long-term inflationary impact resulting from this scheme. The other thing to say Barrie, is that we need to ensure, we need to ensure that we have proper powers for the competition watchdog, the ACCC so that whenever any system of this nature comes in, that there's no opportunistic price gouging at that time as well.
CASSIDY: And what about jobs, obviously jobs can be created in some areas, but they'll be lost in others?
PM: Well the economy is always in a process of adjustment, reform and readjustment and all these changes in the economy produce new jobs in different areas. The CSIRO produced a report on this quite recently and it indicated that with the of these climate change management systems, that over time, in the next two decades, they projected we would see the addition of between two and three and a half million jobs to the Australian economy. But they won't be the same jobs necessarily but they never have been.
This economy has been in a process of structural reform now, going back to the great reforms of the Hawke and Keating period. Now that process will continue, but will be in the direction of a cleaner lower carbon economy. But let me tell you, when you look at the future of employment and economic opportunities in the renewable energy sector, they are huge.
Therefore, there will be difficultly, and there will be adjustment and there will be pain, when it comes to certain parts of business. We accept that, that's why we embrace the principle of helping business with adjustment support.
But in the longer term, there is also the prospects of new opportunities for employment as well.
CASSIDY: Now the 2010 deadline, are you determined to meet that?
PM: Our ambition remains 2010 and you'll see all that canvassed in the green paper itself. We don't believe there's a case for delay, we will be very mindful of what business says to us in terms of implementation arrangements which flow from the scheme. But our ambition remains that and part of the reason our ambition remains for it Kerry is as Professor Garnaut outlined in his report. I mean time for Australia is running out, we can't just keep putting these things off and off and off and off and remember the previous Government were presented with an Emissions Trading Scheme proposal by Treasury in 2003, and put it into the too hard basket. That's five years wasted.
We believe we believe we have the right timeline outlined, 2010 remains our ambition and of course we'll consult with industry on implementation arrangements.
CASSIDY: Do you accept the logic of what the Opposition is saying on petrol, that skyrocketing prices of late is a big enough price signal for anybody and that you don't need to move again?
PM: I think what I'd say to that one Barrie is that what we're talking about here is how we deal with a realistic price for carbon for the next half century, and when do we bring in a system which accurately prices carbon over that period of time. Because if we don't act by the quarter century point and mid century point, both as a nation and as a globe, then frankly we start to run the risk of getting to the point of environmental no return, at least that's what some of the scientists are warning us.
Therefore pricing carbon for the long term is a challenge. In the shorter of course you going to have massive fluctuations in the price of petrol for example because of the supply and demand factors in the Middle East. We'll always be mindful of that in terms of what can and should be done to assist motorists in terms of their broader income arrangements. But what we are on about with this reform is a long term reform for the environment, and for the economy.
On the environment, one other thing as well - today the Agriculture Minister will be releasing a new report on the impact of climate change on drought. We asked some time ago for the CSIRO and Bureau of Meteorology to advise us how do we deal with exceptional circumstances drought arrangements into the future. They've now presented us with a report and the findings are again very disturbing. What they say in two short points is this, and this will come out later today - firstly that when it comes to exceptional or extreme drought, exceptionally high temperatures, the historical assumption that this occurred once every 20 years has now been revised down to between every one and two years, that's the first point.
Secondly, with exceptional circumstances drought conditions, under scenarios within it, that that will occur twice as often, and with twice the area of droughted parts of Australia included. Now this is a serious revision of the impact of climate change on drought and the Agricultural Minister will make that clear in the report that he releases later today, again on climate change.
CASSIDY: If that's so then why did you let John Brumby get away with what he got away with at COAG where he refused to allow you to raise the cap on the Murray River from 4% to 6%
PM: Well the actual agreement says that the Council of Australian Governments has the ambition to raise this to 6% by the end of next year.
CASSIDY: But no guarantee's?
PM: But the first thing is we first of all have a Murray Darling Basin Authority for the first time, six months ago there was not one. Secondly it will come on stream as of 1 January next year in terms of its staffing and its powers. Thirdly, for the first time a basin-wide management plan covering one seventh of the area of Australia and on top of that for the first time a basin-wide cap for the entire system.
