HOST: The Prime Minister joins me. Mr Rudd, good morning.
PM: Hey Jeff, how are you?
HOST: Good thank you. Prime Minister, our world's changing isn't it? How important is it, do you think, that the US Senate supports a bailout in the next couple of hours?
PM: It's very important. I have just this morning early Perth time been speaking to the House Majority leader Steny Hoyer, who I have known for some time, about how things stand in Washington. Apart from the House, the process as I understand it that these matters will go to the Senate in the next few hours and they will go to the House some time Friday Australian time.
I think it's still tight but my job has been to argue to the American Congressional leadership that friends and allies of the United States like ourselves, the Japanese and the British have also a big interest in the passage of this measure, because the stabilisation of US financial markets means the stabilisation of global financial markets.
HOST: Do you have an Australian contingency plan? If it turns out that this bailout goes ahead but it proves to be pouring good money after bad, what does the Australian Government need to reassess then?
PM: We have been working very closely on the implications from the global financial crisis for Australian financial institutions all year, a whole range of measures - the Reserve Bank, often without much fanfare, injecting liquidity into Australian capital markets, that's been going on in March, in June and in the months since then; also measures announced by the Treasurer last Friday for the Australian Office of Financial Management to provide additional liquidity to assist with bank lending.
These are measures which we have been taking all throughout the course of the year and we will continue to act responsibly in response to what the Australian financial regulators advise us. That's the approach we will be adopting in the future as well.
HOST: Prime Minister, I spoke to our own Premier Colin Barnett earlier today about the fact that this situation changes the way that Governments, State and Federal, spend. How much do you think this global financial crisis is going to strip from Australia's Budget surplus? What are the numbers?
PM: The international reports, both the International Monetary Fund and the World Bank, have indicated that the global financial crisis is going to see a reduction in global economic growth. That's also reflected in Australia's growth numbers and if growth is going to be down, it follows that Budget revenue is going to be affected as well.
I can't give you exact numbers, we are working our way through all of that. But what it does mean, it puts an absolute premium on Federal and State Governments working closely together to do three practical things.
Reduce duplication and waste because there is no money to waste. Secondly also act together to take away unnecessary regulation on businesses because businesses are finding it tougher and we have got to make it easier for them to invest. And thirdly for Governments themselves to maximise what they can do to invest in the nation's and in the case of WA the State's future infrastructure needs. That's what I will be talking to the premiers about today
HOST: Will you be telling them not to expect federal money of the kind that Colin Barnett wants for those infrastructure projects in the north for instance? Will you be telling them they do have to rein in spending?
PM: Well it's going to be necessary for all of us to be very, very prudent about the way in which we spend, because this is a global financial crisis and it affects all of us. I had a good chat with Colin yesterday about his infrastructure priorities in the State and we will continue to work those through with him and my Ministers will be meeting with him in the weeks ahead as well.
HOST: Will they be shaking their heads and saying Colin you know the realities as well as we do - the money is not going to be there at least in the short to middle term?
PM: We intend to be very practical about all of this. There will be stuff that we can do practically with the WA Government, Labor or Liberal. And there will be stuff which will be too hard to do because of the financial affordability factor. But you know we intend to cooperate very practically with them, this is a very important State for the nation's future economy. The percentage of national exports which are generated out of WA is huge and therefore I have always said both in Opposition and since becoming Prime Minister, that the national Government needs to invest more in WA's infrastructures needs, really important for WA, really important for the nation.
HOST: We understand the vote is about to happen any minute, the financial bill will be considered very shortly. Prime Minister, is Australia facing a new austerity?
PM: Well it's going to be tough times. I have said consistently that this global financial crisis, throughout the course of this year I have been saying it, the global financial crisis is real, it affects economies around the world, it affects the budgets of all Governments including in Australia. But most critically it affects household budgets.
One of the reasons why in the Budget earlier this year we were determined despite a whole lot of criticism to pass a $54 billion family support package including tax cuts for low and middle income families, including increasing the child care tax rebate, including bringing in for the first time the education tax refund - these are practical measures to help with the family and the household budget because it is going to be tough.
HOST: So Prime Minister, with the family and the ordinary household budget, can you explain to ordinary Australians again why Wayne Swan and yourself are not chasing big banks with a big stick, demanding that they pass on the likely rate cuts offered up by the Reserve next week?
PM: Our first responsibility is to maintain the stability of the Australian financial system and Australia's banks have strong balance sheets, they are well regulated. And around the world in the midst of this financial crisis, out of the world's top 20 AA rated banks, our four major Australian banks are among those top 20. We need to keep them there and that is very important for the stability for the Australian financial system.
My attitude to interest rates is very simple, we want to see the absolute maximum pass through of any change to official interest rates next week, if there is any change, through to consumers. They have suffered 10 interest rate rises in a row under the previous Liberal Government. The first cut in seven years occurred last month and we have been seeking to support the Reserve Bank in doing that by having a responsible Budget surplus. The times are tough, this is a very difficult financial environment and my first responsibility is to do whatever it takes to maintain the stability of the Australian financial system because it affects households and their interests as well.
It may not be politically popular but it's the responsible course of action and that's what I intend to do.
HOST: Prime Minister, we only have a very small amount of time before we get to the news. COAG was going to be about climate change, it was going to be about health reform, it was going to be about water. Now it is largely going to be about finances. But very briefly on education, the plan for school funding to be tied to teacher and student performance, do you think you are going to get support for that from Western Australia? Colin Barnett says he doesn't like the idea, says it's not practical?
PM: We will work through the detail with the WA Government and that will be part and parcel of the negotiations we have with all the States and Territories on the future of our schools package, both the quantity of what we invest but also the quality you need to attach to it. My own view is very simple. We need to make sure that all schools - government and non government - are providing the highest quality education to kids. And parents should have the right to full transparency about how their kids and their schools are performing.
And we also need to attach incentive packages to ensure that those schools which are underperforming can lift their game.
We have spoken about an education revolution. That's about how much you invest, it's also about the quality of the system as well. But we will work this through with the WA Government.
HOST: Ok, I appreciate you talking to me this morning. Thank you very much.
PM: Good to be on the program.