Now, in the meantime I was talking to Penny Wong about this yesterday when we visited Lake Alexandrina and the lower lakes, which are highly stressed because climate change...
CASIDY: Well stressed because water has been taken out of the Murray, surely not because of climate change?
PM: Well there's an aggregation of factors, stress because of climate change, stress because there's been frankly shocking use practices of the Murray Darling system going back frankly decades and in six months I think we've achieved more than the predecessors did in 12 years on this. But on the specific question of how do you deal with flows into the system, you need a combination of short, medium and long term arrangements.
Long term is what we're discussing, acting sensibly on climate change. Medium term, through getting this authority established, having a cap for the entire system. But reinforced by the Water Minister Penny Wong, having now for the first time, begun a large scale program of purchasing back water entitlements across the system. We've already begun that, our predecessors never did that.
CASSIDY: Its just that it has been presented in Victoria that John Brumby has given to commitment about supporting an increase from 4-6% and he picked up an extra $100 million to boot.
PM: Can I say Barrie, prior to the change in Government Victoria ruled out any Murray Darling Basin authority, we now have one. Prior to the change in Government the Victorian Government refused to engage in any of these intergovernmental arrangements through what we now have, an intergovernmental agreement.
We have made significant progress. But I'm the first to say there's a long way to go. Can I say, in terms of pulling pressure out of the system, you do two things. One is you empower, as you have done, the Water Minister, Penny Wong to buy back water entitlements and we've already bought back some $50 million worth and that program will continue and expand.
The second is this massive investment that we have put in, some $3.7 billion across Australia, across the Murray Darling Basin to improve the irrigation efficiency of the system so there is less pull on the system that way.
Shorter term measures by the way, is what I was in South Australia with Mike Rann talking about in the lower lakes. Which is how do you actually pump water from elsewhere in the Murray to assist with farming and local communities right there at the Murray mouth. What we need is short, medium and long term strategies for dealing with this. In six months we have got the framework right. I'm the first to say however we have a long way to go.
CASSIDY: Ok just a couple of quick ones, we're running out of time. Will Labour contest the Mayo by-election.
PM: Oh look, we'll sort our way through that, I haven't really had a discussion with any of the colleagues about that. Mayo has never been held by the Labor Party as you know and we'll sort our way through that in the weeks ahead.
CASSIDY: But its out at 7%, some polls have you sitting at 57% two-party preferred, if you didn't run it would look like you've been spooked by Gippsland wouldn't it?
PM: Well I've got to say, you always got to be mindful of one or two things here Barrie, which is one which is making sure that local voters have got a choice, and the second is I don't know about the opponents, but the Australian Labor Party is not made of money. Each time you run an election or participate in it, that's another several hundred thousand dollars which gets spent in a campaign, in a seat which you have never held in the history of the federation. So you have got to work these things out, and we'll sort is out in due course.
CASSIDY: Have you got any messages for your colleagues in NSW, should they give Morris Iemma a fair go?
PM: Morris Iemma has taken really tough decisions on the future of the electricity industry there, really tough decisions. That is why I support him. I think he has done a good job on this very, very difficult debate, and I think Premiers such as him are fully deserving of support, and he certainly has mine.
CASSIDY: Just finally on top of the Bill Henson controversy, a taxpayer supported magazine has put a naked 6 year old girl this time on its cover, Art Monthly Australia. The editor said that he did it to restore some dignity to the debate, is that what it does?
PM: If you asking my personal view Barrie, no it doesn't and it does the reverse. My view hasn't changed on this. We are talking about the innocence of little children here. A little child cannot answer for themselves about whether they wish to be depicted in this way. I have very deep, strong personal views on this which is that we should be on about maximising the protection of children. I don't think this is a step in the right direction at all.
CASSIDY: And it does seem to be a deliberately provocative act aimed directly at you?
PM: Who knows what the motivation is, but I've got to say my interest and the interest of many Australians. I think most Australians, is to protect little children and restore innocence to kids childhood. But I go back to the fundamental question: how can anyone assume that a little child of 6 years old, 8, 10, 12, somehow is able to make that decision for themselves? I mean, I don't think they can. That's just my view, and that's why frankly, I can't stand this stuff.
CASSIDY: Thanks for your time this morning.
PM: Good to be with you.